Mobile Payment, Consumption Smoothing and COVID-19 Shock in Rural China

Abstract

Using a unique dataset that combines monthly Alipay payment data with city lockdown and government-issued risk level data, this paper investigates the impact of the COVID-19 pandemic on online payment activities in rural China. We find that city lockdowns caused a decrease of around 3% in consumption during 2020, while the implementation of zero-Covid policies during 2021 correspond with a minor and insignificant decrease in consumption. Further investigation provides evidences for a consumption smoothing behavior after the zero-Covid policies in 2021, as we find Alipay users decreased their financial investment by around 4.5% in response to the pandemic. We also find individual consumption negatively reacts to the increase in the local COVID-19 cases. Furthermore, our analysis suggests that this negative effect is more pronounced in counties with relatively high exposure to digital finance and among individuals who are inexperienced with Alipay payments or have less funds within Alipay.

Andong Yan
Andong Yan
Postdoctoral Fellow

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