Western literature always prescribes that the best model for railway reform is privatization. China’s leadership also enunciated the state’s determination to re-arrange property rights and rejuvenate corporate governance. But is China’s railway reform really a story of convergence? Will the property rights of railway assets be clearly demarcated, if not privatized, eventually? To answer the questions precisely, this thesis bridges the socialist reform and transport policy literature, and studies the empirical changes of the property rights arrangements in China’s railway system. Refuting the convergence theory, this thesis concludes that the cyclical reform policies of decentralization and re-centralization were actually an exploratory and interactive mechanism of “assets disco...[ Read more ]

Western literature always prescribes that the best model for railway reform is privatization. China’s leadership also enunciated the state’s determination to re-arrange property rights and rejuvenate corporate governance. But is China’s railway reform really a story of convergence? Will the property rights of railway assets be clearly demarcated, if not privatized, eventually? To answer the questions precisely, this thesis bridges the socialist reform and transport policy literature, and studies the empirical changes of the property rights arrangements in China’s railway system. Refuting the convergence theory, this thesis concludes that the cyclical reform policies of decentralization and re-centralization were actually an exploratory and interactive mechanism of “assets discovery” and “assets recovery.”

The surface appearances of decentralization and profit sharing reforms served two purposes. First, the profit sharing approach was a mere mimicry of the western model. By complying with the western style, the Chinese government could easily be legitimized in terms of obtaining financial and technological assistance from various international funding. But the so-called de-centralization reform policies did not lead to partial or full scale privatization.

Second, decentralization did not clarify property rights arrangements, which could have helped the state leadership to gradually identify the right person to inherit the state assets. Rather, during the initial phase of reform, the state administered the dual track system, resulting in an unexpected situation of asset ambiguity, and encouraging local cadres to discover and rejuvenate the extra-budgetary productive resources.

After the discovery of the idle productive assets, the central government began to recover the newly discovered assets. For those productive assets of those industries which required significant upfront investment, produced public goods, or vulnerable to market compettion, the Chinese government re-centralized or consolidated the respective property rights; otherwise the government de-centralized and, perhaps, privatized them.