Export fluctuation and overcapacity in China’s manufacturing industry—the inspection of the causes of excess capacity from the perspective of external demand

Background: Intuitively speaking, there is an inverse proportional relationship between exports and overcapacity, which means in export’s busy season, enterprises would expand output and improve capacity utilization rate but control yields to avoid dull sale in slack season, causing exacerbated excess capacity. However, this is just the reflections of “sales effect” on overcapacity by export fluctuation. For some enterprises, there is indeed “competition effect” which may alleviate overcapacity because enterprises face even more fierce domestic competition for the sake of weak exports and may increase the utilization load of existing capacity in order to cut costs.