Research On The Cooperation Of International Production Capacity In China

Since the beginning of reform and opening up, favored by the opportunities of globalization and its own advantage of low-cost production factors, China’s manufacturing industry has achieved considerable progress, with its scale ranking No.1 in the world.At present, China’s manufacturing industry accounts for 19.8% of the global total, and its export of industrial products makes up one seventh of the global total, making China the biggest manufacturing country. In terms of industrial scale and the structure, manufacturing is an important pillar of China’s economy and main underpinning force of economic growth,contributing over 40% of its GDP. It is the mainstay of the economy,and constitutes the foundation for the development and prosperity of the country. At the same time, however, since 2000, there has been a problem of over capacity, which is a result of the transfer of global manufacturing industry and excessive government interference, and also attributed to the fast accumulation of the capacity in the efforts to tackle the Asian financial crisis and international financial crisis. Over supply is a problem for many sectors, especially in traditional fields such as iron and steel,electrolytic aluminum, automobiles, cement, electricity, textile,household appliances, and real estate. By the end of 2012, the utilization rate for iron and steel, cement, electrolytic aluminum,flat glass, and ship building was respectively 72%, 73.7%, 71.9%,73.1% and 75%, obviously lower than the international level. Over capacity is a more serious problem for high-energy consumption and high-emission sectors. In 2012, the production capacity of iron and steel in China was 717 million tons, with only 560 million tons consumed in China and tens of millions of tons still under construction. The production capacity of cement reached 2.21 billion tons, with only 1.54 billion tons consumed in China for the year and 400 production lines under construction which willadd another 600 million tons of capacity. Over capacity is not just a problem for traditional sectors. Investment has also flooded into emerging industries such as PV and wind power, leading to serious over capacity. The utilization rate for PV capacity is less than60%, and that for wind power is less than 70%.(1)At present, the central authorities have issued the policy of“consuming some capacity, transferring some capacity,streamlining some capacity and eliminating some capacity” to address the problem, among which transferring some capacity refers to international production capacity cooperation. The essence of international production capacity cooperation is the international transfer of industries, i.e. realignment of of production factors worldwide. The author referred to the theories of overseas direct investment, industrial transfer and value chain,and conducted analysis based on China’s advantage in manufacturing capacity, experience accumulated after years of“going global”, international economic environment,international experience, and the “Belt and Road” initiative,stating that China faces rare historic opportunities for international production capacity cooperation. At the same time,full consideration has been given to the different circumstances of various segments of the manufacturing industry, its strength and weakness, and situations in countries of different regions,so as to analyze the positional choice and various models for international production capacity cooperation. The author also analyzed the challenges faced from the perspectives of challenges from other countries, difficulties of countries taking over the capacity transfer, weakness of Chinese businesses, and insufficiency of related policies, and gave policy suggestions from the angles of the current international environment, related policies in China, independence and self reliance of Chinese businesses, and diplomatic guarantee. The author also talked about the operationality and feasibility of these theories in guiding international production capacity cooperation. One thing new about the paper is that the author conducted analysis and offered solutions to the problem of over capacity in China from the perspective of international production capacity cooperation,especially explored the role of diplomatic agencies and Chinese diplomatic missions overseas.The first part of the paper is the overview, talking about the background, purpose and significance of the study, basic research ideas and methods, innovative parts, and related elaborations in China and the world. Part two includes related concepts and basic theories for international production capacity cooperation. Part three is the analysis of production capacity cooperation for China’s manufacturing sector, including its comparative advantages, existing problems and related theoretical analysis.Part four is the major opportunities for China’s manufacturing sector to carry out international production capacity cooperation.Part five is the positional choice for China to conduct international cooperation for the manufacturing capacity. Part six is the challenge for China’s manufacturing industry to develop international production capacity cooperation and policy suggestions. And the seventh part is the conclusion and research outlook.