HSR Opening, Formation of High-End Manufacturing Suppliers and Domestic Sourcing of Intermediate Inputs

【Authors】

PI Jiancai, LUO Yuhan

【WorkUnit】

Nanjing University, 210093.

【Abstract】

In creating the new development dynamic, China prioritizes the domestic market as the foundation, which makes the domestic sourcing of intermediate inputs an urgent research priority. The rapid expansion of China’s High-Speed rail （HSR） network over the past decade provides a novel perspective for addressing this challenge.
We employ matched samples from the Chinese Annual Survey of Industrial Enterprises and the Customs Database spanning from 2004 to 2013, using HSR openings as a quasi-natural experiment to systematically examine their impact on firms’ domestic sourcing of intermediate inputs. Our measurement comprehensively considers both direct intermediate goods imports and indirect imports formed through input-output relationships. Results demonstrate that HSR openings significantly promote domestic sourcing of intermediate inputs, and this conclusion remains robust when indirect intermediate inputs are considered.
The mechanism analysis reveals that HSR openings facilitate the agglomeration of local advanced manufacturing firms, which drives local firms to adjust their intermediate input strategies. The emergence of such firms effectively fills the gaps in local industrial structures, reduces costs for establishing cooperative relationships with local high-end manufacturing suppliers, and strengthens internal connections within regional firm clusters. Notably, firms with higher information acquisition efficiency or greater cost sensitivity can better exploit supplier selection opportunities created by the HSR network, optimizing their intermediate input structure.
This study provides crucial policy insights for enhancing industrial and supply chain security. Aligned with national requirements for building autonomous, controllable, secure, and reliable industrial systems, HSR openings should more precisely target hubs of advanced manufacturing and skilled labor pools. Through scientific assessment of critical industrial chain segment distribution across regions, priority should be given to connecting industrial clusters with strong complementarity, particularly strengthening linkages between critical component and core technology suppliers and terminal manufacturers. 
In HSR-accessible areas, it is essential to establish government-guided, market-led industrial chain coordination mechanisms. Graduated tax incentive policies should target intermediate goods suppliers, particularly by increasing technological renovation subsidies for firms engaged in the R&D of high-end intermediate goods. Regional industrial chain matching platforms should be established, and regular and targeted supply-demand matching activities should be organized to effectively reduce matching costs caused by information asymmetries. For firms key to the industrial chain, collaborative platforms of the government, industry associations, and leading firms should be explored, and cross-regional coordination models should be built for upstream and downstream firms.
Research findings indicate that firms with strong information acquisition capabilities disproportionately benefit from HSR openings; therefore, it is particularly important to accelerate “industrial chain plus digitalization”. Focus should be placed on building industry-specific industrial chain and supply chain digital platforms, achieving data-driven and visualized supplier resource management. Large firms should be encouraged to open core system interfaces to upstream and downstream partners, thus promoting digital industrial chain coordination. Using the HSR network as physical infrastructure, inter-regional industrial chain data sharing mechanisms should be constructed to create integrated virtual-physical industrial chain information sharing systems that enable firms to respond more agilely to supply chain changes and optimize domestic intermediate input structures.

JEL: H54, O18, P25

【KeyWords】

High-End Manufacturing, Supplier, Intermediate Input, High-Speed Railway, Independence and Controllability