Measurement of Capacity Utilization Level in China's Iron and Steel Industry and Its Relationship with Macroeconomic Fluctuations

摘要

Since 2000, a large scale of capital has been invested to infrastructures of China, and the overheating of economy therefore gives rise to excess capacity in certain industries. The eruption of 2008 US economic crisis, followed by the European sovereign debt crisis in 2010, has influenced the world as a whole. Central banks introduced a variety of plans to stimulate the economy, including China, who has taken the 4 trillion economic stimulus plans in order to restore market confidence. The plan, on the one hand, increases investment in infrastructures and in cement, steel and other energy-intensive and high polluting industries and has contributed to excess capacity to a certain extent. On the other hand, the contractionary monetary policy has led financial strains to many small and medium-sized enterprises and private enterprises. The significance to the study of excess capacity lies, first, in determining the reasonable level of capacity to optimize enterprise market strategy as well as providing references for government policies. Second, the level of redundant constructions can be declined. To analyze the problem of excess capacity in Chinese steel industry, this paper uses the rate of capacity utilization to measure the degree of excess production, and the data envelopment analysis (DEA) method to measure the rate of capacity utilization of iron and steel industry using data collected from 29 areas in China from 2004 to 2011 and compare the differences between each provinces.