Research On The Effects Of Overcapacity On China's Economy

Since the 18th CPC National Congress,the central government has clearly stated that China's economic development has entered a period of "new normal",that is,China is in a crucial period of transforming the development mode,optimizing the economic structure and changing the driving force of economic growth.In order to solve the structural problems in economic and social development,the 2015 Central Economic Work Conference put forward supply-side structural reform and identified cutting excessive industrial capacity as the primary task.In fact,overcapacity,as one of the most important economic risks in China,has been widely concerned by all sectors of society.Over the years,the central government has issued intensive policies to resolve the contradiction of overcapacity.With the solid progress of efforts to resolve overcapacity in key areas,although the contradiction of overcapacity in some industries has eased,from a practical perspective,the economy is still facing severe overcapacity pressure.According to the data released by the national bureau of statistics,since the fourth quarter of 2017,China's industrial capacity utilization rate has continued to decline.A new round of overcapacity shows a recovery trend.In the first quarter of 2019,China's industrial capacity utilization rate was only 75.9%,and there is still a long way to go to eliminate inefficient supply.Overcapacity is not only an important threat to China's economic development,but also a manifestation of inefficient economic operation.Therefore,how to resolve the contradiction of overcapacity while promoting economic development has become an important research topic.Although the existing researches on the causes and measurement of overcapacity have obtained many valuable results.However,studies on the impact of overcapacity are relatively weak,lacking systematic theoretical studies and empirical evidence.A comprehensive and accurate understanding of overcapacity requires not only understanding its causes and characteristics,but also clarifying its possible impact on the economy.Unsystematic research is not only difficult to accurately judge the economic consequences of overcapacity,but also is not conducive to grasping the overall development trend of China's overcapacity.The question of how overcapacity will affect the macro economy needs a more precise answer.Therefore,further exploration of the possible key impacts of overcapacity is of great theoretical and practical significance for scientifically grasping the trend of overcapacity,correctly understanding the current economic policies implemented in China,formulating better measures to prevent and resolve the contradiction of overcapacity,and promoting economic development.Based on the reality of China's economy,this study examines the effects of overcapacity on credit allocation efficiency,industrial structure upgrade,and economic growth.This study attempts to establish the research based on rigorous theoretical analysis and solid empirical research,and uses a combination of literature research method,theoretical research method,quantitative research method and comparative analysis method.The study includes seven parts,the specific arrangements are as follows:The first chapter is introduction,which explains the background and significance of this study,the research ideas and methods,the structure of the article,and the possible implications.The second chapter is literature review.On the basis of summarizing the existing theories and empirical studies to resolve the contradiction of overcapacity,this study focuses on combing,comparing and commenting on the relevant literature on the effects of overcapacity on economic.From the perspectives of credit resource allocation,industrial structure upgrading,economic growth,employment risk and environmental pollution,this study reviews the research results of the impact of overcapacity on China's economy and provides a solid foundation for empirical analysis.Based on literature review,this study finds out topics that need to be further explored in the existing research field,and thus determines the research direction.The third chapter is theoretical basis,which mainly sorts out the relevant theories related to investment and economic growth,industrial structure upgrading and financial development,which are closely related to the research in this article,and provide theoretical support for subsequent research.The fourth chapter is the impact of overcapacity on the credit allocation efficiency.From the perspective of allocative efficiency,this chapter analyzes and tests the credit misallocation effect of overcapacity.Using the micro data of The People's Republic of China 2012 Enterprise Survey from World Bank,this study applies Probit,Tobit and OLS regression models to investigate the impact of overcapacity on the efficiency of credit allocation from the enterprise level.The endogenous problems of the models are controlled by ?-estimation strategy(?-Probit,?-Tobit and 2SLS).Then the heterogeneity test is carried out to further compare and analyze the differences of misallocation of credit resources under different government-enterprise relations,industries,and financial ecological environment.The fifth chapter is the inverted U-shaped impact of overcapacity on industrial structure upgrading.This part examines the relationship between overcapacity and industrial structure upgrading from the perspective of economic structure transformation.First,based on the provincial panel data of China from 2004 to 2016,this study uses stochastic frontier analysis(SFA)to measure the level of overcapacity in China.Second,using a fixed panel effect model test the inverted U-shaped relationship between overcapacity and industrial structure upgrading.Third,testing the moderating effect of technological innovation on the relationship between overcapacity and industrial structure upgrading.Fourth,taking the financial crisis in 2008 as an opportunity,this study also compares and analyzes the influence of overcapacity on the industrial structure upgrading in different periods.The sixth chapter is the dynamic impact of overcapacity on economic growth.In this chapter,based on a theoretical analysis of the interaction mechanism between overcapacity,economic growth and bank efficiency,this study uses a panel data from 2004 to 2016 in China and panel vector autoregressive(PVAR)model suitable for dealing with endogenous relationships to conduct empirical analysis.This chapter examines the direct effects of excess capacity on economic growth.The seventh chapter is conclusion and suggestions.In this part this study first summarizes the full text.Then puts forward countermeasures and suggestions to resolve the contradiction of overcapacity in our country and promote the healthy development of the economy.Finally,this part also points out the limitations and future works of this study.The conclusions of this study are as follows:(1)Overcapacity is one of the main reasons for the misallocation of credit resources in China.Administrative intervention has affected the flow of bank credit to companies in industries with overcapacity through financial suppression and the government's"rent-seeking" approach.Overcapacity has caused distortions in the allocation of credit resources.The misallocation of credit resources is more serious when the relationship between government and enterprises is tight,enterprises are in industries with overcapacity,and enterprises are located in areas with poor financial ecological environment.(2)Overcapacity has a significant "threshold effect" on industrial structure upgrade.Slight overcapacity has a positive impact on industrial structure upgrade.As overcapacity increases and reaches a critical value,severe overcapacity will have a significant negative effect on industrial structure upgrade.This negative effect can be alleviated by increasing the level of technological innovation.(3)Overcapacity has caused significant and long-terrm damage to the stable operation of the economy and economic growth.Both economic growth and overcapacity have a strong "path dependence" phenomenon that depends on the inertia of the previous state.Overcapacity cannot be quickly digested in a short period of time.Cutting overcapacity and eliminating zombies are still long-term tasks.The possible innovations of this study are as follows:(1)Based on the background of supply-side structural reform of finance,an endogenous model was used to test the impact of overcapacity on credit allocation efficiency.Based on the micro data of the world bank's survey of Chinese enterprises in 2012,the study applies Probit,Tobit and OLS regression models to investigate the impact of overcapacity on the efficiency of credit allocation from the enterprise level.The endogenous problems of the models are controlled by IV-Probit,IV-Tobit and 2SLS methods.The study revealed the suppression effect of overcapacity on the improvement of credit resource allocation efficiency under government intervention and provides a theoretical reference and empirical basis for resolving potential financial risks caused by overcapacity in China.(2)Establishing a fixed-effect panel data model and introducing technological innovation as a moderating variable to examine the non-linear relationship between China's industrial overcapacity and industrial structure upgrading under the industry dimension This study explores important structural transformation issues in the process of China's economic transformation.From the existing literature on the research of overcapacity,it seems that there are few literatures that takes the relationship between overcapacity and industrial structure upgrade as the research object and conducts empirical tests.This study enriches the research results in this field.(3)A dynamic panel vector autoregressive model was established to directly examine the long-term dynamic impact of overcapacity on economic growth.Considering the complex interaction between the financial system and the real economy,this study incorporates overcapacity,economic growth,and bank efficiency into the same research framework in the research model and describe the interaction between them.This is not only a new perspective for the study of China's economic growth,but also provides an explanation for why the overcapacity with short-term fluctuation characteristics will affect economic growth in the long run.