A Study On Measurement And Causes Of Overcapacity Of Chinese Manufacturing Industries

With the rapid growing economy, the increasing intensity of investment in industrial products,as well as the financial crisis which gradually affected around the globe after2008, a seriousproblem of overcapacity in domestic manufacturing industries——an important forming part ofindustrial industries——has appeared in recent years, which aroused a highly focus of thegovernment as well as a heated discussion among social scholars. Amongst the empirical results,there are various concepts of overcapacity in manufacturing industries, different ways of estimatingthe capacity utilization, and different opinions explaining what factors form the overcapacity. Underthese circumstances above, it is important and meaningful to a) correctly justify the concepts ofovercapacity in manufacturing industries, b) select creative methods to calculate the capacityutilization in each industry and c) deeply explore the main influence factors which cause theproblem of overcapacity.Grounded by collecting and analyzing the relative researches of scholars at home and abroad onconcept, ways of calculating and forming causes of the problem of overcapacity, the article not onlygives the definition of capacity utilization (abbr. CU), but also draws the model of generalized DEAbased on panel data to estimate the CU of each29domestic manufacturing industries of each yearfrom2000to2012, which intends to create a group-deviding standard based on the value of CU,thus screening the industries which has the issue of overcapacity. What’s more, the article exploresthe relationship among the industrial rate of overcapacity, the rate of investment in fixed assets aswell as the profit margin using the analysis of panel co-integration, and utilizes the fully modifiedOLS (i.e. FMOLS) model in order to estimate the co-integration coefficients.We can draw the conclusion by empirical results that:(1) Domestic manufacturing industries,including the Manufacture of Non-metallic Mineral Products, exhibit a serious issue of overcapacityfrom2000to2012;(2)There exists huge gap on overcapacity between light and heavy industries.Compared to the condition of capacity utilization of light industries, the problem of productionutilization of heavy industries is more serious and severe;(3) For those overcapacity industries,there exists a long-term equilibrium relationship among the industrial rate of overcapacity, the rateof investment in fixed assets as well as the profit margin. More specifically, the rate of investmentin fixed assets plays a positive role in deteriorating the problem of overcapacity, while for thevariable of profit margin, the influence direction is unsteady, which depends not only on theproperties of the industries, but also the joint effects among other economic factors. The empirical results provide references for alleviating industrial overcapacity, adjusting national industrialstructure, and promulgating industrial policies.