Role of high-speed rail services in China’s economic recovery: Evidence from manufacturing firm inventories

Abstract

Changes to corporate inventories in China impact the realization of green supply chains and improvements in resource utilization, and thus influence China’s capacity to pursue green and sustainable economic development. This study examines how high-speed rail (HSR) impacts the green development of China’s economy through a quasi-natural experiment using a differences-in-differences model from the perspective of corporate inventories and identifies the mechanisms involved. The study finds that enterprises’ inventory levels decrease significantly after the opening of high-speed rail in cities where they operate; the average inventory holding decreases by approximately 6.0%, which greatly reduces resource waste and energy consumption. The information, innovation, and agglomeration effects generated by the opening of high-speed rail are found to reduce enterprises’ inventory, indicating that the opening of high-speed rail strengthens and improves the efficiency of resource allocation between regions and enterprises and promotes the green transformation of the supply chain and the green development of the economy. Heterogeneity test results also show that the effect of high-speed rail opening on firm inventories is pronounced among non-state-owned, small, and non-exporting firms as well as downstream firms and light industrial firms in the supply chain. The findings of this study provide policy insights that Chinese manufacturing firms can use to utilize high-speed rail infrastructure more effectively to reduce costs, energy consumption, and resource waste, improve efficiency, and advance China’s green economic development.