Abstract
This study evaluates the impact of policy intensity on overcapacity using listed Photovoltaic (PV) firms over the period 2011-2019 in China. We divide PV industrial chain into three segments, which are upstream, midstream and downstream. Results show that China's PV industry is diminishing returns to scale with low level of capacity utilization (20%). The enhancement of policy intensity can significantly promote overcapacity, but its impact varies in different policies and different enterprises. Fiscal subsidy has the largest positive effect in promoting overcapacity, followed by tax preference and land support. For three segments of PV industrial chain, fiscal subsidy, land support and tax preference play a significant role in promoting overcapacity in each segment; the increase in financial support exacerbates overcapacity in midstream. Furthermore, this study tests the effectiveness of an important PV policy posed by Chinese government in 2013. The results show that, the policy is inefficient in the short term. Nevertheless, it promotes the development of PV industry in the long term. It takes a long time to reduce positive effect of policies on overcapacity. This study provides a theoretical basis for the government to make comprehensive use of different policies.
Highlights
Overcapacity in industrial production has become a huge drag on Chinese economic growth
We conclude from the statistics that: Overall, the capacity utilization of PV industry in China is generally low during the study period; overcapacity exists in every segment
It takes a lot of time to reduce positive effect of policies on overcapacity
Summary
Overcapacity in industrial production has become a huge drag on Chinese economic growth. Some Chinese scholars believe that, in addition to the cyclical factors of economy, another important cause of overcapacity is the improper intervention of local governments (Zhang et al, 2017; Yang et al, 2019). This improper intervention shows in blindly following central government’s instructions to carry out industrial planning while ignoring local development needs (Dai and Cheng, 2016; Wu S. et al, 2016; Zhou et al, 2017). Industries that the government is eager to develop and support are more likely to witness
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