High-Speed Rail and Industrial Upgrading in China：Facts and Mechanisms

Abstract

China’s economy has shifted from a high-speed growth stage to a high-quality development stage, which is the most distinctive feature of China’s economy in the new era. Industrial upgrading is the core and key to China’s future high-quality economic development. The overall change of the international pattern leads to China’s need to find more internal driving forces for economic development. In this context, the biggest innovation of this paper is to explore a new way to promote industrial upgrading relying on the integration of domestic market from the perspective of domestic market integration and resource allocation. This paper regards the construction of the high-speed rail as a quasi-natural experiment. Based on the panel data of 2004-2016, a multi-period DID model is constructed to study the impact and mechanism of high-speed rail on industrial upgrading.The study finds that, on the whole, the construction of the high-speed rail can significantly improve the rationalization and advanced level of a city’s industrial structure, and the estimation results are still robust after considering the assumptions and a series of factors that may interfere with the estimation results. The analysis of the impact mechanism finds that the construction of high-speed rail significantly promotes the flow of labor between cities, and promotes the rationalization and upgrading of industrial institutions by triggering economies of scale, technological innovation and capital labor allocation. Among them, economies of scale have the greatest contribution to the rationalization and upgrading of industrial structure, followed by technological innovation and capital labor allocation. Therefore, it is necessary to create conditions to exert technological innovation and spillover effects and improve capital labor allocation. Further mechanism decomposition shows that high-speed rail construction has a more significant effect on the overall economic development level and the higher-level industrial structure of the city, and the higher-level changes in the industrial structure are mainly due to the optimal re-allocation of resources between cities; cities with relatively poor development base benefit from the optimization and re-allocation of resources within the city after the construction of the high-speed rail, and the level of rationalization of the industrial structure has been significantly improved.The findings of this paper on the facts and mechanisms for the promotion of the high-speed rail to promote industrial upgrading show that high-speed rail construction will promote the deepening of industrial division of labor between regions, improve resource allocation efficiency, and urge new developments in production industry and economic development, but it does not mean that all cities can achieve the desired effect after the construction of high-speed rail. The construction of high-speed rail in China is accompanied by the general trend of industrial transfer and upgrading in developed regions. Compared with the existing poorly-developed regions, the high-speed rail has optimized the allocation of factors in cities with relatively good economic development. The large differences in the capital, technology and infrastructure of the region under the big economy determine the particularity of China’s industrial upgrading. Based on the research findings, this paper proposes the following policy recommendations: In the historical process of large-scale construction of China’s high-speed rail, accelerated industrial restructuring, and transformation of economic development mode, it is necessary to coordinate the synchronization of high-speed rail construction and industrial transformation and upgrading, and continue to improve the efficiency of resource allocation by developing and optimizing high-speed rail networks to reform and innovate. Deeply excavating and continuously releasing the resource reconfiguration effect of high-speed rail construction will provide support for industrial upgrading and high-quality development under the new normal economic development.