Overcapacity and Role of Government

  • Dianqing Xu
  • Ying Liu


  • Visible hand and invisible hand are like the two sides of a coin, and both deserve sufficient attention.

  • Overcapacity is the result of overinvestment which comes from excessive government intervention. The duties of government do not include alleviating overcapacity. As a problem of market operation, overcapacity should be solved by the market, not the government.

  • It’s inadvisable to overemphasize the government’s role as a macroeconomic regulator. Economic reform is a dynamic process, which means it is hard for government authorities to recognize the twists within the system and to give a fast and effective response. As a market phenomenon, overcapacity falls within the jurisdiction of market mechanism.

  • The complaints about overcapacity by some enterprises are means of edging out rivals and maintaining market shares. The claims of overcapacity by some officials are covers for their fight for rights of approval which has become a perfect tool for seeking rent. In recent years, the alleviation of overcapacity has been haunted by rampant corruption. A good system could keep the good from the bad, while a bad one would turn the good into the bad.

  • The research of orders issued by NDRC show that it has been forecasting excess capacity in the past 15 years. Facts prove this is just a repetition of mistakes.

  • During the process of overcapacity alleviation, the private sector has been clearly discriminated against.

Copyright information

© Peking University Press and Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  • Dianqing Xu
    • 1
  • Ying Liu
    • 2
  1. 1.Huron University CollegeUniversity of Western OntarioTorontoCanada
  2. 2.School of StatisticsDongbei University of Finance and EconomicsDalianChina

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