The Impact Of Foreign Capital Entry On Overcapacity Of China's Local Enterprises

Since the 1990s,overcapacity has been troubling the healthy development of China's economy.At the same time,the large-scale influx of foreign enterprises inevitably occupy the market space of local enterprises,which is not optimistic for China's overcapacity situation.in previous studies on overcapacity,almost has not involved the function of foreign capital entry.so,it is of great significance and value to discuss the impact of foreign investment on local enterprises'overcapacity.By reviewing relevant literatures,this paper expounds that foreign capital entry mainly affects the capacity utilization rate through competition,demonstration and industry association effect,the final impact direction is determined by the tradeoff between negative competition effect and positive demonstration effect.On the basis of theoretical analysis,the empirical test is carried out based on the world bank's China business environment survey data and China industrial enterprise database.The results show that:(1)the entry of foreign capital brings more obvious competitive effect and significantly reduces the capacity utilization rate of local enterprises in the same industry.In addition,compared with the export part of foreign-funded enterprises,the domestic sales part has brought a significant negative effect;Compared with foreign enterprises in Hong Kong,Macao and Taiwan,foreign enterprises' entry has significantly increased the burden of overcapacity of local enterprises;Compared with foreign-funded enterprises in the province,the entry of foreign-funded enterprises outside the province has a significantly negative impact.The above results all support the negative impact of the competitive effect of the entry of foreign-funded enterprises in the industry on the utilization rate of capacity.(2)the results of examining the inter-industry correlation effect show that the backward spillover effect of foreign investment is significantly positive,while the forward spillover effect is not significant.(3)the test results of enterprise heterogeneity show that higher labor productivity and export behavior can alleviate the negative impact of horizontal spillover effect.Export behavior also significantly promotes the absorption of positive backward spillover effect by local enterprises,but also significantly aggravates the negative impact of forward spillover effect.Finally,enterprises with government-appointed managers are more vulnerable to the competition from foreign capital.