A Study On Investment Impulsion And Excess Capacity Under The Perspective Of Financial Intervention

Moderate overcapacity is a normal phenomenon in a market economy,which can promote competition and realize the “survival of the fittest”.However,China's overcapacity has already become a huge hinderance to the development of the economy and has been caught in a strange circle of “the more regulation,the more expansion".Therefore,it is of great significance to study the causes of overcapacity and discuss its countermeasures.On the basis of reviewing the present research both at home and abroad,this paper first analyzes the causes of overcapacity in China,and tries to study it under the perspective of the financial intervention.Based on the panel data of 36 industrial industries from 2001 to 2011,this paper empirically shows the positive effect of tax incentives and fiscal subsidies on investment impulse and overcapacity.It shows that:(i)The overcapacity in China is essentially an "institutional overcapacity".China's fiscal decentralization and political centralization lead to a strong motivation of local governments interfer enterprises' investment and stimulate local economic growth.Taking advantage of the system defects,local governments achieve their purpose of intervention by the means of financial intervention,land support,financial support and environmental indulgence,which causes over-investment and overcapacity.(ii)Over-investment would directly cause overcapacity,and as the most important ways of financial intervention,tax incentives and financial subsidies affect overcapacity through investment,which means both of them could induce enterprises' investment impulsion and cause over-investment and overcapacity.Meanwhile,this paper also validates the distorting effect of financial subsidies on investment,and finds that subsidies will cause the loss of efficiency and further worsen the overcapacity effect of investment.(iii)In addition,the lack of innovation,excessive labor input,structural imbalance between supply and demand,as well as path dependence formed in opening-up,are also important factors leading to overcapacity.Beasd on the above research,this paper proposes: we should take the system reform as the basis,the transformation of economic development as the support,the enterprise independent innovation and human capital cultivation as the key for resolving overcapacity.