The Study On The Effect Of Regulation Of Urban Water

Urban water is a typical natural monopoly industry and key area of government regulation. Under the influence of historical and planned economy, China’s urban water industry lagged behind urbanization over a long period of time. Since 1978, the Government continued to try to seek breakthrough in two ways----reforming price regulation and reforming entry Regulation----to promote enterprise investment level and encourage private capital to enter in. It should be said, under the constraint of lagging development in urban water supplies, the policy which emphasizes “development” is appropriate. However, after thirty years development and practice, the scale of China’s urban water industry has been able to basically meet the needs of urban development. The government should pay more attention on efficiency. However, the way to improve water regulation reform is to evaluate the effect of current regulatory policy, which can help us understand the actual effect of regulation policy. It will also put forward some ideals for the future regulation reform.The enterprise is the best example for studying on the effect of regulation of urban water. Considering the environment of reform, this paper selects 14 urban water listed company during 2004 and 2013 and uses panel data analysis method. It establishes two government regulation variables----entry regulation and price regulation---- to research margins and efficiency of listed company, where margins indicators mainly reflect technical efficiency and efficiency indicators reflect the efficiency of input. As the impact factor, the paper also examines the listed age and firm size as the impact factor of performance.Through this research, we find that price regulation and entry regulation of urban water industry in China do not show consistent influence for listed companies. This means that yield price regulation does not promote the profitability of listed company. The variables and its lag periods influence the performance in opposite direction. The current period of price regulation even has a negative impact on the profit of listed companies, The reason may be that the determination of yields is a dynamic process. While, the significant evidence shows that price regulation has consistently influence the cost of listed companies, which also indicates that price regulation mode has appeared out A-J effect. Combining theory with practice, elements endowment of urban water industry has quietly changed. Currently, price regulation system is damaging efficiency, attracting capital entering and promoting total development. The research also found that entry regulation on water industry has a weak promoting for listed companies. Although the current period of entry regulation has a positive influence on margins of listed company. We believe that this is due to short-term policy adjustment. Entry regulation does not play a necessary role in policy. It suggests that foreign and private capital is not enough and the competition is insufficient in water industry. This article is a case study based on the listed companies in China, we can draw the conclusion: At present, with the development of urban water industry, the yields price regulation and entry Regulation do not achieve good regulation effects.Based on the above findings, this paper puts forward three reform proposals on government regulation. In terms of entry regulation, we suggest regulators should relax regulatory reform, adjust the structure of water industry, and develop competitive business areas. Modify the conditions of entering of the private and foreign capital, to attract more foreign and private capital to enter the water industry and treat equally without discrimination. Meanwhile, widen the financing channel of urban water, to add vitality in the water industry. Regulators should explore business model innovation so as to improve the efficiency of the industry as whole.In terms of price regulation, incentive regulation should be introduced with the development of economics. And, according to the practical experience of European and American countries and Chinese specific conditions, price cap regulation may be the best choice. Based on making use of information advantage and profit maximization motives, water companies should be given the right of setting price. Meanwhile, regulators may consider the competitive theory between areas to provide more information for government. In terms of local government behavior, local Government has not shirk of responsibility for the current regulatory condition. So, the key point is to specify he behavior of competition among local governments. The government should explore different management modes and marketing modes base on practice. Only in this way can the government provide basis assurance for the development of urban water industry.Also, this paper examines that how do listed age and enterprise size effect the performance of the listed water companies and concludes that stock ownership diversification in water company should be implemented. Water companies should establish profit-related payment system to encourage the senior more effective. Meanwhile, in order to achieve economies of scale, water companies should run under a reasonable interval of asset and avoid diminishing returns of scale at the same time.