Abstract: As an economic policy reform in China, financial inclusion aims to effectively provide financial services for all social classes and groups, thereby exerting positive influences on the development of many economic indices, including industrial structure. Based on the index of financial inclusion (IFI) system proposed by Sarma (2008), the IFI of 31 provinces and autonomous regions in China from 2005 to 2017 is measured. On this basis, the panel smooth transition regression (PSTR) model is used to explore the nonlinear effect of financial inclusion on the industrial structure rationalization (CSR) and industrial structure advancement (CSA). The results show regional differences in the development level of financial inclusion in China during the sample period. The IFIs in the eastern region are significantly higher than those in the central and western regions. Financial inclusion can markedly decrease the degree to which the industrial structure deviates from the economic equilibrium state. At the same time, it significantly promotes the degrees of CSR and CSA.Moreover, this effect shows significant nonlinear characteristics. When the IFI is greater than 0.2402, the promotion effect of the development of financial inclusion on the degree of CSR is gradually strengthened. When the IFI is greater than 0.5914, the promotion effect of the development of financial inclusion on the degree of CSA is strengthened. Meanwhile, there is regional heterogeneity in the industrial structure upgrading of financial inclusion. Financial inclusion has a significant promoting effect on the industrial structure upgrading of eastern and central regions. However, it has no noticeable effect on western regions. In addition, a robustness test was applied to the model by utilizing the system generalized method of moment (GMM), proving that the conclusions remain tenable.

Key words: financial inclusion; industrial structure; regional heterogeneity; PSTR model; system-GMM.