The Nonlinear Impact of Green Finance on Green Innovation: Insights from China

Green finance is vital for fostering regional green innovation in China to promote high-quality economic development. An extensive index system is employed in this study to examine the correlation between green financial growth and regional green technology progress. Findings indicate a positive influence of green finance on green technological advancement, characterized by a diminishing effect as green financial development progresses in an "inverted U-shaped" pattern. Since 2017, the implementation of green financial reform pilot zones has led to a convergence in green financial development levels among provinces, approaching a critical threshold that signifies a shift in its influence on regional innovation. Regional disparities are evident, with the central region benefiting the most from green financial development, the eastern region experiencing weaker effects, and the western region facing limitations due to underdeveloped financial infrastructure. Recommendations for policymakers comprise deploying dynamic monitoring systems to enhance the efficacy of green financial policies, managing financialization risks via strengthened ESG frameworks, and implementing customized regional strategies to maximize the synergy between green finance and technological progress. These results provide crucial guidance for policymakers to utilize green finance as a catalyst for sustainable development and technological innovation.