| This paper studied the policy support,misallocation and excess capacity of China from 2001 to 2013.China’s industrial sector could be divided into two parts,one part meet the diversified development goals of the central or local governments,which was subject to more resources and subsidies,the other part can only got comparatively lower resources.In this paper,a theoretical model was built up to say that the supportive policy was favorable for both the government and firms before the financial crisis.However,conflicts of interests may become a big problem during the financial crisis.In this case,supportive policy could be harmful.The data used in this paper included industial sectors ranging from 2001 to 2013.Empirical results showed that misallocation of input factors caused about 11% of output gap.Particularly,during the financial crisis,capital allocated to the supported sectors was 23.1% higher than the efficient level,which was 1.46 trillion RMB in amount.Interactive effects between financial crisis and policy support exacerbated the misallocation of resources.After the financial crisis,the distortion coefficients of supported industries became larger,and their contribution to the industrial economic growth became smaller,especially for resource based industries(black,non-ferrous metals,electricity,etc.).Regression analysis at the industry level showed that both cyclic and policy effects were important.The "4 trillion" economic stimulus policy in 2009—2010 pulled up the manufacturing demand in the short term,yet made the over-capacity problem more severe in the long term.Micro-level analysis of listed companies verifed the above conclusion.Empirical results showed that,policy support was in favor of corporate earnings during 2001—2007,causing the ROA of supported firms to rise by about 1.0%.However,after the financial crisis,the effect became negative,the ROA of supported firms declined by 1.7%(2008-2009)and 2.0%(2010-2013)because of policy interventions. |
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