Abstract

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Author(s):: CHEN Si-lu 1 ; REN Tong-xuan2 ; CHEN Yu-jie3; 1.School of Economics and Business Administration,Central China Normal University,Wuhan 430079,Hubei,China; 2.School of Business,Macau University of Science andTechnology,Macau 00853,China; 3.School of Hospitality and Tourism Management,Macau University of Science and Technology,Macau 00853,China

Keywords:: high-speed railway industry; political connection; private firms; over-investment; bi-direction rent-seeking 

Abstract:: The highspeed railway industry in China has grown quickly due to support from the government’s fourtrillion yuan investment plan and most parts of China are now covered by the highspeed railway network.However,the highspeed railway capacity is growing faster than the economy.To solve this problem,China has now proposed “Highspeed railway diplomacy” to attract more offers of foreign contracts.In this context,this article selects 64 key private firms from the highspeed railway industry between 2009 and 2014 to empirically analyse the problem of overinvestment in private firms with political connections.Using the panel data,through descriptive analysis,data and model chosen and test,regress result analysis.This article finds that first,the local government for district economic and achievements target will impel them to intervene the private enterprises’ behaviour in decisionmaking,which makes private enterprises on additional overinvestment.Second, private enterprises are limited by resources and policies and,in pursuit of economic interests,often actively work with the local government to establish a link with government officials,while excessive investment is the political cost.Third,the influence of political relevance and overinvestment is a twoway relationship between private enterprises and local government,based on their own interests and resources exchange,to achieve both economic and political goals. 