How Digital Finance Facilitates the Release of Urban Residents’ Consumption Potential

Consumption is a critical driver of economic growth, particularly in sustaining domestic demand. In China, the government has prioritized boosting consumption through financial reforms and digital financial services. However, the impact of digital finance on urban household consumption and its heterogeneous effects across demographics remain underexplored. This study addresses this gap using micro-level data from the China Household Finance Survey (CHFS). The findings reveal that digital finance significantly increases the marginal propensity to consume (MPC), with the strongest effects among middle-to high-income groups and in central China. Lower-educated households show greater spending growth, particularly in transportation and communication, while digital finance facilitates consumption upgrades toward higher-value categories. These insights provide valuable guidance for policymakers promoting financial inclusion and sustainable consumption-driven growth.