High‐speed Rail and Urban Economic Growth in China after the Global Financial Crisis

• DOI: http://doi.org/10.1111/cwe.12274
• Date: 01 March 2019
• Published date: 01 March 2019
• Author: Shujie Yao,Jinghua Ou,Feng Wang,Fan Zhang

China & World Economy / 44–65, Vol. 27, No. 2, 2019

44

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

*Shujie Yao, Professor, School of Economics and Business Administration, Chongqing University, South

China Agricultural University and the University of Nottingham, Ningbo, China. Email: yaoshujie@cqu.edu.

cn; Fan Zhang, PhD Candidate, School of Economics and Business Administration, Chongqing University,

China. Email: zhangfan514@hotmail.com; Feng Wang (corresponding author), Associate Professor, School of

Economics and Business Administration, Chongqing University, China. Email: wangfeng2008@cqu.edu.cn;

Jinghua Ou, Associate Professor, School of Economics and Business Administration, Chongqing University,

China. Email: oujinghua@cqu.edu.cn. This research was supported by the National Social Science Foundation

of China (No.18ZDA005), the National Natural Science Foundation of China (No.71673033) and the Ministry

of Education Social Science Foundation of China (No.16YJA790058).

High-speed Rail and Urban Economic Growth in

China after the Global Financial Crisis

Shujie Yao, Fan Zhang, Feng Wang, Jinghua Ou*

Abstract

High-speed rail (HSR) has been an important driver of China’s economic expansion

over the last decade. Using data of 285 prefecture-level cities over 2010–2014, this

paper proposes an endogenous economic growth model to explain how and why HSR

may have propelled China’s economic growth by reducing the time-space between cities.

The research results show that HSR has a potent effect on urban economic growth and

regional convergence. Ceteris paribus, HSR appears to have accelerated economic

growth by more than 0.6 percent and the pace of regional economic convergence by

approximately 2 percent per annum over the data period. Our research ndings have

important policy implications for the sustainability of China’s economic development,

backed by HSR.

Key words: China, economic growth, high-speed rail, regional convergence

JEL codes: L92, O1, O18

I. Introduction

Since China adopted its reform and opening-up policies in 1978, its economy has

experienced four decades of uninterrupted rapid expansion. In recent years, particularly

in the aftermath of the global financial crisis, China has changed its development

strategy from a focus on external trade and foreign direct investment (FDI) to one of

domestic demand, structural change, industrial upgrading and innovation. Substantial

investment in infrastructure, particularly the high-speed rail (HSR) system, has been

High-speed Rail and Urban Economic Growth in China 45

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

made to boost economic development and reduce regional growth imbalances.

As a result of these development efforts, a clear trend of regional economic

convergence has been observed (Lemoine et al., 2015; Barro, 2016). Many coastal

enterprises have set up subsidiaries or even moved their entire operation to inland areas

where land and labor costs are cheaper. In addition, information and communication

technology (ICT) has developed rapidly throughout the country as a result of

technological progress, as well as China’s vast population and territorial advantages.

The most stunning development, which is unique to China so far, is HSR.

As shown in Figure 1, the Gini coefcient measuring the per capita GDP inequality

of China’s 285 prefecture-level cities shows an inverted-U shape, indicating that

regional inequality rose rapidly in the period 2000–2007, but declined steadily after the

global nancial crisis.

Figure 1. Gini Coefcient Using Per Capita Real GDP of 285 Prefecture-level Cities in China,

2000–2014

Source: NBS (2001–2015).

Declining regional inequality coincided with three major events in China: the global

nancial crisis that hit China’s export processing industries located in the coastal cities

hard; supply-side reform focusing on structural change and industrial upgrading to

reduce regional growth imbalances and cut excessive capacities of some major industrial

products; and the accelerating development of infrastructure, particularly HSR, to boost

internal development.

These three events reect China’s efforts to shift its development strategy from an