Analysis of China's Overcapacity and Influencing Factors: Evidence from New Energy Industry

This paper utilizes the annual data of 216 Chinese new energy listed companies from 2008 to 2023 to evaluate their capacity utilization rate and identify the extent of overcapacity using the production function method. Subsequently, we examine the influencing factors of the overcapacity by constructing a fixed effect model. Our findings reveal that from 2008 to 2023, the average capacity utilization rate for China's new energy industry was 24.9%, significantly lower than the normal level, indicating a severe overcapacity issue. The study also highlights that market demand and market price both have a negative impact on China's new energy overcapacity. In other words, the decline of market demand and price will exacerbate the overcapacity. However, the increased market demand in mid and downstream industries may exacerbate overcapacity. This is due to the varying stages of development in different segments of China's new energy industry, which result in different influences of market factors on overcapacity. Moreover, we investigate the diversity of enterprise types and reveal that non-state-owned enterprises have a lower capacity utilization rate compared to state-owned enterprises. In light of the findings, we propose a series of recommendations aimed at effectively addressing the overcapacity issue and fostering the sustainable growth of the new energy industry. Finally, we identify the constraints of the study and present a prospective framework for future research.