Structural investment addresses structural overcapacity
- By Shi Zhengfu
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E-mail China.org.cn, February 12, 2016
Relative overcapacity
In techno-economic terms, "relative overcapacity," or excess production that meets technical, environmental and safety standards, are productive assets attributed to efforts from countless workers, technicians and entrepreneurs that should be well used.
"Relative capacity" mirrors the industrial achievement in recent years and is still regarded as a valuable asset for most emerging economies like India and Indonesia. It is the result of global economic turmoil and the declining effective demand but can potentially become a valuable asset in new market demands.
Without regard to short-term demand, focusing on the long-term security and prosperity of the country, the "relative overcapacity" is actually an essential means of production.
In the long-term, China is faced with a severe shortage of supplies in four areas, namely, generalized production factors in ecology, energy, labor, resources, technology, high-tech products and assets that affect people's livelihood like public service capabilities and low-income housing, as well as assets that involve national security.
I personally categorize all four areas as national basic assets with strategic importance. Taking China's history and national conditions into consideration, as well as making a parallel comparison with other countries, we are experiencing a scarcity of these "assets" whose undertaking involves large-scale investment comparable to the well-renowned Dujiangyan Irrigation System with "relative overcapacity" coming in handy in their development.
As China launches new projects, the immediate demand of bulk commodities like constructional materials, transportation and labor forces will transform overcapacity into effective capacity.
In this connection, dealing with "relative overcapacity" not only calls for the elimination of outdated productions but also structural investment in a bid to make full use of the excess ones through decent planning and deployment.
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