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China’s Solution to Overcapacities: Progress and Policy Options (No.80, 2018)


By Xu Zhaoyuan & Yin Ting, Research Team on “Green Growth Strategy against the Industrial Transformation and Upgrading”, DRC

Research Report, No.80, 2018 (Total 5355) 2018-5-8

Abstract: Relying on the statistics from the National Bureau of Statistics and listed companies, this report makes comparative analysis of the overcapacity-resolving progress in China’s 16 major industries such as iron and steel, electrolytic aluminum, flat glass and coal and comes to the following findings. First, the overcapacity of the majority of industries has been evidently relieved since the second half of 2016. Second, related policies on resolving overcapacities have played an important role and the market mechanism has also fulfilled the fundamental regulative function. Third, regulations that promote fair market competition such as environmental and quality inspection are conducive to resolving overcapacities. Fourth, highly efficient law-based bankruptcy and mergers and acquisitions can accelerate the advance of overcapacity resolution. In the future, overcapacities may reappear in some heavy chemical industries such as iron and steel, cement and electrolytic aluminum, due to the slow-down of infrastructure investment. Therefore, the supply-side structural reform needs to be carried forward and a long-term mechanism for resolving overcapacities needs to be established as soon as possible.

Key words: overcapacities, supply-side structural reform, heavy chemical industry