PROMOTING NEW VENTURES OR MITIGATING DEMISE? DIGITAL INCLUSIVE FINANCE AND THE SURVIVAL OF SMES

This study investigates the impact of digital inclusive finance (DIF) on the survival of SMEs in China, using business registration data from millions of enterprises spanning 2011–2017. The findings identify the alleviation of financing constraints as the primary mechanism through which DIF enhances SME survival rates. However, the study also reveals a nuanced nonlinear effect associated with DIF development: at lower levels, DIF may exhibit a crowding-out effect where consumer credit expansion inadvertently tightens financing constraints for SMEs by diverting resources from productive credit; this adverse effect is, nevertheless, mitigated as DIF reaches higher levels of development. Overall, the results confirm the positive role of DIF in optimizing SMEs’ survival status and underscore the importance of promoting higher-level DIF development to fully realize its benefits. Moreover, the study finds that the increased survival rate of SMEs facilitated by DIF does not lead to market rigidification but instead enhances urban innovation vitality and economic growth rates. These findings provide empirical evidence for fostering balanced regional development.