The Influence of Internet Finance on the Sustainable Development of the Financial Ecosystem in China

As a new species in the financial ecosystem, internet finance has significantly impacted traditional finance and has improved the diversity and ended the long-term stability of the financial ecosystem. From the perspective of the interaction between the ecological subjects of the Internet and traditional finance, this study examines the influence of internet finance on the sustainability of the financial ecosystem in China. We tested the dynamic correlation and risk transmission at the volatility level between the ecological subjects of internet finance and the banking, securities, and insurance industries by establishing a dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (GARCH) model of Baba, Engle, Kraft, and Kroner (DCC-GARCH-BEKK). The result indicates a positive dynamic correlation between internet finance and traditional finance almost all of the time. The introduction of internet finance has changed the risk transmission effect among the ecological subjects of traditional finance. Based on empirical findings, this study provides suggestions to promote the sustainable development of internet finance and the whole financial ecosystem. Our research not only has strong practical significance but also contributes significantly to the literature on internet finance and sustainable development.