Does Green Finance Expand China's Green Development Space? Evidence from the Ecological Environment Improvement Perspective

It is important to explore the intrinsic mechanism of green finance’s role in widening the green development space for China, in order to optimize the structure of green financial development and accelerate the construction of a modernized economic system. Taking ecological environment improvement as a new research perspective, this paper presents the impacts and mechanisms of green finance on the green development space of the economy and society through the fixed-effect model and moderating-effect model, based on panel data from 30 provinces and municipalities in China from 2011 to 2020. The findings show that green finance development in China significantly expands the green development space of the economy and society, and this conclusion did not change after robustness tests such as replacing the main variables, adjusting the study interval, and considering endogeneity. In terms of its mechanism of action, ecological environment improvement plays an important mediating and regulating role in the process of green finance, essentially magnifying the green development space of the economy and society. In terms of a heterogeneity analysis, the effect of green finance on the expansion of the green development space is the largest in the eastern region, followed by the northeastern region, and the smallest in the central and western regions. In addition, the positive effect of green finance is relatively larger in regions with a higher urbanization level, government fiscal expenditure level, foreign investment level, and advanced industrial structure. The main contribution of this paper is to the field of green development, revealing the important role of the ecological benefits of green finance, which can help to achieve high-quality sustainable development in the economy and society.