Study On China’s Capacity Utilization And Its Impact On Inflation

This paper mainly researches the theoretical and empirical aspects of the current economicissues--Excess Capacity. Emphatically illustrates the causes and consequences of excesscapacity in our country，and combined with China’s inflation problems to analyze the impact ofChina’s excess capacity in the process of economic development, as well as how to effectivelymanage the problem of excess capacity.A model of operations research on multi-objective programming DEA model (dataenvelopment analysis) was adopt in this paper. The evaluation of China’s major manufacturingcapacity utilization in the view of microcosmic productivity. Comparing the differences betweenproduction function method and data envelopment analysis of the two methods and demonstratethe effectiveness of DEA estimates the industry in terms of capacity utilization. While usingmultiple linear regression coefficients to measure the utilization of industrial capacity, and thenuse VAR model (vector auto regression) with impulse response and variance decomposition toanalyze the empirical relationship between inflation and the capacity utilization.This research found that the current excess capacity is consistent with the stage of economicdevelopment in our country at present. The imbalance between the supply and demand as well asthe institutional problems of government-led economic development has bring about a seriousexcess capacity in the industrial areas. Capacity utilization is estimated by DEA method is morereasonable, with a high reference value. Capacity utilization and inflation has some relevance,capacity utilization and the analysis of this indicator as a predictor of the economic outlook andstatus quo has a better applicability.