Research On The Railway Industry Incentive Regulation Reform In China

Regulation economics is a new branch of the economics. It mainly studies interventional problem under "market failure" by the government: why to intervene, how to intervene, whether intervention is effective or not, and to find the second best selection process under failure of regulation by cost-benefit analysis comparison between regulation and relaxed regulation.Railway transportation is the typical network fundamental industry, which plays an important role in promoting national economic and social development. Railway industry which belongs to the natural monopoly industry has huge infrastructure investment scale, strong asset specificity, high barriers to entry and relatively low daily operation cost. Various countries’governments generally take the management mode which is exclusively operated or franchised by the government on railway transportation, railway regulation reform is an important topic that various countries’governments face. In recent years, privatization and relaxing regulation are a trend of regulation reform to railway industry in the world which various countries’governments have been exploring.Since the foundation of the People’s Republic of China, the Railway Industry has been invested and monopoly operated by the government, and that transport price is controlled by the government too. It leads to the single investment channel, smaller investment scale, a serious shortage of transport capacity, slower improvement of the service quality, disordered charges outside the price etc. Since 1986, the Chinese government began to reform the management system of railway, they have instituted management contract system and asset management responsibility system, railway construction funds had been raised through their own profit by the railway department etc. Railway freight rate have a series of reform and adjustment, railway transportation tensions status has an alleviation of certain degree, service quality has also been certainly improved. However, with the problems of the railway regulation’s institutional reform unsolved, the railway development in scale and speed could not adapt to requirements of the national economy development, railway transport capacity is still insufficient, it is very difficult to obtain a railway ticket during the holiday season above all the Spring Festival period, the service consciousness in railway is not always strong, people have criticized many inequality rules in railway, the development of the railway has made the debt as high as 2.09 trillion for high-speed railway construction since 2006, only the interest to pay is about 100 billion a year, and that high-speed railway accidents are frequently happen. Railways reform need to have a real breakthrough in management system.At present, there are many literatures about regulatory reform at home and abroad, most of them are about separation of enterprise from administration, introducing competition etc. But the separation of enterprise from administration or introducing competition is only the direction of the railway regulatory reform. In fact, these reform will inevitably involve the restructuring of the railway industry, the way to set the enterprise boundary in order to reduce the transaction costs between enterprises, and keep effective market competition needs further discussion, meanwhile, in the gradual procession of the railway reform, railway departments and state-owned railway enterprise became closely related to the community of interests, they protect the existing interests in the procession, and reject joint ventures and the private enterprise coming into railway transportation field, reform path dependence has made the railway reform temporarily into a locked status, that is, administrative monopoly status. If the interest groups were underestimated on the power of assimilation and dissolving in regulatory reform, railway reform will not achieve real breakthrough, the competition in railway transportation won’t be formed the contradictions in railway industry development will not be solved. Therefore,this paper takes up from the effective mode of the railway reform and restructuring on the analyzing enterprise boundary of railway restructuring research, trying to solve the railway reform path dependence problem, break current administrative monopoly status, puts forward incentive suggestions on relaxing regulation reform cost,establish the railway freight rate model of the incentive mechanism, solve the main question of railway development, realize the sustainable development on railway transportation.First of all, I have studied railroad transportation industry’s natural monopoly characteristics and economic particularity and the analyzed public welfare, externality and unique technical characteristics of Chinese railway transportation. Railway transportation usually produces in the left of average lowest cost. There is a certain idlness of transport capacity. Railway industry has natural monopoly characteristics, the capacity of Railway transportation will be fully utilized during transportation peak period. Railway industry has weak natural monopoly characteristics at the point. At the same time, railway transport unique characteristics network characteristics and complexity of transport operation show that economies of scale and scope can not be separated. This characteristic is embodied by transport economies of density and range. The important role of railway transportation in the national economy and social development determines that rail transport has not only the natural monopoly characteristics, but also the public benefits. Understanding correct economic and technical characteristics of railway industry is the indispensable foundations of the railway regulatory reform.Secondly, after the review of the evolution processes of China railway development and reform, this paper analyses the influence of path dependence to railway regulation reform with an economic perspective. It emphasize analysis the achievements of the China railway regulation reform, through contrast analysis other natural monopoly industry regulation reform, found the huge disparity of China railway regulatory reform existing, the current railway management system bring about the influence to promote the incentive regulation reform.Meanwhile, the United States, Britain and other western developed countries have a railway development history of more than two hundred years. And there is a perfect legal system and the effective market regulation system at the transport market. We research their main experience and practice of railway regulation reform. These can help us to absorb the experiences and lessons of their regulation reform and provide the beneficial reference for the China’s railway regulation. To reduce the cost of government regulation and make the maximization of social welfare come true, the western developed countries have obtained useful experience and enlightenment on the property rights system arrangement of railway industry, changing regulations pattern and relaxing regulation.Through the above analysis, this paper put forward China’s railway incentive regulation reform goal and pattern. It analyses the necessary system basis of the incentive regulation reform, And then on this system basis, It are put forward to the China railway incentive regulation reform main goal, through the double factors analysis model,It are put forward to the effective operation mode and basic structure framework of railway industry restructuring,gives the reform route choice, the countermeasures and proposals about the China railway incentive regulation reform.Finally, the regulation price of natural monopoly industry is an important part of government regulation. China railway transport pricing model had formed under the planned economy system and it remains so, this is the typical government pricing model. With the socialist market economy system established, the existing pricing model cannot adapt to the economic development needs, the railway transport enterprises are lacked of management flexibility for fixed freight rate, and the soft budget constraint of the cost plus pricing model have made that the railway enterprises lacks the incentive of control cost. High cost of transport, the profit level low of railway enterprise have made that railway investment scale cannot satisfy the market demand, and causing the social welfare net loss. It’s the time to relax price control in the railway industry, carry out incentive regulation in transport freight rate. Having analyzed the present situation of railway transport price regulation, this paper raise the basis idea about railway price reform, an established Price-Cap model linkage with price index which can protect the interests of consumers in the transportation peak and ensure that the transportation enterprise can adjust freight rate according to the market needs flexibly and improve railway transport efficiency.All in all, this paper comprehensively analysis China railway reform with empirical analysis, comparison analysis and mathematical analysis method, points out the the main contradiction and trouble of China’s railway development, puts forward the five main target of railway regulatory reform and the corresponding countermeasure, establish a Price-Cap model linkage with price index.This paper has made innovations in the following several aspects compared with the domestic research results. Such as analyzing that railway regulation reform’s difficulty in achieving institutional breakthrough mainly due to the locked status on account of the reform path dependence, putting forward restructuring reform mode of "regional company and passenger separation" with the double factors analysis model, and establish Price-Cap model linkage with price index which has incentive effect in improving transportation efficiency by lower operating costs.