Local Government Competition And Overcapacity

Since the beginning of last century,China has experienced three serious industry overcapacities,which the impact increased successively.The last two overcapacities occurred in the 21st century,which across the construction,motor,chemical engineering and so on,including the emerging industries such as the photovoltaic and wind power.In response to the financial crisis in 2008,the government introduced economic policies such as the Four trillion government investment and tolerant economic policies to stimulate the economy,which caused the excessive investment and the third overcapacity.Thus,in order to curb overcapacity,the government introduced the policy of eliminating disqualified production capacity every year,while the implementation effect of local governments is not satisfactory.Overcapacity has become an unstable factor in the healthy development of China's economy.Therefore,the calculation of capacity utilization and study on causes of overcapacity have important sense to the optimization of industrial structure and improvement of overcapacity.This paper researches the reasons for the overcapacity in manufacturing industry in China from two aspects that including the property rights of listed companies and the competition among local governments(financial pressure and officials' promotion pressure).In this work,we first analyze that method of calculating the productivity utilization rate on the domestic and foreign industry.Then select the Stochastic Frontier Production Function method to calculate the capacity utilization of A-share listed manufacturing companies in China from the micro enterprise plane.And employing the output-weighted computing the capacity utilization of 29 industries and 31 provinces in China.Moreover,on the basics of analyzing the effect on capacity utilization by property rights,fiscal pressure and officials promote pressure,the paper estimated panel regression with the perspective of property rights,fiscal pressure and officials promote pressure.Finally,the conclusion is consistent with the research hypothesis.There exist cyclical,regional and institutional characteristics on overcapacity in China's manufacturing industry.The state-owned enterprises have low capacity utilization ratio,and the higher the industry nationalization degree,the more serious the excess capacity.The property rights of enterprises have a significant impact on the effect of policy implementation,for the effect of policies on state-owned enterprises is stronger than non-state-owned enterprises,the central enterprises is stronger than local state-owned enterprises.Local government competition(financial pressure and promotion pressure)has positive effect on excess capacity that the greater on financial pressure and promotion pressure,the lower capacity utilization on state-owned listed companies.The influence of promotion pressure on the capacity utilization is higher than financial pressure,and the term of provincial officials has an inverted U-shaped relationship with capacity utilization.Local state-owned enterprises and central enterprises are not fully consistent with the competition of local governments.In addition,the significant impact of local government competition on capacity utilization to state-owned listed companies is limited to the provincial level.local governments' intervention in investment decisions of state-owned listed companies brings over investment in a short period of time,resulting in overcapacity.Accordingly,this paper suggests that:Deepening the investment system reform and enhancing the independence of state owned enterprises.Improving the performance appraisal mechanism on local officials and improving the taxation systems that match financial rights and administrative rights.Establishing a statistical monitoring system covering the capacity utilization of main industries to guide state-owned enterprises to make investment decisions.