Analysis On The Role Of OFDI In Reducing China's Manufacturing Overcapacity

In the context of the global economic downturn and China's economy entering the stage of transformation and upgrading,the phenomenon of overcapacity in manufacturing sector of China has become increasingly acute.China's economic development in the 21st century has been restricted by the serious imbalance in the supply and demand structure of production capacity.However,the capacity absorbed and eliminated by the domestic market is very limited,and enterprises' capacity internationalization transfer through OFDI is an important way to reduce excess capacity.Since 2010,China's economy is recovering from the global financial crisis,after the "One Belt and One Road" initiative puts forward,the Chinese government actively encourage enterprises to invest abroad and countries along the cooperation capacity,on the one hand can meet the demand of the production capacity of the host country,on the other hand can digest domestic excess capacity,expanding the international market to achieve rational allocation of production on a global scale.On this background,studying the effect of OFDI on the reduction of excess capacity of Chinese manufacturing enterprises is significant.At present,most of the literature on quantitative research on OFDI to alleviate overcapacity in China focuses on the industry and regional level,while only a few of them involve micro enterprises,and seldom pay attention to the impact of enterprise heterogeneity.Therefore,starting from the perspective of micro enterprises,this paper selects 925 listed manufacturing companies in China as samples to quantitatively study whether enterprises' OFDI can improve their capacity utilization efficiency from 2010 to 2015.First of all,based on the stochastic frontier production function method(SFA)estimates the capacity utilization rate of every enterprise in different years,and then use tend to score matching method(PSM)during the sample period of investment enterprises with the investment enterprises in accordance with the characteristics of the enterprise to carry on the match,and on the basis of the matching samples(DID)of double difference model was established to study the effect of foreign direct investment in capacity utilization.The results show that the impact of OFDI on capacity utilization is positive,and the average treatment effect of investment on capacity utilization is 1.22%,indicating that the OFDI can significantly promote the capacity utilization of enterprises.Second,on the basis of the main regression,this paper makes an expansion test of the scale effect and time lag effect of overseas investment.The results show that the scale effect of overseas investment in reducing overcapacity is significant.The average treatment effect of OFDI on the improvement of capacity utilization has a strong lag and sustainability,and the more the lag period,the more obvious the improvement effect of capacity utilization.The maximum average treatment effect of OFDI on capacity utilization after three years of investment is 1.47%.Thirdly,in order to ensure the robustness of the empirical results,this paper re-calculates the capacity utilization rate as a new explained variable through data analysis enveloped method(DEA)for testing,and the results are still robust.In addition,considering that enterprise heterogeneity may affect the effect of OFDI on the reduction of excess capacity,this paper classifies sample enterprises according to ownership,industry and economic development of the host country.Results on the whole,different types of enterprises' overseas investment is conducive to the improvement of capacity utilization,but the degree of improvement is different.To be specific,state-owned enterprises through overseas investment to reduce the effect of capacity is more significant than other types of enterprises;The degree of overcapacity in heavy industry enterprises is more serious,and the effect of OFDI on capacity utilization is better than that of light industry.Companies that invest in developed countries can increase capacity utilization more effectively than those in developing countries.Finally,this article from the government and enterprise perspective of China's manufacturing overcapacity to resolve the proposed recommendations.The Chinese government should continue to encourage enterprises to invest abroad and strengthen production capacity cooperation with countries through the platform of "One Belt And One Road" initiative.Encourage enterprises to carry out diversified investment in host countries with different location and economic development level,and produce learning effect and scale effect;Government preferential subsidies should be given to innovative high-tech enterprises and small and medium-sized private enterprises.Enterprises should also enhance their capacity for independent innovation,export high-quality production capacity and enhance their international competitiveness.