The Impact of Digital Financial Inclusion on Household Consumption Upgrading: Empirical Evidence from Provincial Panel Data in China

Whether digital financial inclusion can push household consumption toward higher-quality categories, and through what channels, remains an open empirical question in the context of domestic demand expansion. This study combines the Peking University Digital Financial Inclusion Index with provincial macroeconomic statistics to build a balanced panel covering 31 Chinese provinces over 2013-2022, and estimates two-way fixed effects models that identify the aggregate impact, its regional variation, and the underlying transmission channels. Three findings emerge. First, digital financial inclusion exerts a significant positive influence on consumption upgrading: raising the aggregate index by 1% is associated with an increase of roughly 0.23 percentage points in the share of development- and enjoyment-oriented spending, a result that survives alternative dependent-variable definitions and a one-period lag of the core regressor. Second, the effect is geographically uneven — clearly present in eastern provinces but not yet detectable in central and western ones — which indicates that turning financial supply into actual consumption behavior requires complementary conditions in income, logistics, and consumption scenarios. Third, channel tests lend preliminary support to the digital credit route but not to the payment convenience route, and coverage breadth proves to be the dominant sub-dimension. The evidence can inform more targeted digital finance policies aimed at expanding domestic demand and upgrading consumption.