The Collusion Between Government And Enterprises And Its Governing During The Process Of Eliminating The Backward Production Capacity

The problem of backward production capacity has been plaguing the economic development of China for a long time, and is becoming increasingly prominent. Considering the industrial characteristics of backward production capacity such as high energy consumption, heavy pollution, lower level of technology and so on, a series of phase-out policies have been issued by the government to improve the industrial structure. Although these policies have achieved some success to a certain extent, the implementation effect, however, is not entirely as desired. Therefore, speeding up the elimination of the backward production capacity and making it smoothly exit the market is the key problem needed to be solved in the process of China’s economic development.Based on the existing related theory research, as well as the policy analysis about the mode of the elimination of the backward production capacity, this paper sets up an eliminating backward production capacity’s principal-agent model, and the model is solved, getting the following conclusions:(1) In order to prevent the local government and enterprises committing collusion in the producing, the central government must give the local government more transfer payment amount and have the enterprise obtain more compensate if they eliminate the backward production capacity. Through doing this, expecting that the local government and enterprises will take no collusion behavior. Though it may reduce the central government’s welfare level, but it is also the best choice for the central government reaching out its target.(2) The amount of penalty formulate by the central government should have the effect that once the collusion behavior between the local government and enterprise were found, they will have nothing. If the punishment is less than the optimal value, then the expected profits of collusion will be strictly positive, and the punishment will be incredible.(3) If the central government can supervise the local government’s behavior effectively, the central government can formulate a higher tax rate and get a higher utility level. Therefore, making an effective regulatory system to supervise the local government action is very important for the central government.Based on this, this paper combines the backward production capacity situation of the steel industry, sets up about28provinces of raw steel production panel model, and analyzes the influence of collusion between the local government and enterprise in the process of eliminating backward production capability. Then this paper draws the conclusion:the governing of the backward production capacity is mainly affected by the competent deputy governor, whether native-born are in the fifth year of term, and whether more than50years old, fixed assets investment, real per capita GDP level. If the first three factors have a positive conclusion, they will have the unfavorable influence to eliminating backward production capacity. Finally, this paper brings forward some corresponding suggestions.