Research On The Impact Of Digital Finance On China’s Leaping Of The "Middle-Income Trap"

"Middle income trap" is an important indicator to measure whether an economy can maintain sustainable growth.It is of great significance for studying how a country can break the state of convergence and achieve higher levels of economic growth in the future.As the second largest economy and the largest developing country in the world,whether China can smoothly stride over the "middle-income trap" and achieve a population of 1.4 billion on the vast land of China moving towards a higher income is not only a major issue facing China in the 21 st century,but also a major task affecting world history and the history of human development.There is no doubt that overcoming the"middle-income trap" as early as possible has profound implications for China’s socialist modernization and the great rejuvenation of the Chinese nation,as well as for the realization of the second “Centenary Goals." So how can we get out of or cross the middle income trap?Finance is the core of modern economy,and digital finance,as the wind vane of financial development at the present stage,has both the dual characteristics of traditional finance and digitalization,and has an important impact on economic growth with its unique advantages of digital enabling finance.Admittedly,the development of digital finance at current has provided a new idea and created a new path for us to overcome the "middle income trap".Based on the provincial panel data of China from 2011 to 2020,this paper uses a panel econometric model to explore the impact of digital finance development on China’s leapfrog over the "middle-income trap",taking digital finance as the entry point.The first part of the article elaborates the connotation and relevant theoretical basis of digital finance and the "middle-income trap".On this basis,it theoretically explains the direct and indirect impact of the development of digital finance on China’s leap over the "middle-income trap".Digital finance can directly help solve middle-income problems in various provinces of China by improving the efficiency of financial markets,reducing market transaction costs,improving the efficiency and ability of financial services to the real economy,and optimizing resource allocation.In addition,digital finance can also provide long-term impetus for solving China’s middle-income problems through enabling the optimization and upgrading of the industrial structure.The second part analyzes the current development situation of digital finance and middle-income issues in various provinces in China,and analyzes their development trends in various provinces from2011 to 2020.The third part conducts empirical testing.Introducing into a regional fixed effect model to explore the impact of digital finance on China’s efforts to overcome the "middle-income trap",we conclude that digital finance can significantly help China overcome the "middle-income trap".This conclusion is still valid in the robustness test.At the same time,the coverage,depth of use,and level of digital support services of digital finance have shown varying degrees of promoting effects on middle-income issues.For endogenous problems,this paper uses instrumental variable method and propensity score matching dual difference method(PSM-DID)to deal with them.The fourth part is a test of the indirect impact of digital finance on China’s transition from the "middle-income trap".By constructing a mediation effect model,using industrial structure upgrading as a mediation variable,and decomposing it into two indicators,namely,industrial structure upgrading and industrial structure rationalization,respectively,to explore the mediation effect of these two indicators.The results show that digital finance can effectively empower the upgrading of industrial structure to help solve China’s middle-income problems.Among them,the rationalization of industrial structure plays a positive intermediary role,while the upgrading of industrial structure is mainly manifested as a masking effect.In the sixth part,effective policy recommendations are proposed based on the above empirical analysis conclusions.To accelerate the construction of "Digital China" and fully unleash the digital dividend;Strengthening the resource allocation function of the financial system through digital finance;To accelerate the improvement of financial literacy among residents in underdeveloped areas;In order to promote comprehensive and coordinated development among different regions,Differentiated digital finance policies should be implemented in each region;Strengthening the coordination and cooperation between digital finance and industrial policies.