Can the Launch of High-Speed Rail Alleviate Technological Choice Distortions in Manufacturing?

Abstract

As a major developing economy, China encompasses all industrial categories classified by the United Nations. However, its persistent non-market-oriented factor allocation practices and extensive industrial development policies have undermined resource allocation efficiency. In response, the Third Plenary Session of the 20th Central Committee of the Communist Party of China has advanced reforms to establish a nationally unified market. These reforms aim to eliminate barriers to market integration and fair competition, facilitate factor mobility, and enhance resource allocation efficiency. The development of a unified national market promotes improvements in manufacturing technology structures through four mechanisms: market scale expansion, factor allocation optimization, innovation incentivization, and cost convergence—all achieved by integrating markets, reducing mobility barriers, and ensuring fair competition.

This study investigates how cities can leverage local factor endowments for sustainable economic growth and manufacturing transformation while minimizing distortion-induced efficiency losses. Analyzing 274 Chinese cities from 2008 to 2022, we employ a multi-period Difference-in-Differences model to assess high-speed rail (HSR) network impacts on manufacturing technology choice deviations, complemented by a Cross-Sectional DID model to examine heterogeneous effects. Our findings reveal a geographical “inflection point” in HSR’s influence on correcting technology choice distortions, with more pronounced improvements in cities adopting comparative advantage-driven strategies. Temporally, HSR’s impact follows an inverted U-shaped pattern, with macroeconomic policy distortions identified as critical institutional barriers.

Based on these findings, we propose three policy recommendations. First, China should learn from manufacturing reshoring strategies implemented by developed economies while recognizing its evolving endowment advantages. Institutional reforms should dismantle barriers arising from irrational intercity competition, amplifying HSR’s capacity to mitigate policy-driven and spatial obstacles. Medium-sized and economically underdeveloped regions should attract manufacturing enterprises aligned with their local technological comparative advantages while improving their business environments. Second, sustainable industrial development policies must be formulated with recognition of the transitional challenges during industrial restructuring. Local governments should comprehensively assess regional factor endowments and effectively leverage proactive governance within market frameworks. Third, production scale effects and manufacturing cluster advantages should be utilized to reduce the opportunity costs of technological structure optimization. HSR network planning should consider temporal infrastructure effects, with enhanced policy support for county-level HSR projects to prevent inadequate infrastructure from impeding industrial transfers from core cities.

This study contributes to existing literature in two significant ways. First, it examines HSR’s role in reshaping manufacturing spatial structures and unifying factor markets through the lens of technology choice, highlighting the coupling mechanisms between quasi-exogenous HSR connectivity and endogenous drivers in technology structure optimization. Second, it elucidates HSR’s impact on technology choice deviations through both direct and institutional transaction costs, integrating active technological upgrades and passive deviation corrections into a unified analytical framework that reveals the dynamics of China’s unified market development.

By addressing city-level factor allocation challenges, this research supports China’s efforts to leverage its mega-scale market advantages and promote coordinated industrial development. The study integrates transportation infrastructure, factor endowments, industrial policies, and economic governance into a cohesive framework, exploring how reduced transaction costs under rapid HSR expansion improve technology-labor substitution efficiency in manufacturing—aligning with the national unified market agenda while advancing discourse on resolving factor allocation inefficiencies.