China’s Industrial Capacity Utilization: Sectoral Comparison, Regional Differences and Determinants

Liang Yongmei 1, Dong Minjie 2 and Zhang Qizi 3

1,3 Institute of Industrial Economics, Chinese Academy of Social Sciences (CASS), Beijing, China
2 China Bond Rating Co., Ltd., Beijing, China

Abstract:  Using provincial-level data, this paper has estimated capacity utilization, technical efficiency and equipment utilization for China’s industrial sectors, conducted a comparative analysis of capacity utilization across various sectors, provinces, municipalities and autonomous regions, and discussed the determinants of capacity utilization. We have reached the following conclusions: (1) China’s average industrial capacity utilization stood at 69.3% between 2001 and 2011, rising for most of the time before 2008 and generally declining afterwards; (2) among the two sources of capacity utilization, equipment utilization is lower than technical efficiency and constitutes a major factor affecting capacity utilization, yet technical efficiency has demonstrated a significant trend of decline in recent years; (3) at the industry level, industrial capacity utilization is generally high for light industries such as textiles while generally low for mining, public utilities and heavy industries in manufacturing; (4) at the regional level, capacity utilization, technical efficiency and equipment utilization are much higher in the eastern region than in the other regions, where the levels are relatively close to each other; (5) economic growth and the level of market-based operation have a significant positive correlation with capacity utilization, while industry capital intensity, the share of output value from SOEs and local government investment intensity have a significant negative correlation with capacity utilization.
Keywords: production capacity, capacity utilization, technical efficiency, equipment utilization, data envelopment analysis (DEA)

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