Research On The Impacts Of OFDI On Overcapacity In Chinese Manufacturing Industry

Since the reform and opening up,China's economy has maintained a rapid growth and its annually surging gross domestic product overtook that of Japan in the first half of 2010,which successfully made China the world's second-largest economy after the United States.However,there exist enormous potential risks behind the vigorous domestic economy and special attention should be paid to the overcapacity in Chinese manufacturing industry.Under conditions of the market economy,overcapacity has become a common economic phenomenon while a mild overcapacity can even promote optimal allocation of resources,healthy market competition and healthy development of national economy.But currently,overcapacity in Chinese manufacturing industry has run far beyond the reasonable limit and become a major impediment of sound economic development.And it is due to profound impacts of the above problem on our national economy that management and settlement of overcapacity in manufacturing industry have gradually become an important economic issue that is intensely concerned by government departments and scholars in recent years.In 15th October,2013,the State Council issued Guiding Opinions on Resolving Serious Production Overcapacity Conflicts for the sake of formulating the industry-dividing policy and launching selective,highlighted and well-targeted solutions according to characteristics of the industry.In November,2013,Decisions of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform was officially issued in the Third Plenary Session of the 18th Central Committee of the Communist Party of China and in this document resolving overcapacity was also deemed as a future work emphasis.Although the government has issued frequently and attached great importance to overcapacity,policy impact still remains minute.Consequently,we should change our way of thinking and consider solving this problem in a global context.In the background of adjusting world economic structure and transforming domestic economic development model,both flow and stock of outward foreign direct investment in China have increased rapidly.Figures from Ministry of Commerce show that China's domestic investors has made direct investments to 6128 foreign companies in 156 countries and regions all around the world in 2014.China's non-financial foreign direct investment exceeded hundred billions of dollars for the first time,reaching 102.9 billion dollars with an annual growth of 14.1%.China's actual used foreign capital in 2014 was around 119.6 billion dollars with an annual growth of 1.7%.If reinvested foreign earnings and third-party investments of Chinese companies were added,China's outward foreign direct investment would for the first time surpass attracted foreign investment,and China would then become a net exporter of capital.Under circumstances of growing momentum of China's foreign direct investment,we should turn the perspective of settling domestic overcapacity to a global view,think over economic associations in the era of economic globalization,enable production capacity to 'sail oversea' and completely release external consumption demands on the basis of general rules of domestic industrial structure changes,which altogether can not only resolve overcapacity,but also help 'Made in China'go global.Taking relationship between overcapacity in manufacturing industry and dualistic OFDI as the research object,this paper firstly makes an overview of concepts of OFDI and overcapacity and causes and measuring methods of overcapacity,and elaborates upon theoretical basis of impacts of OFDI on overcapacity in manufacturing industry before analyzing their relationship.Then,in order to understand the current situation of capacity utilization rates in different manufacturing industries in detail,by means of calculation of capacity utilization rates from 2000 to 2013 in those industries on the basis of generalized DEA model,this paper concludes seven industries with severe overcapacity including chemical fiber manufacturing industry and paper and paper products manufacturing industry in light industry,non-metal mineral products manufacturing industry,smelting and pressing of ferrous metals industry,smelting and pressing of non-ferrous metals industry,raw chemical materials and chemical products manufacturing industry,and petrochemical processing and coking and nuclear fuel manufacturing industry in heavy industry.Furthermore,with the help of vector auto-regression(VAR)model,this paper gives an analysis of impacts of dualistic OFDI on capacity utilization rates in manufacturing industry,and empirically concludes that both down-gradient and anti-gradient OFDI and improvement in rationalization of industrial structure can exert positive influences on capacity utilization rates in manufacturing industry.Finally,according to above theoretical analysis and empirical research,this paper puts forward the following suggestions for resolving overcapacity in our manufacturing industry:firstly,we should actively implement the national strategy'One Belt,One Road' and encourage enterprises to directly invest abroad practically according to economic development level and resource endowments of countries along the Road;secondly,we should strengthen our technology-seeking-oriented foreign direct investment and enhance both product quality and competitiveness of domestic enterprises on the international market through reverse technology spillover effects;thirdly,we should accelerate the transfer of marginal industries abroad so as to guide productive factors into emerging industrial sectors and optimize domestic industrial structure;fourthly and lastly,we should seize the chance of external demand promotion with the help of Asian Infrastructure Investment Bank and encourage enterprises to actively expand overseas market.The innovation of this paper is to OFDI perspective to analyze and solve our current manufacturing overcapacity,while OFDI into the inverse gradient along the gradient OFDI OFDI to be explored separately.On the measure of capacity utilization in manufacturing industry,this paper uses the generalized DEA model panel data(non-parametric DEA method)based,effectively avoiding the parameters in the parameter setting method brings not precise enough and cause results to appear error,and thus produce a more accurate measure of capacity utilization,provide more scientific data to support the subsequent empirical analysis.The inadequacies of this article is difficult to find foreign direct investment data of China's manufacturing industry,and therefore can not establish a business model with the panel capacity utilization of foreign direct investment only in estimating the overall industry capacity utilization based on the use of vector autoregression(VAR)model analysis OFDI and capacity utilization dynamic relationship between the two.