FinTech and liquidity creation of Chinese commercial banks: a perspective from both on- and off-balance sheet

Using panel data from 184 Chinese commercial banks during 2011–2022, this study examines how FinTech affects bank liquidity creation. We construct novel FinTech indices from multi-dimensional internet search data using the partial least squares method. The results show that FinTech significantly augments both on- and off-balance sheet liquidity creations, with a stronger effect on the asset side. The positive impact operates through three channels of improving operational efficiency, expanding deposit inflows, and optimizing the non-interest income structure. However, higher economic policy uncertainty attenuates the liquidity-enhancing role of FinTech. Furthermore, unconditional quantile regression reveals heterogeneous and asymmetric effects across banks with different levels of liquidity creation. The impact on on-balance-sheet liquidity decreases from lower to higher quantiles, while its effect on off-balance-sheet liquidity increases. These findings underscore the transformative role of FinTech development in bank intermediation and offer vital implications for financial stability and macroprudential regulation in the evolving digital era.