Land Marketization, Land Accessibility For Firms And Excess Capacity

The land regulation system in China generates conflict about “empowerment and restriction of rights” within the land marketization process in C hina. This system structure increases rent-seeing behavior of local officers, resulting in twist of firm behavior and excess capacity. This paper explain this phenomenon by constructing theoretical mechanism and multi- level regression models, using the data from World Bank China-enterprise survey 2012 to do empirical study of the relationship between obstacle of land marketization, terms of local officers and capacity utilization. According to the results, there is a positive correlation between the level of obstacle to access land for firms and capacity utilization. And the relationship between land marketization and capacity utilization is inverted U shape. When land marketization rate is 49.00%, firm capacity utilization is maximized. This implies that too low or too high land marketization rate will lower obstacle for firms to access land, resulting in excess capacity. Moreover, the relationship between terms of local officers and the level of obstacle to access land for firms, and the relationship between terms of local offices and firm capacity utilization, are both U shape. The capacity utilization rat e of firms is minimized, when term of local officer is 0.031 years, say when the new officer takes office. In C hina, there is huge difference between land marketization rates in different regions. Especially, land marketization rates in developed regions are comparably lower, which means level of obstacle to access land is low in C hina for most firms. And during this land marketization process, the rent-seeking behavior of local officers lowers the land marketization rate. This is one key reason for C hina to suffer from excess capacity. Therefore, the government should formulate proper regulation policies to control land, in order to increase land marketization rate and obstacle to access land. Thereby, enterprise investment can be coordinated; capacity utilization can be improved; and the problem of excess capacity can be relieved.