Government Intervention,industrial Chain Links And Overcapacity

Since forty years of the reform and opening-up,China’s economic development have achieved remarkable improvement in both quantity and quality.Our government,as one of the most important participants in socialist market economy,has played a key role in these achievements.Although we have have witnessed the significant contribution made by our government,a series of issues triggered by excessive government intervention should also be concerned.Among these issues,the overcapacity in the photovoltaic industry leaded by some of government policies have drawn extensive attention.Due to the government behaviors,the expansion of production scale of photovoltaic enterprises,rapid expansion of production capacity,large amounts of invalid supply can not be digested within a short time,which may finally cause the redundant production capacity.If the overcapacity of the photovoltaic industry cannot be effectively alleviated,it will inevitably distort product prices,damage market efficiency,cause misallocation of resources,which will further hinder the optimization of industrial structure and the development of the national economy.Therefore,exploring the capacity utilization in the each link of the photovoltaic industry chain and the influence degree of government intervention has increasingly become the focus of theoretical research.For the investigation of the problem,the panel data of 45 representative companies in China’s photovoltaic industry from 2012 to 2018 are selected for analysis.Firstly,we adopt the C-D production function to measure the potential maximum output of each enterprise under the given production factors,and further obtain the excess capacity rate of each enterprise through estimating the specific production function form.Secondly,we put forward the impact mechanism of government intervention on the whole photovoltaic industry and various industrial chain links through analyzing the phenomenon of overcapacity based on the existing literature.Finally,we select the appropriate interpreted variables,set the mode,and perform the regression tests through the GMM system,thus the hypothesis of impact mechanism can be verified.The research shows that,China’s photovoltaic industry exhibited a serious overcapacity phenomenon in the entire industrial chain from 2012 to 2018.Furthermore,the degree of overcapacity in each industry chain link was different,among which the overcapacity in the upstream links such as silicon materials production,silicon powder processing and silicon wafer synthesis is the most serious.Although the overcapacity in the midstream and downstream links is relatively mild compared to the upstream,but the overall situation is still not optimistic.The corresponding overcapacity rates are all above 60%,which four times over the normal value of 15%.The above phenomena indicate that overcapacity in China’s photovoltaic industry is mainly structural overcapacity.Regarding the impact mechanism,government intervention has aggravated the overcapacity of the photovoltaic industry to a certain extent.The real intention of government intervention is to support the rapid development of the photovoltaic industry.However,in the actual implementation of the policy,excessive government subsidies and low industrial land transfer prices have induced disorderly investments from enterprises and caused them to lose their motivation for innovative research and development with ignoring the market demand for photovoltaic products.Specifically,government subsidies play a direct role in the impacts of government intervention on overcapacity while the provision of industrial land with low prices plays an indirect role.For labor-intensive midstream companies,non-targeted government subsidies are more likely to cause overcapacity;for capital-intensive downstream enterprises,preferential industrial land transfer prices are more likely to attract them to expand production scale;for technology-intensive upstream enterprises,appropriate government subsidies can encourage enterprises to increase research expenditures,promote technological innovation,reduce investment in projects with high pollution and energy consumption,and improve capacity digestion.It can be concluded that the impact of government intervention on the overcapacity of the photovoltaic industry cannot be generalized,and it is necessary to distinguish the links in the industrial chain and discuss the specific links in detail.The Chinese government should establish a set of scientific and reasonable capacity utilization evaluation criteria as soon as possible,and regard the staged excess capacity as a research focus.Government should also clarify the relationships with the market,create and maintain a good legal environment and social ecological environment.Furthermore,government need to characterize the industrial chain structure,find the right solution to the problem of overcapacity,avoid the blindness of subsidies,improve the land supply protection mechanism,and promote the healthy development of the land market.The domestic and photovoltaic market should be organically combined to digest overcapacity.Alleviating the overcapacity in the photovoltaic industry from the demand side can promote the optimization and upgrading of the photovoltaic industry structure,and enhance the international competitiveness of the photovoltaic industry.