Wednesday, March 27, 2013

How Beijing-Shanghai rail will effect economic growth?

How Beijing-Shanghai rail will effect economic growth? 

by Vanda Szendrei

Improving public transportation has always played an important role in economic development. Now you can see the possible effects of the new Chinese high speed railway, even for clustering.

In the summer of 2011 the Beijing-Shanghai High-Speed Railway started to operate connecting together two major economic zones. The railway is 1.318-kilometre long and it is the world’s longest high-speed line ever constructed in a single phase. This line means only one part of the huge railway development in China: starting with the operation of China’s first high-speed railway, Beijing-Tianjin intercity railway on August 1, 2008, China’s high speed railway develops from nothing. In the past four years, 21 high-speed railways have been come into service. Until the end of July 2012, the total mileage of China’s high-speed railway reaches up to 6,894km, ranking first in the world. Let’s have a look why the railway is vital for China! 

This development is determined by both China’s first and second geographic nature. Regarding its first geographic nature, China is a vast country with 5,000 km of north-south and east-vast distance. As for second geographic nature the distribution of resources and industries is uneven and large amount of goods through the regions needs to be transported via train. These reasons explain the importance of these giant constructions.

One of the first effects was the decline in transportation costs. Coinciding with the rail launch, economy airfares have slumped with 52 % immediately. However, fares in less price sensitive business and first-class markets appear to have remained comparatively unaffected. Since commuting has become faster for most people, the real distance (measured in time, not in distance) has decreased.

Going back to the impacts, accelerating economic growth seems to be obvious. According to the China Daily newspaper, the newest high-speed railway will create a new economic belt and strengthen the integration of the Bohai Sea Rim and the Yangtze River Delta economic zones. Indeed before the operation started, cities surrounding the railway had benefited from its potential economic effect because real estate prices have risen in spite of the general downward trend. For example in Changzhou, a third-tier city the real estate prices doubled within one year. Soaring housing prices along the rail line are due to the high-speed train's projected effect of business clustering – predicts the paper.

The “direction of” the clustering is an important question. Probably the concerned inter-cities will behave as Central Business Districts gaining more importance over the neighbouring area. Although, as we have seen in the case of the fast-railway between Madrid and the southern part of Spain, a possible outcome is that either Shanghai or Beijing or both of them will loose from their leading role and there will be a shift in emphases to the five inter-stations.

This hypothesis is supported by Zhao Hui who analysed the prospects of this measure with investigating the case of Jinan West Area. The expert predicts that after the completion of Beijing-Shanghai High-Speed Railway, the passenger capacity can achieve 27,000,000 people in the very short time which will lead to huge demand to service industry therefore the market potential of these areas will increase as well. It is possible that local cultural industry will develop enormously. According to the plan, Jinan’s Cartoon Industry will achieve 20 billion dollar. Moreover Huaiyin Industry district, Huaiyin Industry Science district and Modernization International Physical distribution which are close to the station will gain a chance to develop.

However, it seems a self-generating process the government has a vital role too. So, what should the government do? At first, they should provide an appropriate environment for investment through following the market economy rule, producing effective administration environment and promoting strict and standard legal and faithful credit environment. Secondly, they should display the function of strategy guidance It realizes by the pure pursue quantity to quality, introduces better project of high technology, intensity investment, low resources consume, less environmental pollution, strong lead role, good development prospects. Finally, they should formulate corresponding industrial promotion policy continuity. That means, relevant institution should pay close attention to research corresponding executive regulation to enlarge the support to the development of Cartoon Industry. Evolving good tax environment can be a key to this goal.

What we can deduct from case study is that although high-speed rail means a great opportunity for clustering, Chinese policy-makers need to be cautious in order to promote and not hinder the development.


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