Research On Excess Capacity In China

Capacity over needs is a common economic phenomenon. To some extent, capacity over needs may expedite economic development. Meanwhile, it could help market form mechanism for the survival of the fittest enterprises. Otherwise, over capacity may have negative effects of economic operation, let to price decrease. Industry economic profit rapidly drop lead to enterprises losses even ban-krupt.Over capacity not only influence enterprises profit and worker employment, but also spoil resource allocation and economic environment. In this way, it may influence the whole country economic on-going and healthy development. Since reform and opening up, over capacity keep perplex Chinese economic development. That’s the reason that Chinese government pays high attention on this issue and takes over capacity management on top priority. Under reform of tax-sharing system, central government and local government divided financial and business authority. In order to obtain enough fund to support financial fund allocation, local government eager to provide Enterprises preferential subsidies to attract enterprise investment locally and increase public finance revenue. Nowadays, government official performance evaluation based on local GDP data.To enhance personal political status, local civil officer have more initiative to expand investment to improve preformation evaluation. Meanwhile, local governments by means of the ambiguity of property rights of land investment manipulate referential land policy to enterprise. Weaken banking system on budget constraints the control on local governments. The over capacity phenomenon significantly impede China economic development. So how to handle this issue will be the top priority. If so, we first should deeply observe and analyze China over capacity phenomenon.From the perspective of government investment, based on the domestic and over capacity relevant research literature, the author study China government investment over capacity formation mechanism. Meanwhile, the author points out China government investment over capacity conduction path and economic impact. Through review and evaluation the macro-economic control measures influence, the author aim at government investment and over capacity mechanism empirical analysis. After examined the efficiency of local government investment and the impact convergence of industrial structure, the author reference developed countries successful experiences on overcapacity curb. Finally, the author proposed governance of public finance institutional arrangements and policy choices.This paper includes 7 chapters:Chapter 1,introduction.Introduces the research background and theoretical and practical significance,the domestic and foreign existing research literature review,research content of this article,research ideas,research methods and frame structure,and points out the innovation and weaknesses of this paper.The Chapter 2,it analysis the government investment and excess capacity. It defined the government investment, excess capacity and the other relational concept. It describes the formation mechanism of excess capacity from three aspects:the low concentration of market structure, the access barriers and excessive entry. It points out that the industry supplying and demanding macro incentive excess capacity, manufacturers category and behavior is the micro foundation of excess capacity. Then it described the governmental excess capacity and non-governmental excess capacity.Chapter 3, it investigates the excess capacity reality in China and evaluates the governance. Through the introduction to excess capacity evolution in China, it analysis the formation mechanism of excess capacity since impulse of the government investment.It points out the pathways of excess capacity in China and its effect on the economy.Chapter 4 is an Empirical Analysis of government investment and excess capacity. It introduces the theory of government over investment lead to excess capacity; it empirically analysis the local government investment efficiency through taking vector auto regression model;it also empirical the research the relationship between the local government investment and industrial structure convergence in China’s east, central and western.The author measure and research the capacity utilization by using data envelopment analysis (DEA) to China 29 provinces, autonomous regions and municipalities.Chapter 5, it Introduces and learn from international experience inhibition of excess capacity, it specifically describes curb excess capacity Practice in the United States, Germany and Japan, then draw the inspiration to Chinese suppression of excess capacity.Chapter 6 and 7, based on the study of China’s excess capacity situation in this paper, it directly proposes institutional arrangements and policy recommendations.The views and conclusions are follows:1.Excess capacity studied in this paper refers to Oversupply that appears in Macro Markets due to economic cyclical fluctuations.2.Government Investment in this paper is defined as all the Investments take place in the infrastructure sectors. Including three sectors:(1) total fixed asset investment for Electricity, gas and water production and supply;(2) total fixed asset investment for Transport, storage and communications;(3) total fixed asset investment for Water Conservancy, Environment and Public Facilities Management。3.Low concentration of market structure,high exit barriers and low entry barriers together can lead to the Formation of excess capacity.Given Increased investment, production capacity and supply, while consumption does not grow synchronously, leading to profit margins reducing, excess capacity is then Inevitable, witch can be taken as the macro incentive of overcapacity. State-owned economy predominates, while Private Economy work As a subsidiary,can be taken as the Micro foundation of excess capacity.4.1n china, local Governments have unignorable influence over State-owned enterprises,while some kind of influence over Private Enterprise.The effect of the central government’s macro-control is undermined by these alignments, giving birth to excess capacity. Tax Distribution System Encourage local Governments to Expand investment,and to Pursue high GDP. China’s bank system and Land Investment Property regulations also help to enlarge this Over-investment.5.Empirical Research in this paper include the Linear Regression between Local Government Investment Efficiency and Industrial Structure Convergence.The results show that Investment Efficiency of Local Government is Far less than private investment.at the same time,Local Tax Exacerbate Regional industrial structure convergence.6.Macro-control means that can be used to Cope with excess capacity mainly include:Administrative intervention,Economic regulation and Legal Regulation. But as we Look back at history,none of these three means Meets expectationsAs for government investment impulse lead to over capacity formation, this paper provides specific suggestion from the perspective of thorough financial system and best choice of government policy, it including:(1)Change fiscal policy direction, from "Construction finance" to "Public Finance" transition; (2) Improve fiscal decentralization, curb blind investment and duplicated construction; (3) Implement fiscal policy to curb over capacity industry development; (4) Establish fiscal and taxation system to support the development of strategic emerging industries; (5) Improve financial policies to inhibition of excess capacity;(6) Improve related measures. Including the improvement of relevant laws and regulations, deepen the administrative system; improve market entry and exit mechanism and optimization of social security mechanisms.This paper tries to make innovation in the following three aspects:1. Starting from the analysis of the perspective of government investment, to study China’s overcapacity problem,Reveals the government investment,Especially the local government investment to the mechanism of the formation and exacerbate overcapacity,Pointed out that China’s overcapacity exacerbated the fundamental reason lies in the corresponding system and mechanism is not sound, make the local government to the local economy and the enterprise investment behavior of the excessive intervention.2.This article take the vector Since the regression model of local government investment efficiency are analyzed in experience,Contains the cointegration test, error correction model, impulse response function and variance decomposition, and a series of methods to analyze the interaction between government investment and economic growth dynamic difference,The results show that the efficiency of government investment is far lower than the private investment and labor input, in terms of promoting economic growth, the efficiency of the government in the fall or lower.At the same time, the government too much investment can produce extrusion effect on private investment, is not conducive to fair competition in the market.3.This paper by using regional dynamic panel data model,On China’s eastern, central and local governments in western material capital investment, human capital investment, taxation and economic growth and industrial structure convergence empirical research.The results showed that the three industrial structure convergence in fiscal policy variables and long-term,stable equilibrium relationship, and regional industrial structure convergence in China to produce the influence of different degree and direction.Among them,Physical capital investment of local government and local tax competition intensifies the regional industrial structure convergence, and the local government human capital investment is decreased convergence of industrial structure, and the optimization of industrial structure upgrade has a positive promoting effect.4.The paper uses data envelopment analysis (DEA) to measure and analysis on China 29 provinces, autonomous regions and municipalities. It conducts China capacity utilization can be divided into three levels:First level:Shanghai, Jiangsu, Fujian and Guangdong as the representative of the non-overcapacity region; Second level:Beijing, Tianjin, represented a slight excess region;Third Level:Shanxi, Liaoning, Jilin, Heilongjiang, Anhui, represented serious surplus areas.Meanwhile, further descriptive statistics show that the degree of excess capacity is significantly lower than the eastern extent of excess capacity in the western region.In this paper,there are problems:Limited to the data collection,we failed to get enough foreign literature material about excess capacity,and the examples of excess capacity in this paper isn’t enough either;Limited to personal knowledge and the understanding of the related work of this topic,the countermeasures which we put forward isn’t nice enough either,and I will continue to study on this topic.