From digital infrastructure to common prosperity: How the digital divide reshapes the spatial pattern of China's inclusive finance

Introduction: Digital Infrastructure Is Redefining Financial Geography

In the global infrastructure investment landscape, digital infrastructure has become the third major pillar alongside transportation and energy. But the value of digital infrastructure lies not only in connection speeds or computing scale, but also in the new service ecosystems it fosters, especially digital inclusive finance. The accessibility, cost, and efficiency of financial services are undergoing fundamental changes as digital infrastructure expands. However, the distribution of digital infrastructure is uneven, and this imbalance—the digital divide—is affecting whether digital inclusive finance can truly become a driver of regional common prosperity.

A study based on panel data from 245 Chinese cities from 2012 to 2022 provides empirical support for this proposition. Published in Humanities and Social Sciences Communications, the study uses economic distance matrices and spatial econometric models to examine the promoting effect of digital inclusive finance on common prosperity and the moderating effect of the digital divide. The findings are not only relevant to China, but also provide a reference for Global South countries in the coordinated advancement of digital finance and infrastructure construction.

Digital Inclusive Finance: A Financial Revolution Built on Infrastructure

Traditional financial services, constrained by physical branches, credit records, and transaction costs, often exclude low-income groups, small and micro enterprises, and rural residents. Digital inclusive finance, by leveraging smartphones, mobile payments, and big data analytics, embeds financial services into everyday scenarios and greatly lowers service barriers. This model essentially depends on the coverage quality of digital infrastructure—including broadband networks, data centers, cloud computing platforms, and supporting cybersecurity systems.

The study finds that digital inclusive finance has a significant promoting effect on common prosperity, with a clear positive spatial spillover effect. This means that a city's digital finance development not only benefits local residents' income growth and consumption upgrading, but also drives the development of neighboring cities through economic linkages and factor mobility. This spillover effect is precisely a manifestation of the network attributes of infrastructure: the scale effects and externalities of digital infrastructure enable financial services to cross administrative boundaries.

The Digital Divide: A Projection of Infrastructure Imbalance

However, the construction of digital infrastructure has never been homogeneous. There are notable gaps between urban and rural areas, and between eastern and western regions, in hardware facilities, usage skills, and digital literacy. This gap is defined as the "digital divide," which is not merely a matter of network coverage, but also involves the mastery of digital skills, awareness of digital risks, and the actual depth of digital service usage.Research shows that the digital divide plays a significant negative moderating role in the relationship between digital inclusive finance and common prosperity. In other words, in regions with a larger digital divide, the promotional effect of digital inclusive finance on common prosperity is weaker. The reason is not hard to understand: when a portion of the population cannot effectively access or use digital financial services, financial resources may instead concentrate among groups with higher digital literacy, thereby exacerbating wealth disparity. This reminds us that simply laying fiber optic cables and building data centers is not enough to achieve inclusive growth; the "last mile" of infrastructure must include human capacity building.

Regional Heterogeneity: The Advantage of the East and the Catch-up of the Central and Western Regions

The study also reveals significant regional heterogeneity. The promoting effect of digital inclusive finance on common prosperity in the eastern region is stronger than in the central and western regions. This is not simply because the eastern economy is more developed, but because the eastern region has more complete digital infrastructure, higher Internet penetration, and a more mature digital financial ecosystem. In contrast, although the central and western regions have continuously increased infrastructure investment, the digital divide still constrains the downward penetration of financial services.

This finding has direct implications for infrastructure investors: when deploying digital infrastructure in the central and western regions, it is necessary not only to focus on returns on hardware investment, but also to consider supporting digital skills training and financial knowledge dissemination. Otherwise, the marginal returns on infrastructure will diminish due to insufficient capacity on the user side.

Structural Effects of Digital Finance from Indicator Decomposition

The study further decomposes digital inclusive finance into three dimensions: coverage breadth, usage depth, and degree of digitalization, finding that all three have significant positive effects on common prosperity. Coverage breadth reflects the penetration rate of digital financial accounts, usage depth reflects the actual activity of services such as payments, credit, and investment, and degree of digitalization measures the convenience and low-threshold characteristics of financial services.

From an infrastructure perspective, coverage breadth depends on the spread of communication networks and terminal devices; usage depth depends on the richness of application scenarios and the reliability of data systems; and degree of digitalization tests the processing capacity of cloud computing platforms and the intelligence level of financial regulation. Therefore, the comprehensive development of digital inclusive finance is essentially a process of coordinated upgrading of multi-level digital infrastructure.

Policy Implications: Invest in People, Not Only in Things

The research conclusions point to a clear policy direction: first, continue to strengthen digital infrastructure construction in rural and remote areas to fill gaps in network coverage; second, improve the application capacity of digital technology, especially skills training for the elderly, people with low education levels, and rural residents; third, improve the relevant institutional systems to promote the inclusiveness of digital finance.

For global infrastructure analysts, the implication of this study is that the assessment framework for digital infrastructure needs to expand from traditional metrics such as connectivity rates, bandwidth, or latency to dimensions such as digital literacy, usage efficiency, and distributional effects. Truly valuable digital infrastructure investment should be able to narrow the digital divide rather than widen it.

ConclusionDigital inclusive finance does not automatically bring common prosperity; its effects depend on the degree to which the digital divide is bridged. In evidence from 245 Chinese cities, we see that the expansion of digital infrastructure does indeed benefit inclusive growth, but if equality on the usage side is neglected, infrastructure investment may become a driver of widening regional disparities. Future infrastructure planning must incorporate digital literacy, financial education, and service design into overall considerations, so that "connectivity" can truly be transformed into "empowerment."

This research provides an empirical foundation for digital infrastructure policy in China and globally: while pursuing physical coverage, it is necessary to simultaneously build human capital and institutional ecosystems. Only in this way can digital infrastructure become the cornerstone of common prosperity, rather than a new dividing line.