Manufacturing Excess Capacity Of China: Measurement And Affecting Factors

Since the 1990s, China’s manufacturing industry excess capacity problem has been the focus of Chinese scholars and government departments. The scope of overcapacity has been expanded from the initial production of consumer goods to most of the traditional industries and the photovoltaic, polysilicon and other high-tech industries in recent years. In addition, the government makes efforts to control overcapacity, but result is not successful, even appearing the phenomenon of "the more control the more seriously", overcapacity has become the most important problem of Chinese economy. So studying reality and factors of excess capacity has important theory significance and practical value to the development of Chinese economy in future.In this article, on the basis of analyzing the basic methods of measurement of capacity utilization, including trend through peak, production function method, data envelopment analysis and cost function method, eventually using data envelopment analysis (DEA) method measuring capacity utilization from 2000-2013, concluded that industry with low plant utilization rate is mainly concentrated in heavy industry, that China’s manufacturing industry overall plant utilization showed a downward trend, and that overall manufacturing capacity utilization rate experienced a rapid decline after initial slow rise.According to existing research of manufacturing excess capacity, we found that affecting factors of manufacturing excess capacity mostly contains macroeconomic environment, government intervention, industrial property and competition intensity. After theoretical analysis of above four affecting factors of manufacturing excess capacity, this article uses a fixed effects panel model and fixed effects panel model generalized method of moments (GMM) to seek out factors affecting overcapacity. Regression analysis showed that factors and way affecting technical efficiency and capacity utilization are the same. And the capacity utilization would be promoted by the international economic environment and market competition and reduced by domestic economic environment, the proportion of fixed assets, the proportion of state-owned assets and the export degree.Based on the above analysis, we propose the following political advice:(1) accelerating the transformation and upgrading of the manufacturing sector; (2) reducing government intervention in the manufacturing sector; (3) rationalizing the market structure to promote competition; (4) imposing environmental taxes on businesses; (5) improving system of production factors; (6) completing the industry statistical system and publishing capacity utilization regularly.