This paper discusses the reason of firm excess capacity in China in the aspect of marketization
under government regulation, by using the data from World Bank China-enterprise survey 2012 to
do empirical study of the relationship between obstacle of accessing land, land marketization and
capacity utilization. According to the results, there is a positive correlation between levels of obstacle
to access land firm capacity utilization. And the relationship between land marketization
and capacity utilization is inverted U shape. When land marketization rate is 49.00%, firm capacity
utilization is maximized. This implies that too low or too high land marketization rate will lower
obstacle for firms to access land, resulting in excess capacity. In China, there is huge difference
between land marketization rates in different regions. Especially, land marketization rates in developed
regions are comparably lower, which means level of obstacle to access land is low in China
for most firms. This is one key reason for China to suffer from excess capacity. Therefore, the government
should formulate proper regulation policies to control land, in order to increase land
marketization rate and obstacle to access land. Thereby, enterprise investment can be coordinated;
capacity utilization can be improved; and the problem of excess capacity can be relieved.