The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development

Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.

Regional Economic Impact of High-Speed Rail

Development in China

Dr. Zhenhua Chen

City and Regional Planning

The Ohio State University

September 6 2019
Asian Development Bank Institute, Tokyo, Japan

1
Background
• High-Speed Rail (HSR) infrastructure
has experienced a rapid development
over the last decade in many
countries , such as China, Japan,
France, Germany, Italy and Spain

• Other countries, such as the United

States, Singapore, Malaysia, India,
Austria, Sweden, Finland, Portugal,
Poland and the Baltic States have now
all started their HSR development
plans

• A massive approach to HSR

development needs to be planned
cautiously given that the HSR
development has to take a broad
range of factors and various
challenges into consideration
(Scordamaglia, 2015)
Ridership of High-Speed Rail in the World

Unit: passenger-km (billions)

Source: Union of International Railways
Updated January 22, 2019
 High Speed Rail in China
• Growth
• 2004-2018: 29,000 km, 500+ stations and more than 1,000
HSR trainsets
• Capital expenditure peak in 2010: 20% per year
• Covering over 30 provinces and municipalities
• Other Issues
• Regional Disparity
• Societal Inequity
• System Reliability
• Financial Performance

4
 Mid- and Long-Term Rail Network Planning Strategies in China
Planning
2004 Planning Strategy 2008 Planning Strategy 2016 Planning Strategy
Content
Period 2003-2020 2008-2020 2016-2025 & 2030
Expected total 100,000 km 120,000 km 175,000 km
track length
Track length of 12,000 km 16,000 km 38,000 km
HSR
Highlights of Separate passenger and Build 4-east-west bound Develop 8-east-west
the planning freight traffic for trunk rail and 4-north-south bound bound and 8-north-south
strategy lines; Improve the rates of HSR trunk lines with a bound HSR trunk lines;
double-track and focus on developed Operating speed should
electrification to 50%; regions with high be 250km/h or above
build 4-east-west bound population density; Build (HSR connecting major
and 4-north-south bound intercity rail systems for cities can be 350km/h,
HSR trunk lines; Operating major megalopolis; regional HSR connectors
speed of HSR should be Expand rail networks in can be 250km/h, intercity
200km/h or above the underdeveloped rail can be 200km/h)
west regions
Source: Author’s collection.

5
Evolution of High-Speed Rail Ridership and Track Length in China

1600 25
Ridership HSR Length

HSR Track Length: thousands of km

1400
Ridership: miilions of people

20
1200

1000 15
800

600 10

400
5
200

0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Author’s collection.

6
Evaluation Framework of HSR’s Impact

7
Objective and Outline
• Research question: how do the economic impacts vary
among different regions in China as a result of high-speed
rail (HSR) development

• Objective: Develop a comprehensive framework to assess

the regional economic impacts of HSR in China with a
focus on its long-term implications

• Outline
− Background
− Literature Review
− Method and Data
− Results
− Findings and Implications

8
Literature Review
• Methodologies for regional economic impacts of rail
infrastructure development include
⁻ Benefit-cost analysis, e.g. Janic, (2003); De Rus and
Nombela, (2007); Brand et al. (2014)
⁻ Econometric analysis, Melo et al. (2013).
⁻ Computable General Equilibrium (CGE) analysis, Chen &
Haynes (2013); Chen et al. (2016)
⁻ Spatial (Multi-regional) CGE analysis, the state-of-the-art
approach to regional economic impact assessment

9
What is CGE?
• A comprehensive economic model that uses actual
economic data to estimate interactions between the
economy and the changes of policy, technology or
other external factors
• More realistic impact assessment
• Linkages between the microeconomic structure and
the macroeconomic environment
• Can be adopted to evaluate various types of policies
(e.g. international trade, fiscal policy, technology
development, disaster related etc.)
Structure of a Computable General Equilibrium Model
.

Summary of Impact Assessment for Infrastructure Investments

using CGE Analysis
Model No. of Level of No. of
Category Region Reference
Regions analysis Sectors
IFPRI U.S. 1 Country 4 Lofgren et al. 2002
Static Single
Conrad Germany 1 Country -a Conrad, 1997
Region Model
Static_Chenb U.S. 1 Country 13 Chen & Haynes, 2013
Dynamic_Chenb China 1 Country 48 Chen et al. 2016
Kimb Korea 1 Country 19 Kim, 1998
Dynamic
Riojab 7 Latin 1 Country 2 Rioja, 1999
Single-Region
American
Model
countries
Seung+Kraybill Ohio
b 1 State 2 Seung & Kraybill, 2001
B-MARIA Brazil 3 Province 40 Haddad et al. 2010
CGEurope Europe 1341 NUTS3 6 Brocker et al. 2004
PINGO Norway 19 Country 32 Vold & Jean-Hansen, 2007
RAEM Netherlands 40 NUTS3 14 Knaap & Oosterhaven, 2002
Static SCGE Sino-TERM China 31 Province 137 Horridge & Wittwer, 2008
J-SCGE Japan 47 Prefecture 7 Koike et al. 2015

K-SCGE Korea 6 Province 7 Koike et al. 2015

T-SCGE Taipei,China 15 Prefecture 13 Koike et al. 2015

Kim+Kimb Korea 14 Province -a Kim & Kim, 2002

Dynamic SCGE Kimb Korea 5 Metro areas 4 Kim et al. 2004

a. The information is unclear.

b. Author(s)’ name was adopted in the case where a CGE model doesn’t have a name.
Source: Author’s collection.
12
 SCGE Modeling Mechanism for Rail Infrastructure Development
Category Driver Direct Impact Applicability in Related What the variable Short/long- What the driver represents Related data source and some key
ID Driver CGE policy shock variable represents Term considerations
in TERM Effecta
Land Use 1 Direct land use factor input xland Changes in land use short-term Land use for rail facility Rail GIS network datab
effect shock by sector and region construction, which is expected
to have a negative impacts on
agricultural sectors
2 Extended effect factor input xland short-term Land use for urban expansion as Side-estimation using regression analysis
shock a response to HSR development to identify linkages between land use in
different sectors and rail development
Output 3 Direct output factor input xinvitot Capital investment by short-term Railway related sector output Regional rail infrastructure
Stimulus expansion shock; sectoral sector expansion due to capital expenditure statisticsc
output shock investment stimulus
4 Extended sectoral output xinvitot long-term Passenger rail transport related Side-estimation using regression
output shock sectors, such as tourism, analysis to identify linkages between
expansion hospitality, real estate and etc.d output expansions in as a result of
rail development
5 Cost reduction margin shock atradma Technical efficiency long-term Transport cost reduction due to Travel time reduction can be used as
r_cs of margin usage developed rail system (applies to a proxy for transport cost reduction.
both passenger and freight) The key is to calculate travel time
change by different routes.
6 Direct productivity atot All-input-augmenting long-term Productivity increase in rail Side-estimation is needed to quantify
productivity shock technical change, by transport sectors due to the productivity change in rail sector by
increase industry and region developed rail system regions
7 Extended productivity atot long-term Productivity increase in other Side-estimation is needed to quantify
productivity shock sectors as a results of improved productivity change in other sectors
increase rail network accessibility and (e.g. manufacturing and tertiary
reduced cost sectors) by region
Demand 8 Substitution of elasticity shock Elasticity Elasticity of long-term Substitution of transport demand Side-estimation of substitution of
Effect demand substitution among as a result of improved HSR transport demand among different
transport modes modes and by region
9 Induced sectoral output ahou_s Changes in household long-term New rail transport demand being Side-estimation of induced rail
demand shock preferences, by generated as a result of demand by region
commodity and region development of new rail system
a Short-term effect refers to the direct effect generated from capital expenditure during the stage of rail infrastructure construction. Long-term effect refers to the indirect effects, such as travel time savings,

promoting a productivity increase and etc. These effects cannot be achieved until the completion of the infrastructure.
b Although the Railway Statistical Compilation include rail land use data by different regional bureaus, the data is useful due to the fact that the geographic boundaries of regional railway bureaus are not

consistent with SCGE framework.

c Data is included in Railway Statistical Compilation
. 13
d CGE modeling structure generally has a more detailed inter-sectoral representation of freight transport than passenger transport. Hence, external shocks for passenger rail related sectors are necessary.

Source: Author’s expansion based on Chen et al. (2016).

 Modeling Framework

Railway Investment

Land Use Effect Output Effect Demand Effect

Direct Effect Extended Effect Output Cost Productivity Substitution Demand Induced Demand
(Rail Construction) (Urbanization) Expansion Reduction Increase among all modes Effect

Macroeconomic Welfare Environmental

Impact Impact Impact

Source: Chen et al. (2019)

14
Methodology
• Dynamic-TERM: Dynamic The Enormous Regional Model
⁻ Developed by the Centre of Policy Studies (CoPS) at the
University of Victoria in Australia
⁻ Includes eight regions and 48 economic sectors
⁻ Period of analysis: 2002 - 2013
⁻ The dynamic functions include rules for capital accumulation,
investment and wage adjustments (Horridge, 2012)

15
Regional Classification

16
Data
Two types of data are needed
• direct impact drivers
⁻ Land use change
𝑊𝑊𝑊𝑊 −∆𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑘𝑘𝑟𝑟,𝑡𝑡 �𝑀𝑀
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷_𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿_𝑈𝑈𝑈𝑈𝑈𝑈𝑟𝑟,𝑡𝑡 = 𝑟𝑟,𝑡𝑡 × 100%
𝑊𝑊𝐵𝐵𝑟𝑟,𝑡𝑡
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑘𝑘𝑡𝑡
𝑊𝑊𝑊𝑊𝑡𝑡 − −1 ×𝛽𝛽×𝑈𝑈𝑡𝑡 ×0.7
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑘𝑘𝑡𝑡−1
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼_𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿_𝑈𝑈𝑈𝑈𝑈𝑈𝑒𝑒 = × 100%
𝑊𝑊𝐵𝐵𝑡𝑡

∆𝑈𝑈𝑡𝑡 = 𝛼𝛼 + 𝛽𝛽∆𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑘𝑘𝑡𝑡
⁻ Capital investments, including rail route construction, facility
construction and procurement of rail equipment
⁻ Rail transport cost
⁻ Productivity change
• Social accounting matrix
⁻ Database was updated based on SinoTERM (Horridge and Wittwer,
2008)
17
 Estimated Arable Land Area Reduction due to
HSR Development in China

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0 0
-5 -100
-10 -200
-15 -300
-20 -400
Eastcoast Eastcoast
-25 Northcoast -500 Northcoast
-30 Northeast -600 Northeast
Nothwest Nothwest
-35 -700 Southcoast
Southcoast
-40 Southwest -800 Southwest
YangtzeMid YangtzeMid
-45 -900 YellowMid
YellowMid
-50 -1,000
Unit: thousands of hectares

(a) Direct Land use change (b) Extended land use change

18
 Rail Infrastructure Investment by Region in China:
2002-2013
120

Northeast Northcoast
100 Eastcoast Southcoast
YellowMid YangtzeMid
billions of 2014 dollars

80 Southwest Northwest

60

40

20

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: The Compilation of Railway Statistics, 2003-2014

19
 Rail Transportation Cost by Regions in China:
2002-2013
2.0
1.8
1.6
1.4
No. of hour/100 km

1.2
1.0
0.8
0.6 East North
0.4 Northeast Northwest
South Southwest
0.2 YangzeRiverMiddle YellowRiverMiddle
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: The Compilation of Railway Statistics, 2003-2014

20
The Average Labor Output Change of Passenger
Rail in China: 2002-2013
1.2
Northcoast YellowMid
Northeast Eastcoast
1.0 YangtzeMid Southcoast
Millions of passenger-km/person

Southwest Northwest
0.8

0.6

0.4

0.2

-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: The Compilation of Railway Statistics, 2003-2014

21
Simulation Results
0.02
0.01
0.00
-0.012002 2004 2006 2008 2010 2012 2014

-0.02
-0.03
-0.04
-0.05
-0.06
-0.07
-0.08

Northeast Northcoast Eastcoast Southcoast

YellowMid YangtzeMid Southwest Nothwest

(a) Land use effect

22
Simulation Results
0.500

0.400

0.300

0.200

0.100

0.000
2002 2004 2006 2008 2010 2012 2014
-0.100

-0.200

Northeast Northcoast Eastcoast Southcoast

YellowMid YangtzeMid Southwest Nothwest

(b) Capital investment effect

23
Simulation Results
0.20

0.15

0.10

0.05

0.00
2002 2004 2006 2008 2010 2012 2014
-0.05

-0.10

Northeast Northcoast Eastcoast Southcoast

YellowMid YangtzeMid Southwest Nothwest

(c) Transportation cost change effect

24
 Simulation Results
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2002 2004 2006 2008 2010 2012 2014
-1.00
-2.00
-3.00

Northeast Northcoast Eastcoast Southcoast

YellowMid YangtzeMid Southwest Nothwest

(d) Productivity change effect

25
 Simulation Results
• Regional impact varies 4.00
considerably
3.00
• The long-term effect is
more substantial than 2.00
the short-term effect
• Productivity change 1.00

has the largest effect

on regional economic 0.00
2002 2004 2006 2008 2010 2012 2014
growth
-1.00

Northeast Northcoast Eastcoast Southcoast

YellowMid YangtzeMid Southwest Nothwest

(e) Simultaneous effects

26
 Aggregate Regional Economic Impacts of Rail
Infrastructure: 2002-2013
Nominal Real Real Agg Nominal Real Real Agg
Output Output GDP
Region Output Outputa GDP Employb
a Output Output GDP Employ
multiplier multiplier multiplier
Level Change Percent Change (nominal) (real) (real)

Northeast 151.36 60.81 6.66 0.11 61.29 23.43 3.94 0.21 3.14 1.26 0.14
Northcoast 172.77 77.45 8.19 0.41 32.55 14.02 4.57 0.38 2.16 0.97 0.10
Eastcoast 295.38 132.06 8.92 -0.04 46.84 19.87 3.07 -0.04 4.67 2.09 0.14
Southcoast 246.28 108.26 11.14 0.11 58.58 24.85 4.39 0.15 3.56 1.57 0.16
YellowMid 251.26 142.03 7.17 0.00 86.27 46.55 3.55 0.00 2.44 1.38 0.07
YangtzeMid 128.75 73.40 3.51 0.14 37.35 20.48 3.32 0.10 1.27 0.72 0.03
Southwest 40.50 20.52 5.61 2.67 13.78 6.85 14.42 1.77 0.40 0.20 0.06
Northwest 22.86 12.42 1.96 0.69 27.45 14.81 9.63 2.28 0.41 0.22 0.04
National 1309.16 626.94 53.16 4.08 46.19 21.19 4.22 0.55 2.10 1.01 0.09
a. billions of 2014 dollars.
b. millions of jobs.

27
 Aggregate Regional Economic Impacts of Rail
Infrastructure: 2002-2013
Nominal Real Real Agg Nominal Real Real Agg
Output Output GDP
Region Output Outputa GDP Employb
a Output Output GDP Employ
multiplier multiplier multiplier
Level Change Percent Change (nominal) (real) (real)

Northeast 151.36 60.81 6.66 0.11 61.29 23.43 3.94 0.21 3.14 1.26 0.14
Northcoast 172.77 77.45 8.19 0.41 32.55 14.02 4.57 0.38 2.16 0.97 0.10
Eastcoast 295.38 132.06 8.92 -0.04 46.84 19.87 3.07 -0.04 4.67 2.09 0.14
Southcoast 246.28 108.26 11.14 0.11 58.58 24.85 4.39 0.15 3.56 1.57 0.16
YellowMid 251.26 142.03 7.17 0.00 86.27 46.55 3.55 0.00 2.44 1.38 0.07
YangtzeMid 128.75 73.40 3.51 0.14 37.35 20.48 3.32 0.10 1.27 0.72 0.03
Southwest 40.50 20.52 5.61 2.67 13.78 6.85 14.42 1.77 0.40 0.20 0.06
Northwest 22.86 12.42 1.96 0.69 27.45 14.81 9.63 2.28 0.41 0.22 0.04
National 1309.16 626.94 53.16 4.08 46.19 21.19 4.22 0.55 2.10 1.01 0.09
a. billions of 2014 dollars.
b. millions of jobs.

28
 Summary of the Different Investigations on HSR
Conducted by the Author
Chapter Theme Period Method Major Findings
2 Land Value 2007 - 2015 Spatial Hedonic The development of HSR is associated with a 3% - 13% increase in land value. The
Analysis impact is found more strongly in provincial capital cities and for the land closer to a
HSR station.
3 Land Use 2005 - 2016 Remote Sensing The impacts of HSR on urban expansion are significant and vary substantially both
& GIS spatially and temporally. The impact is much stronger in medium and small cities
and is generally more substantial before and during the development of the HSR.
4 Housing Value 2014 Spatial Hedonic The impact of the Beijing-Shanghai HSR on housing value is considerable in medium
Analysis and small cities, whereas the impact in capital cities is smaller and local.
5 Housing Value 2015 Spatial Hedonic The spillover effect of HSR tends to vary among different cities. For instance, the
Analysis spatial spillover effect from intercity HSR systems on housing value is stronger in
major metro area, such as the Guangzhou, whereas the effect is relatively smaller in
Chengdu as is primarily a local effect.
6 Tourism Demand 1999 - 2011 Econometric HSR tends to boost foreign tourism by 20% and overall overseas tourism by 23%
Analysis with a 25% increase in total oversea revenue.
7 Air Transport 2001 - 2014 Econometric HSR services have a significant substitution effect on domestic air transport in
Supply and Analysis China. The negative impacts on air service are the greatest between large cities
Demand located in the 500 to 800 km range.
8 Regional Economic 2000 - 2014 Econometric HSR promotes regional economic convergence in China. The effect is substantial
Disparity Analysis primarily in the Middle Reaches of Yangtze River, the Southwest and the South.
9 National Economy 2002 - 2013 Dynamic Single- The continuous rail investment during 2002-2013 has contributed 10.3 percent
and Environment Region CGE growth in GDP and 8.5 percent increase in social welfare. The mitigation of CO2
emission from HSR is small due to the fact that the induced demand is much large
than the substituted demand.
10 Regional Economy 2002 - 2013 Dynamic SCGE The distribution of real GDP growth rates stimulated by rail infrastructure
investment were found to be proportionally stronger in the southwest regions,
and positive but relatively smaller in the developed eastern regions.
29
Conclusions
• A comprehensive modeling framework to evaluate the long-term
regional economic impacts of rail infrastructure development in China
⁻ Four types of effects: land use, capital investment, change of
transportation cost and productivity
⁻ Captures both the short-run effect from rail investment and the long-
run effect from the operations of new HSR services
⁻ Results are expected to be a more reliable estimate than the
traditional approach
• Chapter findings
⁻ A positive long-term impacts on regional economic growth with a
gross output multiplier of 1.01 and a GDP multiplier of 0.09
⁻ Largest impacts occurred in the north, east and south; The impact in
the southwest region experienced the fastest growth

30
Conclusions
• Overall Findings
―A positive impact of HSR development of on various
aspects of China’s economic geography is confirmed
―Achieved the goal of promoting a coordinated
regional development as outlined in the original
development plan
―HSR serves as a unifying element in geography and
the economy

31
Limitations and Implications
• The assessments focused on the benefit side of quantification
only
• More detailed data are needed to capture regional rail investment
patterns
⁻ Some drivers need to be improved
⁻ Key parameters of SCGE model needs to be improved
• Implications
⁻ Future infrastructure development and investment plans need to
be more cautiously implemented
⁻ More considerations should be paid to how to improve the quality
(equity, resilience and sustainability) of the system rather than
the quantity of the system

32
Email: chen.7172@osu.edu
33