Inclusive Finance, Income Gaps and Common Prosperity

According to the Report to the 20thCPC National Congress, delivering common prosperity for all the people is an intrinsic requirement of Chinese modernization. Based on China Household Finance Survey(CHFS) data from 2015 to 2019, this study examines the effects of inclusive finance on China’s household income disparities and demonstrates how inclusive finance contributes to shared prosperity. Our empirical research reveals that inclusive finance has significantly decreased the income disparities between Chinese households. Inclusive finance has significantly increased the income levels of households below the 40thpercentile, making it more likely for them to move above the 40thpercentile of incomes, which is conducive to delivering common prosperity. Our analysis indicates that inclusive finance will reduce income disparities by assisting low-income households in starting a business and by promoting rural household employment. Reflecting its inclusive nature, further investigation reveals that inclusive finance has a greater positive impact on the income level of vulnerable households. Our research offers new evidence for comprehending the role of inclusive finance and a new interpretation of income disparities,with policy implications for accelerating Chinese modernization.