Research On Institutional Factors And Measures Of Overcapacity In China

In recent years, the issue of overcapacity in some industries in China has aroused the attention of the central government. The central government has formulated a series of policies and measures to deal with the issue of overcapacity. Though the issue is eased, it still has a long way to achieve the expected effect. Even some industries are stuck into a vicious cycle of "more excess under more governance". Currently, the overcapacity is affected not only by the weakness of domestic and international market demand, but also by China’s economic development concept, development stage and the institutional system/system mechanism along with other factors. Nevertheless, the profound institutional reasons for its recurring are the unreasonable institutional system and the inappropriate government intervention. It’s closely relevant with the fact that government and enterprises ignore the importance of the economic laws, especially the law of proportional development of social production.At the present stage, the characteristics of the overcapacity, viewing from the micro level, are mainly that the product prices drop relatively, and the enterprise profits reduce greatly; and viewing from the macro level, those mainly cover that redundant construction are fairly common, the self-inflicted-setback economy is flooding, investment scale is too large, supply and demand are in serious imbalance, the issue is concentrated on low level industry. The analysis shows that, the government should govern the problem issue of overcapacity from institutional aspects. The institutional factors of overcapacity can be summarized as following: GDP–oriented assessment mechanism, tax-sharing-oriented financial management system, the public power supervision system, investment constraint and accountability mechanism, industrial policy under the macro-control, distorted factor market and underestimated environmental cost. With the analysis of the reasons, major corresponding countermeasures are put forward, which include converting the extensive development concept and constructing a reasonable performance appraisal system; deepening the reform of financial system to establish a financial system with governance rights balanced with property rights; strengthening the rule of law and supervision to curb the phenomenon of irresponsible investment; grasping the national fundamental policy and formulating reasonable industrial policies; deepening the reform of property right system and rebuilding "individual ownership"; handling the relationship between government and the market appropriately, giving full play to the "two hands"; deepening the reform of income distribution system and expanding effective demand; reinforcing the learning of economic theory, and following the laws of economic development.