Digital Finance and China’s Foreign Trade Development: Theory and Empirical Evidence

Abstract

The rapid advancement of digital finance has injected fresh impetus into the transformation and upgrading of foreign trade development models. Utilizing panel data from 31 provinces and municipalities across China between 2011 and 2021, this research conducts a systematic investigation into the mechanisms and key factors through which digital finance influences the evolution of foreign trade. The analysis demonstrates that digital finance plays a vital role in advancing regional foreign trade by facilitating industrial restructuring and boosting innovation capability. Moreover, both the quality of the business environment and the extent of urbanization act as positive moderating variables in strengthening the impact of digital finance on foreign trade expansion. Significant regional differences are observed: the eastern region benefits most from digital finance, while the central and western regions exhibit comparatively weaker effects, largely due to slower progress in industrial digital transformation. Among the components of digital finance, coverage breadth exerts the most substantial effect, followed by digitalization level and usage depth. The identified “industrial structure–innovation capacity” dual-driver framework not only enriches the theoretical understanding of digital finance’s role in foreign trade promotion but also offers actionable insights for shaping region-specific investment attraction strategies within the context of the dual circulation economic model.