China's Railway Industry External Capital Into The Barriers To Study

The railway industry is an important infrastructure sector of country, and plays an important role in the comprehensive national transport system. Our country has a vast territory and imbalance between the distribution of resources and the layout of industries. A large number of spare labors flow from the central-west areas to the east provinces because of the dual economic structure. In this case, railway becomes very important because it is a kind of cheap vehicle and has advantages in medium-to long-haul passenger and bulk transport. With the restrict of low revenue and with the characteristics such as security, low consumption of resources and being more environment-friendly, Chinese railway industry is far away from being a sunset industry and still has great potential to develop. Based on such cognition, in 2004 the State Council passed National Middle/Long Term Transport Plans of China, which put forward the goal of Chinese railway in 2020. In order to achieve this goal, the investment reform is very urgent. Begin from 2005, the Ministry of Railways (MOR) has enacted several policies to encourage the foreign capital and civil capital to enter the railway industry. However, these policies had little effect in practise. So it has great realistic significance to research the barriers to entry in Chinese railway industry.In the industrial organization theory, there are several traditional models on the barrier to entry. Howvever, these models are all not satisfying to explain the barriers in Chinese railway industry exactly. It is obvious that the reason roots in the special market structure of Chinese railway industry and the complicate relationship between MOR, the state railway enterprises and the joint venture railways. So, the research of this dissertation is an important complement to the theory of barriers to entry and has great theoretic significance.This dissertation researches the barriers to entry in Chinese railway industry from the angel of industrial organization. The main contents are below:First, the paper reviews the theory of barriers to entry, the price and non-price discrimination theory, the theory of network externalities, the correlative research about the characteristics of railways and some other researches on the barriers to entry in Chinese railway industry. It is found that each existed theory before cannot explain the barriers to entry of railway industry, especially of Chinese railway industry. The formers' opinions are criticized by the latercomers. Thus, we need to find new methods to research and explain the problem of barriers to entry in Chinese railway industry.Second, this dissertation researches the background and status quo of the entry of outside capital in Chinese railway industry. From the view of capital supply, railway construction fund, government's financial allocation and loans of banks are in a decreased trend. It is hard to rely on them to take on the responsibility of railway construction. From the view of capital demand, a large number of funds are needed in order to reach the goal of National Middle/Long Term Transport Plans of China. The huge gap between the supply and demand of the funds must to be met by attracting the funds outside of the MOR in. The paper also reviews the process of opening the door towards the funds outside of the MOR and researches the structure of Chinese railway and the relationship between MOR, the state railway enterprises and the joint venture railways, which is the basis of the theoretic research.Third, as the start point of the research, the paper gives an empirical analysis of scale economy of Chinese railway. The railway has been considered to be of scale of economy, for which the railway was owned by government or regulated strictly by government for a long time. If this kind of consideration is true, the research of our paper would lack the theoretic basis, because the new entity will reduce the efficiency of the industry and harm the social welfare. The empirical analysis shows that Chinese railway is not of scale economy, so it is benefical to encourage the outside funds to participate in the railway construction, which will create a new entity to compete with the state railway enterprises and improve the efficiency of the industry in result. The conclusion of the empirical research provides the essentially theoretical evidence for the entry of the outside funds. The paper also analyzes the status quo of outside funds that participated in the construction of the railway. It is found that the increased ratio of the total route length, passenger traffic, passenger-kilometers, freight traffic, freight ton-kilometers of the joint venture railways are all in a decreased trend, which deviates from the policies of MOR.Last, on the basis of the structure of Chinese railway, the paper establishes a non-price discrimination model for the problem of the barriers to entry in Chinese railway industry. The conclusion shows that though MOR is one of owners of the joint venture railways, the profit of MOR is not reduced when the state railway enterprises discriminate the joint venture railways with a non-price means, because the getting of non-price discrimination is far more than the losing of joint venture enterprises. As a rational economic man, MOR has no incentives to regulate the non-price discrimination behavior of the state railway enterprises. And from the angel of the whole society, non-price discrimination doesn't cut the traffic down, but increases the traffic, so MOR hasn't incentives to regulate the discrimination behavior of the state railway enterprises from the angel of industrial management department. Furthermore, the fluctuation of the joint venture railway's price is limited, so the joint venture entity cannot minimize its losing when facing the non-price discrimination. The interest of joint venture railways cannot be guaranteed by MOR and by adjusting the price, which are the most important barriers faced by outside funds.In order to cut the barriers to entry in Chinese railway industry, several policy advices are given. First is the separation of regulation from operation. On the one hand, MOR would turn in its operation function to the state railway enterprises, manage and supervise the railways as an industrial management department. On the other hand, the state railway enterprises would turn in its supervising right to MOR, then the state railway enterprises would lose the condition to carry on discrimination. Second is the recombination of the industry. On the one hand, we should develop the joint venture railways. On the other hand, the large state railway enterprises would be divided, so that the scale of the joint venture railways and the state railways will be symmetrical. Third is the reform of price formation mechanisms. The state railways and joint venture railways should both have the right to adjust their prices according to the cost, supply and demand, and competition conditions. Fourth is the simultaneousness of starting all the above reforms. The investment reform, the goal of which is to attract the outside funds, must be carried on with the reforms of separation of regulation from operation and of recombination of industry and so on together, or it would be unsuccessful.The dissertation is divided into five parts. Part I is the introduction, which introduces the realistic and theoretic significances of the paper, the research methods and the structure of the dissertation. Par II is the review to relevant literatures and comments. Part III analyzes the background and status quo of the entry of outside funds. Part IV is the empirical analysis to the economy of scale of Chinese railways and the operation of the joint-venture railways. Part V is the theoretic analysis of barriers to entry of Chinese railways. Part VI is the conclusions and policy advices.