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Overcapacity is a global problem and a phased product that comes with the economic development of a country. On the one hand, the macro-economy is cyclical, and the demand side is affected by fluctuations in the economic cycle. When the economy prospers, the production capacity formed by investment will manifest itself as oversupply. On the other hand, individual production of enterprises is strategic. Enterprises retain a certain amount of excess capacity to cope with the changing economic environment of the market, and are also a credible threat or barrier to entry for potential entrants. At the same time, investment in steel, coal and other industries has a lag, and it is prone to dynamic inconsistency. This is similar to the cobweb model. The project is in great demand, but the market may have shrunk after the production starts. Overall, overcapacity is a market behavior and there is no need to be overly nervous.
However, China's overcapacity has its own particularities. Through international comparisons and micro-research, it is found that China's overcapacity has a special phenomenon of “excessive levels exceeding other countriesâ€, “environmental standards are artificially depressed†and “overflows of enterprises are still in excessâ€. In other words, China's overcapacity problem goes beyond what is generally believed to be the role of macroeconomic cycles, corporate behavior and market mechanisms. There is another thrust behind it. This is the local government.
In fact, textiles, home appliances and other industries rely on market regulation is no longer a serious excess, but the steel, coal, electrolytic aluminum and other industries that have repeatedly been "heavy" have repeatedly fallen into the cycle of serious overcapacity, and even emerging industries such as photovoltaics and robots have Excess signs. It can be said that local governments have artificially lowered the access standards for environmental protection and safe production to a certain extent for GDP and fiscal revenue, and a large number of enterprises that fail to meet the standards can also enter the market smoothly. The local government also gives corporate subsidies, land, credit, taxation and other preferential policies, so that enterprises enter the non-profit industry in order to obtain government resources, which in turn leads to excessive entry. For this reason, China's overcapacity is far more than other countries that are not supported by local governments.
The particularity presented by the local government has affected the resource flow and rational allocation among Chinese enterprises, industries and regions. What is more serious is that the market forces that eliminate backward production capacity, improve product quality and industrial structure are limited, and the market survives the fittest and innovation. The general mechanism of development is distorted. For example, when a company makes a profit, there is no innovation incentive due to the existence of administrative protection, and product quality and structure are copied at a low level for a long time. When a company loses money, it is difficult to go bankrupt due to the existence of bank loans and government subsidies, becoming a “zombie enterpriseâ€. Therefore, the work of de-capacity should grasp the "bull nose" of the characteristics of overcapacity, and systematically disintegrate the foundation of overcapacity.
China's economy still needs to maintain medium-to-high-speed growth. The expansion of industrial production capacity is inevitable, but it cannot be a simple expansion and reproduction of inefficient and backward production capacity in the past. It should be accompanied by product quality improvement and industrial structure optimization, that is, suppression of "capacity" is not an end. It is fundamental to resolve and eliminate “excess†and meet higher levels of demand.
De-capacity is in urgent need of institutional change. We don't have to pay too much attention to the increase or decrease of the “quantity†for a while, because this is likely to be a regular change in the economic cycle or the market mechanism itself. Instead, we should start with the characteristics of local governments pushing up production capacity and resolutely put an end to certain local governments. Under excessive protection, the backward production capacity was reduced by the standard and forced to launch. At the same time, new kinetic energy such as research and development, innovation, entrepreneurship, and new economy should be tolerated and encouraged, because they are the fundamental force for long-term structural adjustment.
How to structurally upgrade the overcapacity base from the system?
Abstract In the first half of 2017, the industrial de-capacity represented by steel and coal has made significant progress, and the pressure of overcapacity has decreased significantly. However, there is still a risk that the prices of industrial products will rise and fall, and the excess capacity will be repeated. Since the last century, steel and coal have been carried out...
In the first half of 2017, the industrial de-capacity represented by steel and coal has made significant progress, and the pressure of overcapacity has decreased significantly. However, there is still a risk that the prices of industrial products will rise and fall, and the excess capacity will be repeated. Since the beginning of the last century, steel and coal have undergone multiple rounds of de-capacity. As the economic cycle changes, excess capacity often rises again at this time. In order to prevent the retaliatory rebound of production capacity, it is necessary to deeply understand the particularity of China's overcapacity, carry out institutional changes, consolidate existing achievements, and seek long-term solutions for industrial structure upgrading.