The Impact Of Railway Reform On The Product Diversification Of Trade By Rail In China

Since China joined the World Trade Organization(WTO)in 2001,after years of development,China has become the world largest trade country.International trade is an important engine to stimulate the economic growth of all countries.At the same time,the contribution of trade to China’s economic growth is also obvious.However,the rise of anti-globalization and the increasingly serious trade protectionism will deteriorate the international trade of China and even the world.In recent years,China’s economic growth shows signs of slowing down.In the process of development,China urgently needs to seek new economic growth points and trade patterns.It is thus very important to find out the influencing factors and mechanism of trade.In order to facilitate trade,one of the key links is to complete the transfer of goods through transportation.Railway is a very important and irreplaceable mode of transportation in China’s comprehensive transportation system.At the same time,the railway is also an important channel for China’s trade on land.However,the proportion of China’s railway trade is still very small.The development of railway trade is of great significance for China’s strategy to open up to the west and to build a new advantage in trade competition.However,most of the existing studies focus on the impact of transport infrastructure on trade.In addition,most of the research in the subdivision field focuses on general transportation modes such as maritime shipping and air transport.Although the existing research has involved the role of institution in the development of transportation,there is still a lack of research on the impact of the institution of a country’s transportation system,especially the business,organization and other aspects on international trade.In particular,the research on the impact of the institutional arrangement of almost completely monopolized railway which has planned economy characteristics on China’s trade is even less.The impact of the complex institution on trade diversification(including the firm and product level)deserves in-depth analysis.Therefore,this paper focuses on the impact of railway reform on the diversification of China’s railway trade.With regard to the concept of trade diversification,this paper selects and constructs multiple variables based on the existing research to define trade diversification from multiple dimensions.It is mainly divided into two levels: one is the variables at the frim level,including the export value,export skewness,export extensive margin and intensive margin.The second is the product level variables,including product import and export value,import and export extensive margin,intensive margin,product export price margin and quantity margin.This thesis selects the two reforms of China’s railway since 2000,which involve firm resource allocation,firm boundary and getting rid of policy burden,and the change of firm governance structure,namely,the reform of separation affiliated businesses from rail sector and the reform of railway bureau directly managing station and depot,as exogenous policy shocks to study the influence of railway institution arrangement on the diversification of China’s railway trade.Reffering to the stylized model of multi product export firms by Melitz and Ottaviano(2008),this paper proposes an economic model which considering transport efficiency to test the impact of transport efficiency on trade.Then this paper employs the difference-in-differences strategy(including various kinds of deformation forms of DID)to test the effect of policy,and use Ordinary Least Square(OLS)to further test the logic conjecture of this paper.Finally,through the analysis of this paper,the following conclusions are drawn: Firstly,the reform of separating affiliated businesses from rail sector has indeed improved the efficiency of railway.It provided another channel for railway export firms to reduce transportation costs under the condition of rigid freight rates,increased the competitiveness of railway export firms,and made them capable of increasing the export of non core products.These resulted in the reduction of the skewness of railway export.Also,it reduced the the risk of exporting a single product,so that the scale of railway export improved.Secondly,the core departments and personnel of railway operation,such as railway dispatching,have huge rent-seeking space.On the one hand,the new departments take over the power,which makes most firms unable to establish relations with railway departments in a short period.As a result,the number of export firms is significantly negatively affected by the reform;on the other hand,the total number of departments that need to be coordinated is reduced after the reform.The additional market transaction cost that firms need to bear for export has been relatively reduced,which makes the price of rail export products decrease,while the quantity of export products has not been significantly affected.It makes the absolute export value of a firm have been significantly negatively affected.Thirdly,comparing with the export firms,the import firms should coordinate the railway departments with relatively long geographical distance,which increases the difficulty of coordination and enlarges the sensitivity of the railway import firms to the railway transport efficiency.This results in a more significant negative effect on the import value,intensive margin and extensive margin of railway import at the firm and product level.At the same time,this paper also finds that private firms and foreign-owned firms suffer more damage,and state-owned firms may even be more favored.At last,according to the conclusion of this paper,some policy suggestions are put forward: firstly,about restarting the affiliated business of the railway,the Chinese railway sector should not invest too much resources and energy in the affiliated business,should avoid providing any kinds of subsidies for the affiliated business again and should ensure that the investment matches the normal development of the main business.Railway sector should select the management team based on the market,and should establish relevant performance evaluation standards to avoid principal-agent problems.And the competent authorities should promote the competition of transportation mode,and provide conditions for the innovation of railway freight mode.Secondly,in view of the railway governance structure,the competent authorities should further separate government functions from the China Railway Group.In addition,the competent authorities should further deregulate railway prices,provide a platform for the release of logistics information,improve the penalty mechanism for breach of contract,balance the distribution of rights among various departments of railway,and further reduce the threshold for private capital to enter the railway industry.Moreover,the competent authorities should separate the dispatch power from the administrative management power at all levels of railway sector and improve the level of dispatch equipment,optimize the operation mode of dispatchers to improve transport efficiency.