The current problem of overcapacity in China is not a normal situation in the market economy, but the result of the intervention of the planned economy.
For the current serious overcapacity problem in China, it can be solved in a market-oriented way, rather than in a planned economy way of thinking.
In the process of resolving overcapacity in China, there has been a phenomenon of "cutting heads and being picky" in some regions. That is, after the introduction of the policy to resolve overcapacity, not only has the implementation of the policy been uneven, but also in some regions, the problem of overcapacity has become more serious as the need to resolve overcapacity increases.
In fact, in a mature market economy, overcapacity is a norm. Market economy is always an economy with surplus products. Only when there is overcapacity can the fittest survive through fierce market competition, and the market can keep the products with low prices and good quality and eliminate the products that are not suitable for the market.
The current problem of overcapacity in China is not a normal situation in the market economy, but the result of the intervention of the planned economy. For example, some industries with prominent overcapacity were once encouraged. In other words, the current serious overcapacity in some domestic industries may be the result of the government's wrong industrial policies.
This also means that it is time to seriously reflect on some industrial policies. The core issue of reflecting on these industrial policies is to return to the principle that the market plays a decisive role in resource allocation decided at the Third Plenary Session of the 18th CPC Central Committee, rather than the government's policy of excessive encouragement, intervention and participation in some industries. This is one of the most important sources of overcapacity in China. Otherwise, the old problem of overcapacity will be solved, and new problems of overcapacity will emerge.
Another reason for overcapacity is the fierce competition among regions. Some places compete with each other in attracting investment, with low land price and low environmental standards, resulting in excessive entry and investment of enterprises. This is likely to cause some enterprises to invest for preferential treatment. The enterprise projects are not considered from the perspective of market prospects, but to enclose land. This makes the short-term effect of the introduced projects in some places very obvious. More and more enterprises with large project scale are involved, which makes the repeated projects and repeated investments more and more serious.
And for the heavy chemical industry, such as steel, cement, flat glass, shipbuilding and other enterprises, these enterprises are often key backbone enterprises and large profit and tax households in some cities and counties. When these industries or enterprises need to be rectified due to overcapacity arising from cyclical economic adjustment, many local governments prefer to keep these enterprises alive rather than let them die.
Therefore, the current serious overcapacity problem in China can be solved in a market-oriented way rather than in a planned economy way of thinking. First of all, the government can only provide industry guidance for other industries and industries, except for direct subsidy policies for some industries and vulnerable industries (such as agriculture) that affect people's livelihood. The so-called industry guidance is to tell enterprises and the market about the future development prospects of certain industries or industries through professional research, so that enterprises can judge which industries or industries they should enter or not enter, rather than the government replacing enterprises to make such investment decisions.
