Studies On Railway Industry Regulation Reform Of China

The fundamental purpose of the railway regulation is to improve the efficiency of railway industry. China has sought to increase the efficiency of national railway industry through a range of reforms. But railroads were still in dire straits. As a result, it is necessary for the railway industry to implement further reforms by optimizing the organization structure in order to improve the efficiency.The railway regulation is a world puzzle. As a developing country, China is confronted with very complex conditions and needs to adapt more advanced fundamental academic theories than received ones to enlighten the reform. The present articles on the railway regulation focus on system reform of property right and the market reconstruction of railway industry. But they are only concrete measures. Actually, from the aspect of improvement of efficiency, the railway regulation reform should be based on the principle of enhancing the degree of competition, which also conduces to guide the railway reform. Meanwhile, we find that regulation reform didn't lead to the increase of productivity in railway industry by the econometrics analysis of the performance of railway regulation reform and analyze the determinants of railway performance. Based on the above analysis, we propose some valid policy countermeasures.Few domestic studies on railway regulation systemically investigate the efficiency of regulation and this study is a pioneer one about how to improve the efficiency of regulation.First, we analyze the characteristics of natural monopoly, its scope and the relative content of the government regulation in the railway industry. The characters of the railway industry vary according to its different operations. Downstream network infrastructure possesses the characteristics of economy of scale,economy of scope,economy of network and strong natural monopoly for its deposition of cost. Because of the development of economy, improvement of technology and increase in the degree of substitution competition, the scope of natural monopoly of railway industry has changed. The upstream operation loses the characteristics of strong natural monopoly and some transportation subsidiary services lose the characteristics of natural monopoly too.Although the scope of natural monopoly of the railroad has changed, the main operations still possesses the characteristics of the natural monopoly or weak natural monopoly. So it is necessary to maintain railway industry regulation. The regulation instruments for the railway industry mainly include price regulation, entry regulation, market structure regulation, etc. Now, incentive regulation has become the main part of price regulation.Second, from aspects of recourse distribution, efficiency of production and efficiency of distribution, the efficiency and its determinants are analyzed. The period of railway regulation reforms can be divided into three phases. They are releasing price regulation, reforming regulation agent, establishing market structure regulation and reform of regulation system. Although a range of regulation reforms are implemented to improve the efficiency of the railway industry, the performance of the railway regulation is rather poor. It can be demonstrated by the following facts. The lack of supply still exists for the inefficient distribution of resources. The efficiency of production doesn't make a progress and still be under the condition of poor management. As for the efficiency of distribution, the price regulation to limit high price leads to low price and causes the increase of average cost.The determinants of railway regulation performance are analyzed from the aspects of regulation system and regulation mechanism. From aspect of regulation system, the regulator agent and regulated firms default, independent regulation institutions lack and the rule and law is out of date. These determinants reduce efficiency of railway regulation. As for the regulation mechanism, the regulation instruments drop behind, the systems are designed illogically and entry regulation is rather strict. Therefore, the reform of railway regulation should implement from the aspects of both regulation system and regulation mechanism.Third, the main measures of the regulation reform of the railway industry in the USA, European countries and Japan are analyzed to evaluate the impact of these regulation reforms from the aspect of reconstruction of railway market, investment regulation, system reform of property right, reform of the government regulation measure, law and regulation institution. We find that the regulation reforms of these developed countries are similar. The same points include deregulation, introducing new instruments, reforming based on edited law, creating independent regulation institutions, optimizing the property right and reforming the market structure. Almost all reforms follow the principle of minimizing exchange cost.Finally, the important countermeasures are brought forward based on the above analysis of the determinants of railway regulation performance and the experience of regulation reforms in the main developed countries. Giving consumers right to choose should be the fundamental principle. The main steps of regulation system reform include separating infrastructure and operations, revising rules and laws, establish and implement special railway industry policy and creating independent regulatory institutions. The main steps of regulation mechanism reform include releasing price regulation, unbundling infrastructure from operations, reducing market entry restrictions entry and optimizing the property right.In general, some measures including econometrics, game theory, comparative economics and new regulation economics are introduced in this article to analyze the railway regulation performance and its determinants. Results demonstrate that the cornerstone of the railway regulation reform is to fulfill workable competition. Some countermeasures are proposed from aspects of regulation system and regulation mechanism to increase the development and improve the efficiency of railway.This study breaks through received domestic ones in following aspects: First, date enclave analysis is introduced in order to analyze the efficiency of the railway regulation in China. We find that the railway industry is still under extensive management characterized by high input and the determinant of reducing the efficiency of railway industry is matter of regulation system. Second, the traditional price-cap regulation model of infrastructure is improved by combining the investment callback time-value model. The new model is more reasonable and incentive than the used one. Third, the main principle is analyzed before countermeasures about the railway regulation reform are proposed. Results demonstrate that it is important to give consumer right to choose. Lastly, the railway regulation reforms of the main developed countries are analyzed and result shows that these countries choose the pattern that minimizes social welfare cost.