Digital transformation bridges regional disparities, driving sustainable economic growth

China’s digital economy is reshaping the path toward sustainable and inclusive development, driving economic growth while reducing regional inequalities. A new study provides evidence that the rapid integration of digital technologies is transforming resource allocation, boosting innovation, and bridging urban-rural divides.

Published in SAGE Open, the study “Bridging Digital Divides: An Empirical Analysis of the Digital Economy’s Impact on Sustainable Prosperity” (2025), the research offers one of the most comprehensive analyses to date of how digitalization is influencing prosperity, equity, and shared development in China between 2011 and 2020.

How the digital economy shapes sustainable prosperity

The study investigates the multi-dimensional role of the digital economy in promoting sustainable prosperity by analyzing provincial-level panel data from 2011 to 2020. Leveraging the resource-based view (RBV) and open innovation theory, the researchers created a framework to understand how digital resources, from advanced infrastructure and big data to human capital and innovative capabilities, influence economic growth and social development.

The findings are striking. Across all regions, digitalization was found to have a significant and positive impact on three critical dimensions of sustainable prosperity: prosperity, equality, and sharing. Digital platforms not only accelerated economic growth but also enabled a fairer distribution of benefits, ensuring that regions with fewer traditional resources could leverage digital technologies for advancement.

Statistical modeling revealed that the growth of the digital economy contributed a coefficient of 0.693 to overall sustainable prosperity. On a more granular level, digitalization contributed 1.959 to prosperity, 2.048 to equality, and 1.360 to sharing. These results highlight the structural role of digital technologies in improving both the quality and inclusiveness of economic growth.

The research underscores that these gains were not confined to urban areas. Instead, rural regions increasingly accessed digital platforms for e-commerce, education, and healthcare, narrowing historical gaps between urban and rural economies and accelerating progress toward balanced development.

Resource efficiency and innovation as growth catalysts

The study identifies resource allocation efficiency and technological innovation as critical mediating mechanisms. By improving how resources are distributed and utilized, digital tools help businesses, local governments, and individuals operate with greater efficiency. This leads to faster economic growth, better public services, and more equitable opportunities across regions.

For example, digital technologies streamline financial services, enabling small businesses in less developed regions to access capital, manage supply chains, and expand into new markets. Similarly, big data analytics allow governments to better allocate public resources, improving the reach and quality of essential services such as healthcare, transportation, and education.

Innovation also emerges as a powerful driver. The proliferation of digital platforms and applications fosters a culture of open innovation, encouraging collaboration across industries and regions. This has spurred the growth of startups, increased patent filings, and accelerated the diffusion of cutting-edge technologies from urban hubs to less developed areas. By democratizing access to innovation, digitalization enables regions with limited industrial bases to participate in high-value economic activities, reducing dependency on traditional sectors and paving the way for sustainable growth.

The study notes that these mechanisms create a feedback loop: as innovation drives growth, resources are allocated more efficiently, which in turn strengthens the ecosystem for further innovation. This synergy enhances productivity and ensures that the benefits of digital transformation extend beyond economic gains to include broader social and developmental impacts.

Policy implications and pathways for inclusive digital growth

The findings carry significant implications for policymakers aiming to leverage the digital economy for sustainable and inclusive prosperity. First, the study calls for continued investment in digital infrastructure, particularly in underserved rural regions. Expanding broadband connectivity, enhancing cloud computing facilities, and promoting mobile internet access are critical steps in bridging the digital divide and ensuring that all communities can participate in the digital economy.

Second, the research emphasizes the importance of digital literacy programs to equip individuals with the skills needed to engage effectively with new technologies. Without adequate training and awareness, the potential of digital platforms remains underutilized, particularly among older populations and those in remote areas. Targeted educational initiatives can empower citizens to use digital tools for entrepreneurship, learning, and improved quality of life.

Third, policymakers are urged to support open innovation ecosystems by encouraging collaboration between government, academia, and industry. This includes funding research and development, facilitating technology transfer, and fostering partnerships that allow smaller firms to access and adopt advanced technologies.

Furthermore, the study points to the need for inclusive policy frameworks that ensure the equitable distribution of digital economy gains. As digitalization reshapes industries, there is a risk of creating new divides if growth is concentrated in already prosperous regions. By prioritizing balanced resource allocation and supporting innovation in less developed areas, governments can mitigate this risk and promote more uniform progress across provinces.