Although rural industrial integration is a crucial pathway for advancing the revitalization of rural economies, it continues to grapple with financial challenges. This paper delves into the theoretical underpinnings of how capital marketization influences rural industrial integration.
Using panel data from China’s provinces spanning the years 2010 to 2020, a comprehensive index of rural industrial integration is constructed from the vantage point of a new development paradigm. The paper employs the system GMM method to empirically investigate the impact of capital marketization on rural industrial integration and to dissect its transmission mechanisms. Additionally, a threshold regression model is applied to explore the specific patterns of the nonlinear relationship between the two variables.
The study’s findings reveal that the degree of rural industrial integration is significantly and positively influenced by its previous level, demonstrating an accumulative effect wherein the prior level of integration lays the groundwork for future advancements. The influence of capital marketization on the degree of rural industrial integration is characterized by a non-linear relationship, adhering to a “U-shaped” curve. Below the inflection point, the development of capital marketization is detrimental to rural industrial integration, whereas above this point, it exerts a positive influence. Currently, China’s overall level of capital marketization is positioned beyond the inflection point, indicating substantial potential for enhancing industry integration in rural China. In addition, the study indicates that at very low levels of economic development, capital marketization does not affect the development of rural industries. As the economic development level rises, so does the impact of capital marketization on rural industrial integration.