Research On Overcapacity In Chinese Manufacturing Industry

Over-capacity has become a stubborn illness which restricts the healthy and stable development of China’s macro economy since reform and opening up policy of our country. No matter in the perspective of the country, the industry or the enterprise, understanding, analyzing, solving the problem of over-capacity is an urgent issue. Years of investment-led growth mode led to redundant development which occurred in many key industries of manufacturing of China, eventually leading to over-capacity of the whole industry. Over capacity is not a new problem in our country. Since2004, curbing over-capacity has been an important content of macro economy regulation and control; In November2005and August2009, two executive meetings of state council were held especially for the issue of over-capacity; In the key period of the economy pick-up, ten departments also joined up; Iron and steel, cement, plate glass, coal chemical industry, polysilicon, wind power equipment and so on six over-capacity important industries will be restrained during the period of " the12th Five-Year Plan ";In2013, the mission "speed up to adjust industrial structure, improve the quality of the whole industry" of the central economic work conference highlighted "we should make full use of the international financial crisis’s reversed transmission mechanism, put focus on solving over-capacity under the general principle that respecting rules, special measures for different industries, combination of measures and seeking both temporary and permanent solutions. We should strengthen the prediction of development trend in various over-capacity industries and develop targeted adjustment and solution.What makes us more worried is that many industries of manufacturing mainly rely on the international market for profit, highly depend on international markets which include both import dependent and export dependent. The photovoltaic industry, for example, accounts for more than50%output of the world, but our domestic installment capacity accounts for only2%to3%of the world. The key equipment and technology, market demand, raw material of photovoltaic industry have serious problems. Import dependence is embodied in the need of getting key equipment and technology, a large number of high purity polysilicon from abroad; Export dependence is embodied in heavy reliance on foreign market demand, extremely vulnerable to swings of foreign markets. Over-capacity is largely caused by decrease of export.In normal years of the world economy, export promotes economy growth in China, but when faces with economic and financial crisis, the industries which are excessive dependence on the international market will appear large losses, even collapse. It is not conducive to China’s economy development and structure stability.According to the common sense, a certain degree over-capacity is normal phenomenon of market economy. Asymmetry of market supply and demand information maintains a certain degree of over-capacity which is advantageous to the formation of market competition and improvement of efficiency. However, at the same time we should be aware that the serious over-capacity will impact the normal order of market. At present, the majority of our industrial products accounts for a large share in the international market, and under the effect of shrinking external demand, over-capacity becomes more and more serious.After Southeast Asian financial crisis in1997, our country began many years of deflation. Under the bad circumstances of insufficient demand and structural factors, it appeared low capacity, low prices, operating losses, and excess inventory backlog; as a result our government took the export-oriented development strategy. In2008,the financial crisis broke out, initially from the United States and gradually spread to the world, then in2010European sovereign debt crisis broke out, their central banks have issued economic stimulus plan and our government also launched a4trillion economic stimulus plan to revive the market. Since the second half of2008, China’s export growth continued to decline, according to figures from the ministry of commerce, in2009China’s foreign trade import and export valued＄2.20727trillion,13.9%less than the previous year;2009national trade surplus of＄196.07billion,34.2%less than the previous year. In the situation of worse export, our country took investment strategy, especially a large number of government direct investments.In the first quarter of2010, the whole social investment in fixed assets was3.532trillion Yuan, up25.6%from previous year,2.3%over the previous fourth quarter. Contribution of capital is57.9%in the GDP growth, accounted for6.9%in GDP growth which was11.9%more than previous year.In the context of domestic development mode transformation and the world economic structure adjustment, we must make good use of the resources of the international market, change unreasonable dependent on the situation, promote industrial upgrading of manufacturing, research and develop new technology, enhance the core competitiveness of our products, improve the level of the internationalization of enterprise management, help over-capacity enterprises get the scarce natural resources and valuable technical equipment, and also strengthen the understanding of foreign markets and trade policies, effectively avoid the trade protection, expand the international market, reduce over-capacity in the domestic manufacturing. All of above are far-reaching meaningful.The innovation of this article is that I have chosen special perspective to analyze and solve over-capacity issue which based on perspective of export-oriented. When face with current international trade protection policy and domestic increasingly serious over-capacity, even if export of products encounter all sorts of obstacles and unequal treatment in foreign trade, making all efforts to sell products abroad is still the choice to cope with over-capacity, the key points are how to go out, how to go for a long time, this paper will give the corresponding methods and measures.The first part is the introduction. It discusses the research background, research objective and significance, the content of the article, innovation point and shortcomings as well as current research status. The second part describes the related concepts and basic theories in the perspective of export-oriented. The third part describes and analyzes the status of manufacturing over-capacity, in means of many data and graphs. The forth part describes and analyze the status of manufacturing export. The last part of the article makes relevant suggestions to solve the above problems from four aspects.