A Study Of The Influencing Mechanism Of China’s Local Government Officials’ Promotion Perspective To Capacity Utilization

Capacity Utilization is an important indicator of accessing the use of resources in a country(or an enterprise).Especially,it should be highly valued in China,because the country is experiencing economic transition and industrial restructuring.Overcapacity and insufficient-capacity are two concepts defined with the deviation the actual capacity utilization and optimal capacity utilization.However,the definition of overcapacity and insufficient-capacity is controversial in academic circles.We believe that the core of judging whether a country(or an enterprise)is suffering from over-capacity(or insufficient-capacity)is the status of production equipment and workers.If that the production equipment and workers used for regular production are in idle state,the country(or enterprise)we discussed is suffering over-capacity,vice versa.Based on this definition,we calculated the capacity utilization of various provinces of China with co-integration method.The result shows that there is widespread over-capacity in most provinces in China,and the condition is turning bad soon.Through analyzing the differences of utilization capacity between provinces,we found a possible inducement,that is,over investment,which was caused by the conveniences that offered by local government officials to reduce the financing cost of enterprises.In order to prove this hypothesis,we discussed the behavior decision model of local government officials in China.The research shows that China’s local government officials make their most of decisions in promotion perspective.They try hard to show their personal abilities for future promotion,and the approach they use to show their abilities is accelerating economic growth.With this inference,we collected the panel data of provincial leaders’ personal information and the capacity utilization of various provinces from 2001 to 2012.Doing econometrics studies with systematic GMM model,we got two main conclusions.Firstly,capacity utilization rises with the increase of local government officials’ tenure.At the beginning of the office,officials have imperious demands in showing personal abilities and promoting policies which may get the superiors’ appreciation.But the effect of this incentive decreases with the growth of tenure.Secondly,the capacity utilization increases and then decreases with the age of local government officials grow.The explanation of increasing sector is the same as last conclusion,and we think that is the limit on retiring age leads to the decreasing sector.Some of the officials may think of gambling for promotion before their retirement,and this may lead to the excessive growth of economy.To sum up,the promotion incentive of local government officials may have a bad influence on optimizing capacity utilization.Therefore,in order to solve the problem of over-capacity,the incentive model of local government officials must be changed.For example,delegating personnel management powers to lower levels,considering comments of citizens and peer officials,etc.Meanwhile,some other measures must be taken as well,such as,clearing the property rights of enterprises,perfecting market mechanism,cutting down the transaction costs and promoting the efficient use and circulation of capital.