The research of capacity utilization measurement on manufacturing industry in China

Abstract

Capacity utilization, as the core factor of estimating capacity and excess production capacity, indicates the resource allocation and the economic progress. This paper generalized and summarized existing definitions of capacity and capacity utilization, further analyzed measurements of two capacity utilization based on physical and economic capacity definitions. Furthermore, estimated the capacity utilization under different scale hypothesis, in addition, analyzed the ray capacity utilization under the physical capacity perspective by comparison. Finally, empirically analyzed the capacity utilization of 12 segment manufacturing industries in China. Compared the differences of two measurement methods. Meanwhile, output elasticity of average cost, scale efficiency and excess production capacity are also discussed. Study found that, first, a majority of manufacturing industries are in the state of overcapacity in China, especially coal, oil and nuclear fuel, basic metal manufacturing industry, food, tobacco, where chemical industry is more serious; second, under the view of physical capacity definition, most industries could realize the maximum capacity, achieve a higher capacity utilization. Only a little part industries have a slightly excess production capacity.