Resources Policy 78 (2022) 102885

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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

The asymmetric effect of green investment, natural resources, and growth

on financial inclusion in China
Deliang Pang a, Kuangzhe Li b, *, Gang Wang c, Tahseen Ajaz d
a
Northeast Asia Research Center of Jilin University, 2699 Qianjin Street, Changchun, China
b
Northeast Asian Studies College of Jilin University, 2699 Qianjin Street, Changchun, China
c
The School of Computer, Jimei University, 185 Yinjiang Road, Xiamen, Fujian Province, China
d
School of Economics, Quaid-i-Azam University, Islamabad, Pakistan

A R T I C L E I N F O A B S T R A C T

Keywords: The financial system plays a significant role in subsidizing an economy’s adaption to environmental challenges
Green investment and promoting its resilience to ecological perils in the context of financial needs. So, researchers have shifted
Natural resource rent their efforts to exploring financial development as a mitigating factor of environmental deprivation. In a similar
Income
context, the current study examines the role of green investment and natural resource rent in boosting Financial
QARDL
Causality
Inclusion (FI) in China from the period of 1990-to 2018. In compliance, a novel empirical estimation technique
popularised, the “quantile autoregressive distributed lag” (QARDL) model, is used to assess the influence of green
investment (GIN) and natural resource rent (NRR), and per capita income on the financial inclusion for China.
We have used the QARDL model to overcome the drawbacks of using any conventional model such as the ARDL
model. In addition, it will give us a robust approach and in-depth analysis of the issue under discussion. Ac­
cording to the empirical findings, green investment is positively and significantly associated with financial in­
clusion throughout the quantiles in the long run. Natural resource rent exerts a positive and significant influence
on financial inclusion in higher quantiles in the long run. In addition, the per capita income significantly in­
creases the financial inclusion at all quantiles. The empirical analysis explored the bi-directional causality in the
selected variables. According to current empirical results, green investment and natural resource rent are the two
most influential factors in boosting financial inclusion in the case of China. Hence, policies should be made on
initiating new projects, green investment, and promoting natural resource rent-seeking attitude by mitigating the
misuse of natural resources and refining the prevailing natural resource tax laws in China.

1. Introduction Wang et al., 2020, 2021).

Financial inclusion is a vital part of financial reform in endorsing
economic expansion. Financial inclusion’s primary motivation is to
deliver financial services to the groups that cannot access these services.
In this way, it encourages ‘vulnerable groups’ to invest in commercial
services by resolving the issue of financial hitches to small and medium-
sized enterprises and dropping poverty rates and social inequality
(Dogan et al., 2021a; Li et al., 2021; Umar et al., 2021). Financial in­
clusion has become a development policy significance in several coun­
tries (Nanda and Kaur, 2016). In this regard, China considered
enhancing inclusive growth and green development in its 13th Five-Year
Plan. It is well-established that green investment and financial inclusion
can encourage green development and inclusive growth (Su et al., 2022;
Financial inclusion plans attempt to ensure that everyone, especially
low-income people, women, and small and medium businesses enter­
prises (SMEs), has access to and uses appropriate formal financial ser­
vices (transfers, savings, loans, and insurance) from a mix of public and
private sources. Financial inclusion can increase risk diversification and
economic growth by expanding financial systems. When financial ser­
vices are targeted to the needs of the poorest and most marginalized, it
can also help reduce income disparity. Access to financial services, such
as current and savings accounts and loans, helps low-income households
improve their situations by investing in physical assets, education, and
enterprises. Households with access to financial services can better resist
the effects of economic stress and seasonal income fluctuations. People
can use savings and borrowing to plan, adjust to change, and absorb

* Corresponding author.
E-mail addresses: pangdl@jlu.edu.cn (D. Pang), likuangzhe@163.com (K. Li), 13749261@qq.com (G. Wang), tahseen@eco.qau.edu.pk (T. Ajaz).

https://doi.org/10.1016/j.resourpol.2022.102885
Received 5 January 2022; Received in revised form 23 June 2022; Accepted 30 June 2022
Available online 16 July 2022
0301-4207/© 2022 Elsevier Ltd. All rights reserved.
D. Pang et al.
shocks. To invest, innovate, take advantage of market possibilities,
manage cash flow and costs, and limit risks, businesses require access to
financial services. As a result, FI is an important policy area for
enhancing resilience at the local, meso, and macro levels. For these
reasons, financial inclusion has piqued the interest of some of the
world’s most powerful institutions.
In this respect, financial inclusion supports reducing transaction-
related costs, improving information asymmetries, optimizing the allo­
cation of resources, and enhancing resource utilization productivity,
thus endorsing green economic efficacy (Güven, 2018; Z.-Z. Li et al.,
2021; Su et al., 2021). Numerous countries have taken different mea­
sures to encourage financial inclusion (Wang and Guan, 2017). Starting
in 2007, in Kenya, the initiative was based on the mobile phone delivery
of financial services (Shen et al., 2021; Wang and Guan, 2017), which
opened the door to better access to financial services for many unbanked
residents. In similar examples like the United Kingdom developed the
“Financial Inclusion Taskforce” to help the Government guarantee ac­
cess to financial services. These initiatives improved the probable access
to finance; most of those before were financially excluded.
The financial sector plays a critical role in carrying the financial
demands of the private sector and distributing credit to individuals and
households (Dogan and Turkekul, 2016). It also plays a significant role
in subsidizing an economy’s adaption to environmental challenges and
promoting its resilience to environmental perils in the context of
financial needs. The financial sector can help to reduce climate change
and sustainability-related risks. It also moderates the impression of these
risks and acclimatizes to climate change, channeling the budget to sec­
tors more prone to climate issues. The environmental issue affects the
financial sector due to its extensive influence throughout the sectors and
borders. The increasing inevitability of these hazards will appear and
have irreversible significance if left unattended. In recent years, the
technological development in financial infrastructures, such as fintech
firms and mobile operators, has amalgamated banks and microfinance
companies to provide financial services (Su et al., 2021). Technological
advancements have enabled providers to forego their investment in a
framework with a physical attendance to bring financial services with a
digital footprint. Green investment is imperative as it encourages and
promotes the financial inclusion flow and interlinked services to the
growth and execution of sustainable business plans, investments, eco­
nomic, trade, social, and environmental developments and policies.
According to International Finance Corporation, in 2016, the total
green finances and banks credited to the private sector in emerging
countries were about USD 1.5 trillion (IFC, 2018). This estimate shows
an unsatisfactory regulatory framework toward banks’ strategies and
the failure to integrate environmental risks into risk management sys­
tems. Financial development put a significant role in evolving sustain­
able eco-growth through intermediary functions. In contrast, green
finance signifies the upcoming expansion of the financial sector through
its ground-breaking financial mechanisms and by creating investment
projects with positive externalities. Vulnerable groups are essential in
transitioning towards a resilient and environmentally stable economy. It
is believed that climate mitigation policies could work effectively
without enhancing the socioeconomic condition of vulnerable groups. It
argues that green finance plays a vital role in supporting vulnerable
groups in acclimatising to environmental change, firming their resil­
ience, and empowering mitigation of climate change and ecological
degradation.
The positive initiatives related to green finance also gained much
attention. They addressed in the 2030 Sustainable Development Goals
(SDG’s) by shifting attention from shareholders’ value creation to the
creation of stakeholders’ value, shifting from only economic value to
economic value, environmental and social values (Jiang et al., 2022). In
the academic literature, the notion of green finance and the concept of
financial inclusion have been taken as two separate concepts. However,
this study tries to explain a meaningful association between these con­
cepts. The target groups in financial inclusion are disproportionally
2
Resources Policy 78 (2022) 102885
exposed to the risks and impressions of local and global environmental
change, playing a significant role in qualifying environmental change.
On these grounds, the present study explained a holistic approach to the
possible connection between green investment and financial inclusion in
the policy context of an integrated, inclusive green finance (IGF)
approach. China’s plan to decrease greenhouse gas emissions intensely
through the next few decades also put growing pressure on the financial
system. Like other emerging economies around the globe, China has
boarded the path of sustainable development in the context of the green
economy. The main goal is to expand social equity and well-being and
suggestively reduce environmental perils (UNEP, 2011). Around the
globe, China is one of the central countries facing the issue of pollution
badly. Environmental contamination and resource enervation result
from an extensive economic development model.
Another important deriving factor of financial development is nat­
ural resource rent. Natural resource rent (NRR) as a significant deter­
minant of financial development has gained considerable consideration
among researchers such as (Guan et al., 2020; Mlachila and Ouedraogo,
2020; Shahbaz et al., 2018; Yuxiang and Chen, 2011), yet the studies
have been unsuccessful in determining its role conclusively. Colossal
literature (Dwumfour and Ntow-Gyamfi, 2018) has testified an inverse
impression of the NRR on the financial system in several
resource-intensive economies by explaining “the resource curse hy­
pothesis” or “the natural resource curse paradox” (Satti et al., 2014;
Williams, 2011). However, this paradox, viewed as an obstacle to
development, has been criticized by various studies in their empirical
analysis (Zaidi et al., 2019). It explains natural resources as an incentive
to the financial system and is evidenced as a blessing rather than a curse.
Studies showed that the harmful impression of the NRR on financial
expansion has not always-happened phenomenon (Mlachila and Oue­
draogo, 2020; Shahbaz et al., 2018; Zaidi et al., 2019). Studies justified
that several factors could assist economies in gaining advantages from
resource-related revenue and alter the former hypothesis to a blessing
hypothesis (Petkovski and Kjosevski, 2014). Conveyed that the states’
inability to administer and channel the resource rent to the growth is the
prime cause of the resource-curse hypothesis. Hence, the philosophy
hypothesizes that the existence of enhanced institutions quality can
overcome the damaging effects of the resource by refining the quality of
political and economic institutions and monitoring the rent-seeking
behavior (Badeeb et al., 2017; Boschini et al., 2007; de Medeiros
Costa and dos Santos, 2013; Mehlum et al., 2006). These can control the
overexploitation and misuse of resource rent and enable countries to get
out of the undesirable externalities of the NRR and thus enhance
financial development.
Although green investment has an important impression on financial
inclusion, literature in this area has made limited effort to explore the
mechanism. Therefore, as an attempt to fill this gap, this study examines
the role of green investment and natural resource rent on financial in­
clusion in promoting green investment as a determinant of financial
inclusion and the underlying working mechanism. Similarly, a vast
amount of literature explores the possible effects of NRR and financial
development, yet limited or no literature is found on the critical deter­
minant of financial development, i.e., financial inclusion. The present
study tries to bridge the gap in several ways. First, by analyzing the
related empirical work, we can deduce that the existing study is the first-
ever study for China, which puts attention on the role of green invest­
ment, natural resource rent, and GDP in explaining the possible effect of
financial development by using financial inclusion, which produces an
accurate picture of vulnerable segment of the population of China.
Second, we analyze the effect of natural resource rent on financial in­
clusion; previous literature only explains the possible channel of natural
resource rent on financial development. Third, the quantile autore­
gressive distribute lag approach (QARDL) has been adopted by the study
to estimate the magnitude such as quantile base relationship among
financial inclusion (FI), green investment (GIN), and natural resource
rent (NRR), and per capita income (GDP). The QARDL approach of
D. Pang et al.
analysis introduced by (Cho et al., 2015a) is one of the efficient quan­
titative methods with a more exclusive way of analyzing the long-term
and short-term dynamics over different quantiles. It also offers a
consistent econometric framework for determining the relationship be­
tween various variables.
Furthermore, the QARDL approach of analysis is also considered the
potential asymmetric effect and nonlinear relationship between finan­
cial inclusion (FI), green investment (GIN), natural resource rent (NRR),
and per capita income (GDP). One of the important advantages of
applying the QARDL technique is that it enables us to check the con­
sistency of the long-term associations across the different quantiles. In
the context of the present study also offers a broader consideration of the
associations amid the variables. The QARDL approach has wider and
greater advantages than the ARDL model, as linear ARDL cannot detect
nonlinearity among different variables and deliver limited insight. The
ARDL model has given a simpler way of analyzing a problem. Still, on
the other hand, our adapted approach to the QARDL model has provided
an in-depth analysis of the issue at hand in a detailed manner at different
quantiles. The study’s findings illustrate that in the long-run, financial
inclusion (FI) inversely and significantly influenced the green invest­
ment throughout the quantiles, besides the natural resource rent (NRR)
affects the financial inclusion in medium to higher quantiles. Corre­
spondingly, the per capita income is also positively and significantly
associated with a bullish market. The study’s findings revealed that the
outcomes are almost the same in the long and short run.
The rest of the paper has been organized as follows: the literature
review has been covered in section 2, and the methodology has been
well-defined in section 3. Empirical findings and analysis have
discoursed in section 4, and lastly, section 5 concludes the whole paper
and offers policy implications.
2. Literature review
Banking authorities and financial managers around the globe are
likewise considering how they can augment sustainable development
and improve environmental quality. There is growing consciousness
among financial development because of the need to factor climate
change into the financial risk valuation in their portfolios (Bonnel and
Swann, 2015). Climate change has a detrimental effect on investment
activities and their portfolios’ performance (Battiston et al., 2017). In
this way, promoting resilience using financial facilities would be a better
stimulating initiative to address the climate issue. However, the complex
international financial exposure and the interconnected financial system
increase the climate perils into financial peril, which is central to
identifying and regulating potential financial system risk (Battiston
et al., 2017; Carney, 2015).
Additionally, financial intermediaries have also documented the
significance of evaluating the prospects produced by their projects
concerning the effect on climate programs in terms of retribution and
adaptation and their arrangement with the SDGs. Still, development
finance institutions endure mainstream climate risk assessment and
scaling up private investments into low-carbon sectors. The groundwork
for sustainable investments in China was established in 2016 when
various state bodies raised the guidelines for establishing the Green
Financial System, which encourages investment in an extensive range of
projects, for instance, clean energy projects, green transportation, and
green buildings.
Over the last 30 years, China has continued its rapid development
process and become the second-largest economy globally. Bridging this
success, however, entailed immense and inefficient resource consump­
tion and hazardous effect on the environment quality (Wang et al.,
2016). Conversion from a polluted country to a green land is now a
deliberate priority for China. The notion of green finance is anticipated
to endorse green and inclusive economic growth by restructuring cur­
rent financial systems. After the worldwide financial crisis, establishing
a green and sustainable financial system that incorporates green
3
Resources Policy 78 (2022) 102885
investment rapidly fetches a global consensus. In 1989, China first
approved an environmental protection law in this regard. Initially, it is
more based on administrative implementation and fines (Zhang et al.,
2003). Though, in the last 15 years, the Chinese Government has
customized various environmental-related approaches to address the
problems through a range of the inclusive set of economic, legal, tech­
nological, and financial arrangements, focusing more on those directly
involved in mobilizing green finance from the financial system. Since
2010, 15 environmental protection funds and seven regional carbon
emanation pilots have been in action and are anticipated to be devel­
oped (Chen and Reklev, 2014).
Even though this finance covers a considerable portion of green in­
vestment, it is observed that the final buyers of these commercial fi­
nances are large investment companies or state-owned enterprises that
utilize government fiscal funding to deliver credit enhancement. How­
ever, less attention has been paid to the vulnerable segment of society in
explaining the climate issue. Green finance policies have, to some
extent, controlled the percentage of loans delivered to highly pollution-
producing and energy-consuming projects and also supported evolving
industries that are most involved in environmental safeguard (Liang
et al., 2014).
Many studies have revealed that financial inclusion is one of the best
ways to build resilience among individuals to the hazardous effects of
climate change. The origin of financial inclusion starts from the
‘Microfinance’ developed in the 1990s, and the primary aim was to
engrossed in helping a particular segment of the excluded society with
specific products (Cobb et al., 2016; Ledgerwood et al., 2013), whereas
financial inclusion includes all individuals who are excluded and em­
phases on a variety of services. Nowadays, there has been a growing
cognizance and debate that financial exclusion is a multi-dimensional
issue impacting one country’s individuals differently in both devel­
oping and developed nations. At the same time, financial inclusion has
been recognized as an imperative financial development policy globally
to boost the financial well-being of individuals, which decreases poverty
and encourages economic development (Bruhn and Love, 2014). In this
regard, no study tries to investigate that if we focus our green investment
on the excluded group, delivering more green products in this segment
would benefit financial development and, ultimately, the quality of the
environment.
(Jahanger et al., 2022) explained the interconnection between nat­
ural resources and financial development in the case of 73 developing
economies. They concluded that natural resources and financial devel­
opment are the two most significant factors to surge environmental
degradation. Another interesting study (Balsalobre-Lorente et al., 2022)
also highlighted that financial development had an unfavorable
connection with environmental quality in the case of newly industrial­
ized economies (Balsalobre-Lorente et al., 2022). illustrated the validity
of the pollution haven hypothesis (Dogan et al., 2021b). also elucidated
those environmental taxes directly affect the level of emissions in G7
economies. Similarly (Anwar et al., 2022), also described a rise in
inequality in energy use at the global level (Balsalobre-Lorente et al.,
2022). also expressed that urbanization is a mitigating factor toward
environmental degradation.
Likewise, exploring the query of whether the natural resource rent is
a “curse” or “blessing” for financial development, the literature has
established disagreeing views. The classical view proposes that natural
resource revenues deter financial development by inducing Dutch dis­
eases, trade openness, rent-seeking attitude, and corruption. In this way
(Yuxiang and Chen, 2011), study was the prime that argued the asso­
ciation between the NRR and financial development in China and
initiated an opposite effect of the natural resource rent and financial
development. They claim that the natural resource revenue has an in­
verse association with financial development through augmenting cor­
ruption, rent-seeking behavior, mismanagement of the resource
revenue, and Dutch diseases. More recently (Guan et al., 2020), also
analyzed parallel results for China. Besides (Mlachila and Ouedraogo,
D. Pang et al. Resources Policy 78 (2022) 102885

2020), inspected the resource-curse hypothesis in 68 resource-intensive

∑
P q1
∑ q2
∑
economies and reported evidence for the natural resource curse hy­ QFIN = ϑ(τ) + φj (τ)FINt− + ωj (τ)GINt− j + λj (τ)NRRt−
j j
pothesis in these countries. j=1 j=0 j=0
On the other hand, the potential role of institutions in financial and q3
∑
economic development has been broadly acknowledged (Khan et al., + ηj (τ) GDPt− j + εt (τ) (2)
2019, 2020). Regardless of how well-designed policy resources are j=0

abundant, if a country’s institutions are not working efficiently, the ( ) ( )

Where εt (τ) = FIN− QFIN τ
and QFIN τ
is the τth
positive outcome cannot be appropriately realized (Sarmidi et al., Ft− 1 Ft− 1

2014). NRR can be a blessing in FD if these institutions work correctly quantile of FIN qualified on the information function Ft− 1 demarcated
and manage corruption-related effects. The natural resource rent can by (Kim & White, 2003). Besides, the probability of sequential correla­
boost financial development by overcoming the issue of rent-seeking tion in the errors (residuals) also ascends; subsequently, Eq. (2) is
attitude, corruption, and embezzlement of resources. The literature restructured, and the redeveloped model of QARDL is as follows:
asserted that a comprehensive institutional environment could over­ q1− 1
∑
come the abuse of resources by potential check channels through which QFIN = ϑ(τ) + ℧GINj (τ)Δ GINt− 1 + ψ GIN (τ)GINt
the financial sector can turn the curse into a blessing. Although we found j=1

immense literature on natural resource rent and financial development, q2− 1

∑ q3− 1
∑
+ ℧NRRj (τ) ΔNRRt− + ψ NRR (τ) NRRt + ℧POPJ (τ)Δ GDPt−
we could not find a single study explaining the association between NRR 1 1
j=1 j=1
and financial inclusion. In this study, we try to bridge the gap.
+ ψ GDP (τ) GDPt + εt (τ)
3. Methodological framework and data (3)
q1
∑ q1
∑ q1
∑
3.1. Empirical methodology Where ψ GNI (τ) = ωj (τ), ℧GNIj (τ) = - ωj (τ)ψ NRR (τ) = λj (τ),
j=0 i=j+1 j=0
q1
∑ q1
∑ q1
∑
Our empirical analysis attempts to discover the interconnection be­ ℧NRRj (τ) = - λj (τ)ψ GDP (τ) = ηj (τ), ℧GDPj (τ) = - ηj (τ)
tween green investment and financial inclusion for the Chinese economy i=j+1 j=0 i=j+1

across different quantiles. The QARDL approach has been familiarised The parameters expressed in the preceding expressions characterize
(Cho et al., 2015a). The QARDL model permits us to elucidate the the short-term time dynamics, whereas the long-run connotation be­
quantile effect of green investment on financial inclusion in the long run tween green investment and financial inclusion is taken by reformulat­
to assess the long-term connotation amongst selected variables. It is the ing Eq. (3).
most advanced technique of the ARDL to deliver more systematic
(4)
′
QFIN = μ (τ) + X β(τ) + Et (τ)
measures to analyze the long-term and short-term dynamic relationships
over different quantiles and give a reliable econometric technique to P
∑ 1
With X = (GIN, NRR, GDP) and βGIN (τ) = ψ GIN (τ) [1- φGINj (τ)]−
estimate the node of included variables. Another vital advantage of the j=1
QARDL method is that it also measured the potential asymmetric effect ∑
∞ ∑
∞
And Et (τ) = γ GIN (τ)Δ GINt− 1 + θGINi (τ)Δεt− 1 , μ(τ) = ϑ (τ) [1-
and nonlinear association among financial inclusion (FI), green invest­ i=0 i=0
ment (GIN), natural resource rent (NRR), and per capita income (GDP). P
∑
Our empirical analysis employed the Wald statistic to estimate the pa­ φi (τ) ] and. γi (τ) = πi (τ)βNTT (τ), andβGDP are measured in the same
j=1
rameters ‘dependability and the time consistency of the coefficients custom. θ0 (τ), θ1 (τ), θ2 (τ), …………and {π0 (τ), π1 (τ), …….are defiend

[ ]− 1 [ ∑q1 ∑q1 ]
∑ p
∑ ∑
∞ ∞
1 j=0 ωj (τ)Lj j=0 ωj (τ)
θj (τ) = 1 − θi (τ)Lj and πj (τ)Lj = (1 − L)− ∑q1 − ∑q1
j=0 j=0 j=0 1− j=1 ωj (τ)Lj 1− j=1 ωj (τ)

across the quantiles to check the robustness.

We have the final version of our functional form of the ARDL model is
as under: To overcome the issue of the serial correlation of errors term, the
q1 q2 q3
further generalization of ARDL is:
∑
P ∑ ∑ ∑
FIN = ϑ + φj FINt=j + ωj GINt− j + λj NRRt− j + ηj , GDPt− j QΔFIN = ϑ + ρFINt− 1 + φGIN GINt− 1 + φNRR NRRt− 1 + φGDP GDPt− 1
j=1 j=0 j=0 j=0
q
∑ p∑
1− 1 p∑
2− 1 p∑
3− 1
+ εt + φj ΔFINt− 1 + ωj ΔGINt− 1 + λj ΔNRRt− 1 + ηj ΔGDPt− 1
(1) j=0 j=0 j=0 j=0

The error term εt in equation (1) is explained as the CE−
E(CE /F (t − 1)) with Ft− 1 as the smallest σ-field caused by all variables
{GIN, NRR, GDP, FINt− 1 , GINt− 1 , NRR− 1 GDPt− j , … ….} and p, q1 ,
q2 and q3 Are the long orders chosen under the consideration of Schwartz
information criteria?
The above equation GIN, NRR, and GDP are the logarithms of green
investment, natural resource rent, and GDP, respectively. The adjust­
ment in Eq. (1) brings a new form of the quantile model.
The final expression for the QARDL framework, established by (Cho
et al., 2015b), is:
+ +et …………(5)
The above equation has the severe issue of contemporaneous corre­
lation among et and ΔGINt ΔNRRt , and ΔGDPt . TO overcome the
contemporaneous correlation and avoid this issue, the study used a more
rigorous method by the projection of et on ΔGINt ΔNRRt , and ΔGDPt .
Therefore, the contemporary form with new projection is
et = ψ GIN ΔGIN + ψ NRR ΔNRR + ψ GDP ΔGDP + εt
Now, the equation is free from contemporaneous correlation among
variables. Additionally, when we integrate the projection in the above

4
D. Pang et al. Resources Policy 78 (2022) 102885

equation and simplify it for quantile estimation, the dynamic quantile and Std. Dev. are 0.753and 1.002.
error correction model ECM of the QARDL method is: The mean and Std. Dev for natural resource rent and GDP possess
( )( ( ) ( ) (2.001, 0.951) and (0.021, 1.001). The correlation matrix confabulates
QΔFIN = ϑ(τ) + ρ τ FINt− 1 − βGIN τ GINt− 1 − βNRR τ NRRt− the outcomes of the possible interconnection and the significance of the
1
selected variable with financial inclusion. Moreover, we borrowed
( ) ( )
q− 1
∑ p∑
1− 1 Jarque-Bera statistics (JB) to check the normality of the data. The value
− βGDP τ GDPt− 1 − τ φj ΔFINt− 1 + ωj ΔGINt− 1 of the JB statistic elucidates a significant value of selected variables that
j=1 j=0 confers the nonnormality of data. Therefore, it induces nonlinear esti­
p∑
2− 1 p∑
3− 1 mation, which may tackle efficiently with such a data type. The present
+ λj ΔNRRt− 1 + ηj ΔGDPt− 1 + et (6) analysis permits us to apply quantile estimation that illustrates the
interconnection between selected variables (Mishra et al., 2019; Sharif
j=0 j=0

The short-term cumulative effect of lag of financial inclusion (FIN) et al., 2017).
q−
∑1
on the current level of financial inclusion is measured by φ* = φj .
j=1 4. Empirical results and discussions
Where the cumulative short-term impression of current and past levels
of green investment, natural resource rent, and GDP are measured as The core focus of the current empirical analysis is analyzing the
p∑
1− 1 p∑
2− 1 p∑
3− 1 p∑
4− 1 impressions of green investment and natural resource rent (NRR) on
ω* = ωj , λ* = λj , η* = ηj and θ* = θj Are respectively. The financial development (FD) in the case of China. In empirical research,
j=0 j=0 j=0 j=0
the critical stage is checking the order of integration in time series data
long-term cointegrating parameters for remaining variables, for
to find the appropriate and suitable model. The present study used the
instance, green investment, natural resource rent, and GDP can also be
structural break unit-root method developed by Zivot and Andrew to
measured as βGIN* = φGIN /ρ , βNRR* = − φNRR ρ , and βGDP* = −
φGDP
ρ check the unit-root properties. The outcomes are depicted in Table 2,
respectively. and we can observe that all variables FIN, GIN, NRR, and GDP, are
Finally, the error-correction model (ECM) assumes that the long-run stationary at first difference. The main objective of applying this
coefficient is expected to be significant and negative. From the above (structural break unit-root) test is to attain robust estimates and remove
expression, we can see that all parameters have converse connotations any biased estimates in the analysis.
and realize the requirement. The empirical outcome of the quantile autoregressive distributed lag
Furthermore, the present study uses the Wald test to test green in­ (QARDL) model is depicted in Table 3. The QARDL estimates illustrate
vestment’s nonlinearity and asymmetric effects on financial inclusion. It that the speed of adjustment coefficient is negative and significant for
is applied to assess the null hypotheses of the parameters φ* , ω* , each quantile, which validates the incidence of the long-term equilib­
β* and ρ* , by utilizing Chi-square approximation. According to Granger rium between the chosen variables, i.e., green investment, natural
(1969), a variable is a predictor of an alternative variable or not in the resource rent, and GDP per-capita income in the case of China. It can
framework of causality analysis to explain the causal relationship. This also perceive from the outcome that the significance level of speed of the
test illustrates that the current value of the focused (dependent) variable adjustment coefficient is higher at the median quantiles (0.225). One of
is conditional to the own values or lag values of the explanatory vari­ the most significant contributions of the present analysis is that it as­
ables. Further, to scrutinize the quantile-causal financial inclusion with sesses the effect of green investment on financial inclusion. The coin­
green investment, NRR, and economic growth, we apply “Granger-­ tegration parameter of green investment is encouraging, indicating an
causality in the quantiles” established by (Troster et al., 2018). upward inclination and long-term connotation between green invest­
ment and financial inclusion in the case of China.
3.2. Data description On the contrary, the coefficients of green investments are higher at
the quantile 0.30 and 0.95. Thus, an increase in the investment in green
The data information embraces four variables, financial inclusion projects is positively associated with financial inclusion and negatively
(FIN), which is domestic credit to the financial sector, green investment associated with CO2 emissions. Green investments are considered and
(GIN) measured as total energy and environmental protection expen­ evidenced as one of the utmost promising and operative methods to
ditures, natural resource rent (NRR), and GDP income of China. The overcome CO2 emissions.
selected variables are borrowed from the World Bank official website One of the main objectives of green investments is to mitigate the
(WDI, 2021) for the period 1990–2018. Additionally, the current study possessions of climate change, and doing so also mobilizes capital for the
also transformed the year-wise information into quarter-wise by “underserved and unbanked” sections of communities, moreover, by
allowing the match-sum approach (W. Li et al., 2021). The technique channelizing funds to the small and medium enterprises (SMEs) that face
will enable us to convert the small frequency data to extensive frequency
data and seasonal deviation, which is the main advantage of opting for
this method. Table-2
The descriptive investigation of the present study is elucidated in Results of Unit root test.
Table 1, which depicts the mean value of chosen variables as positive
Variables ADF ADF (Δ) ZA Break ZA (Δ) Break
and yields a deviation of the mean is low. The mean value for FIN is 1.01 (Level) (Level) Year Year
with Std. Dev. of 0.015. In the case of green investment, values of mean
FIN − 0.654 − 5.011*** − 1.010 2008 − 6.010*** 2001
Q4 Q2
Table 1 GIN − 1.010 − 6.031*** − 2.021 2016 − 8.012*** 2017
Results of descriptive statistics. Q1 Q4
NRR − 0.314 − 5.012*** − 1.013 2006 − 9.011*** 2003
Variables Mean Min. Max. Std. Dev. J-B Stats Q2 Q1
FIN 1.010 0.101 2.001 0.015 54.043*** GDP − 1.011 − 4.010*** − 2.001 2014 − 7.014*** 2010
GIN 0.753 0.035 1.010 1.002 33.022*** Q2 Q1
NRR 2.001 1.011 3.001 0.021 16.048***
Note: The values specify the statistical outcome of the ADF and ZA test. The
GDP 0.951 0.019 1.010 1.001 28.039***
asterisks ***, **, and * represent the significance level at 1%, 5%, and 10%,
Note: The asterisk ***, ** and * represent level of significance at 1%, 5% and respectively.
10% respectively. Source: Author Estimation

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D. Pang et al. Resources Policy 78 (2022) 102885

Table 3
Results of quantile autoregressive distributed lag (QARDL) for financial inclusion.
Quantiles Constant ECM Long-Run Estimation Short-Run Estimation

(τ) α*(τ) ρ*(τ) βGIN(τ) βNRR(τ) βGDP(τ) φ1(τ) ω0(τ) ω1(τ) θ0(τ) έ0(τ)

0.05 0.015 − 0.209*** 0.311* 0.103 0.282*** 0.345*** 0.143 0.037 0.032*** 0.037*
(0.017) (-3.254) (1.699) (1.210) (3.002) (4.037) (1.026) (0.981) (2.991) (1.743)
0.10 0.006 − 0.201*** 0.324* 0.104 0.260*** 0.453*** 0.130 0.054 0.012*** 0.029*
(0.015) (-3.314) (1.801) (1.308) (2.992) (3.831) (1.232) (1.601) (3.001) (1.730)
0.20 0.012 − 0.228*** 0.318* 0.100 0.278*** 0.483*** 0.134 0.069* 0.052*** 0.024*
(0.006) (-3.231) (1.791) (1.211) (3.001) (4.030) (1.327) (1.710) (2.992) (1.711)
0.30 0.019 − 0.217*** 0.343** 0.105 0.264*** 0.465*** 0.149 0.053* 0.063** 0.034*
(0.016) (-3.317) (1.999) (1.209) (2.991) (4.243) (1.420) (1.671) (1.991) (1.652)
0.40 0.013 − 0.204*** 0.310** 0.101 0.273** 0.374*** 0.150*** 0.023* 0.023** 0.019
(0.013) (-3.507) (2.229) (1.214) (1.980) (3.778) (3.124) (1.801) (1.901) (1.258)
0.50 0.021 − 0.225*** 0.304** 0.109 0.252** 0.442*** 0.141*** 0.043* 0.034* 0.020
(0.010) (-3.435) (2.408) (1.503) (1.961) (4.364) (3.439) (1.699) (1.801) (1.047)
0.60 0.011 − 0.115** 0.317** 0.118* 0.269* 0.367*** 0.165*** 0.024** 0.021* 0.032
(0.007) (-2.454) (2.791) (1.673) (1.789) (4.085) (3.025) (1.962) (1.700) (1.031)
0.70 0.014 − 0.103** 0.321*** 0.118* 0.270* 0.480*** 0.140** 0.024** 0.050 0.028
(0.004) (-2.501) (3.002) (1.718) (1.642) (3.974) (2.745) (1.980) (1.609) (0.718)
0.80 0.020 − 0.121* 0.316*** 0.190** 0.258 0.354*** 0.171** 0.029** 0.073 0.021
(0.005) (-1.750) (2.992) (1.996) (1.603) (4.441) (2.337) (1.991) (1.599) (0.627)
0.90 0.025 − 0.014 0.320*** 0.112** 0.274 0.372*** 0.159* 0.020** 0.059 0.027
(0.002) (-1.248) (3.001) (2.212) (1.609) (4.832) (1.848) (2.001) (1.470) (0.512)
0.95 0.016 − 0.047 0.341*** 0.166** 0.263 0.357*** 0.170* 0.026** 0.068 0.019
(0.003) (-1.321) (2.991) (2.107) (1.629) (4.951) (1.836) (1.989) (1.501) (0.217)

Note: The Table reports the quantile estimation results. The t-statistics are between brackets. ***, ** and * indicate significance at the 1%, 5% and 10% levels,
respectively.
Source: Author Estimations.

barriers to get investments and bottlenecks in their journeys to trans­

Table 4
form and participate in inclusive growth. In addition, green finance
Results of the Wald test.
enhances the environmental quality by issuing green bonds to finance
with the clear objective of social benefit and should be vital to make sure Variables Wald-statistics [P-Value]

that this growth is inclusive and only benefitting people(Wang et al., ρ 12.010***
2021). On the one hand, giving cheap financial products and green [0.000]
8.662***
technology investments and delivering more convenient access to βGIN
[0.000]
companies improves financial inclusion accessibility (Le et al., 2020; Hu βNRR 9.967***
et al., 2022). In this way, the financial inclusion system can be very [0.000]
supportive of mitigating the environmental risks through financing βGDP 3.580**
environmentally friendly technology like green technology (Yu et al., [0.000]
16.992***
2022).
φ1
[0.000]
In the case of natural resource rent, the long-run coefficient has a ω0 2.951**
beneficial and significant effect in higher quantiles, and we also observe [0.031]
a mixed magnitude trend in quantiles (0.6–0.95). It means that natural ω1 0.251
[0.999]
resource rent has a strong association with higher quantiles. Natural
θ0 5.001***
resource rents are one of the main sources used in the financial devel­ [0.000]
opment system. The surge in individual savings, with the natural re­ έ0 1.296
sources, upsurges the financial system’s funding volume by shifting the [0.224]
revenues gained associated with these revenues to the financial in­ The p-values are between square brackets. ***, ** and *
stitutions (Yıldırım et al., 2020). The impression of income from every indicate significance at the 1%, 5% and 10% levels,
resource on financial development is not at the same level for each respectively.
country. However, in the case of China, we observed that this effect is Source: Author Estimations
more promising at a higher level of natural resource rent.
The study also analyzed the role of per-capita income in raising the previous changes in GDP per-capita income positively and signifi­
financial inclusion in the case of China. Table 3 also shows that GDP cantly affect financial inclusion throughout all quantiles.
beneficially prompts the level of financial inclusion in China. GDP per The present study applied the Wald test to check the parameter
capita and the saving rate positively affect the financial development constancy in our empirical analysis. The estimation results demonstrate
system (Jaffee and Levonian, 2001). China is the fastest-emerging that the null hypothesis of the parameters towards linearity is rejected,
country with an improved economic system, focusing more rigorously confirming the validity of the asymmetry of the parameters. While the
on its financial system by establishing new financial plans. Wald test statistic also stated that long-run connotations among green
Alongside long-run estimation outcomes, the short-term time dy­ investment, natural resource rent, income, and financial inclusion
namics established that the lag values of financial inclusion have a establish an asymmetric dynamic. This justification reflects these out­
positive and significant effect on the current level of financial inclusion comes from the structural transformation in the different periods of
at all the quantiles. Furthermore, the contemporaneous impact of green macroeconomic revolutions in China over the period.
investment on current financial inclusion is positive and significant at In a similar context, by observing the Wald test’s estimated values,
(0.4–0.95) quantiles. In this way, empirical results show that natural one can get that the Wald test rejected the null hypothesis and accepted
resource rent is positive and significant (0.2–0.95) quantile. Likewise, the nonlinearity in the short term, the cumulative effect of the past

6
D. Pang et al. Resources Policy 78 (2022) 102885

Table 5 the Chinese Government must bring about innovative projects of green
Granger causality in quantile test results. finance on a prior basis. Products related to green finance are evolving
Quantiles ΔFINt ΔGINt ΔFINt ΔNRRt ΔFINt ΔGDPt but still limited in coverage, type, and usage. Bank loans only provide
↓ ↓ ↓ ↓ ↓ ↓ the critical source of financing, followed by environmental liability in­
ΔGINt ΔFINt ΔNRRt ΔFINt ΔGDPt ΔFINt surance. However, China has made remarkable advancements in
[0.05–0.95] 0.000 0.000 0.000 0.000 0.000 0.000 expanding green investment; still, many hindrances are also there to
0.05 0.000 0.000 0.000 0.005 0.000 0.000 meeting the financing needs and shifting to a green country. Such dif­
0.1 0.000 0.000 0.000 0.010 0.000 0.000 ficulties in the tangible economy regulations translate into obstinate
0.2 0.000 0.000 0.000 0.001 0.000 0.000
0.3 0.000 0.000 0.000 0.006 0.000 0.000
incentives against green finances, consequently growing risks and un­
0.4 0.000 0.000 0.000 0.011 0.000 0.000 certainties to financial institutions and the economy’s overall health.
0.5 0.000 0.000 0.000 0.015 0.000 0.000 Despite the rapid expansion of financial inclusion in China, the notion of
0.6 0.000 0.000 0.000 0.012 0.000 0.000 green finance is new. The diffusion and financial inclusion sustainability
0.7 0.000 0.000 0.000 0.009 0.000 0.000
require expanding, developing, and realizing that China’s prosperous
0.8 0.000 0.000 0.000 0.013 0.000 0.000
0.9 0.000 0.000 0.000 0.004 0.000 0.000 financial inclusion market still has far to reach. The Government needs
0.95 0.000 0.000 0.000 0.000 0.000 0.000 to integrate environmental protection objectives into local economic
and social development plans. The improvements in the green financial
Source: Authors Estimation.
system and priority to green activities and low carbon industries
application process are necessary for the green, ecological, and healthy
realization of financial inclusion in every quantile (see Table 4). Like­
environment (Ajaz and Kanwal, 2018; Majeed and Ajaz, 2018; Razzaq
wise, the outcomes direct that all explanatory variables have a
et al., 2021). Green financial growth in vulnerable and underdeveloped
contemporaneous nonlinear impact on the focused variable in the cur­
regions lowers the issuance and trading thresholds for green bonds and
rent research. Conversely, the empirical result also shows that the short-
green securities. Financial services also enable the vulnerable people
term cumulative effects of green investment, natural resource rent, and
(poor) to make inexpensive investments in alternative green technology
per-capita income on financial inclusion are asymmetrical (nonlinear) at
and motivate them to embrace healthier environmental practices, which
the 1% significance level across all quantiles.
decrease donations to climate change and potentially enhance welfare at
The results of the Granger-Causality test are presented in Table 5,
the individual level.
where the p-value shows the causality among the variables. We observed
Green investment has several ramifications that connect the present
a bi-directional causal association between selected variables by
to the future. The most prominent element in its context is financial
analyzing the overall quantiles, i.e., green investment, natural resource
management, which is intertwined with sustainability. Finance sus­
rent, income, and financial inclusion.
tainability entails many weighted factors, ranging from balancing re­
cords to resource management, all covered by GI. The GI focuses on
5. Conclusion and policy recommendations
environmental dangers, and the applicability of risk reduction is
controlled from providing funds to the specific project to the financial
The present study analyzed the impact of green investment, natural
inclusion. Because of the early stages of the project’s preventative
resource rent (NRR), and per-capita income on financial inclusion in
methods, GI has a wonderful way of influencing financial sustainability.
China. The current analysis employed the QARDL econometric method
The transformation is expected to be tangible when important sustain­
to assess the underlined associations. Moreover, the current research
ability aspects (through conservation) are addressed, resulting in a
also evaluated the causation across the quantiles for the chosen vari­
brighter and less polluted future. Finance will also have been properly
ables. The estimated outcomes offer inclusive explanations of the vari­
handled to vulnerable groups to address any future difficulties if left to
ables against the conventional (OLS, ARDL, NARDL) approach.
their own devices.
The concerning outcomes of the QARDL approach divulge that the
Secondly, the study explored that natural resource rent is one of the
error-correction term (ECM) is negatively and significantly related
crucial factors of financial inclusion. Thus, it is vital to regulate such
across the quantiles. The outcomes intricate the convergence towards
policies, lowering the possible effects of rent misusing and boosting
the long-run equilibrium path between the included variables and
China’s financial inclusion. This empirical analysis endorses the
financial inclusion. The present analysis divulges that green investment
following policy recommendations based on these empirical results. The
is crucial in eradicating the harmful impressions of climate change by
Government of China should alleviate the overexploitation of NRR by
focusing investment on vulnerable segments using financial inclusion,
improving the prevailing tax laws on natural resources. An environ­
manifest in the range of quantiles (0.30–0.95). In contrast, empirical
mentally friendly natural resource tax law should also be established to
outcomes for NRR elaborate that in the long term, NRR is a significant
boost green finance. At the same time, these policies must be framed to
channel to improve financial inclusion in the case of China as it is
link green investment to financial development and upsurge the overall
explored from 0.6 to 0.95 quantile. Furthermore, we have scoured the
size of financial inclusion in China. China should also intensify the in­
effect of GDP on financial inclusion in China. The outcome shows that
vestment in renewable energy projects to certify cleaner production and
per capita GDP beneficially influences China’s level of financial devel­
decrease carbon emanation in vulnerable groups. Lastly, the increase in
opment. However, the impression is significant at the lower and medium
per capita income also boosts financial inclusion, so improvement in
quantile, from 0.050 to 0.70. Additionally, the current study has
overall economic activity also has a beneficial impact on green finance
employed the QARDL approach. The empirical findings of the QARDL
and, ultimately, financial development.
framework exposed that in the long-term, the practices of green in­
vestment, natural resource rent, and GDP serves as boosting factors for
Authors statement
financial inclusion and ecological quality in China.
The empirical outcomes offer a few exciting policy intuitions. Firstly,
Deliang Pang: Conceptualization, Resources, Visualization, Writing-
our results reveal that the practice of green investment is a significant
review & editing. Kuangzhe Li: Project administration, Validation,
way to expand financial inclusion throughout the quantile. Therefore,
Investigation, Supervision, Writing-review & editing. Gang Wang:

7
D. Pang et al. Resources Policy 78 (2022) 102885

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