In response, Zhang Shuguang, a researcher at the Institute of Economics of the Chinese Academy of Social Sciences, analyzed at the 2014 Observer Annual Meeting that economic growth relies on investment and exports. However, the long-term implementation of such policies has now caused great difficulties in China's economic operations. Currently, there are major dilemmas: overcapacity, and trade fluctuations and structural imbalances.

“From current data, the capacity utilization rate of our entire industrial manufacturing sector is 78%, with over 20% of capacity unused. Among the more serious cases, the capacity utilization rates of steel, cement, flat glass, electrolytic aluminum, and shipbuilding are only 71%-75%,” said Zhang Shuguang.

He believes that ten years ago, in 2004, policies were introduced to address overcapacity in three industries, including steel, cement, and electrolytic aluminum. However, from July to September this year, the Ministry of Industry and Information Technology issued three documents to address overcapacity in 16 industries. The overcapacity problem has been addressed for ten years, yet it has increased several times. A very important reason for overcapacity is continuous investment.

Regarding the current overcapacity in the steel industry, Zhang Shuguang stated that it is still caused by investment. He believes, “Take steel for example. In recent years, under the condition of overcapacity, in order to maintain growth this year, as you know, the Zhanjiang steel project in Guangdong was approved years ago but only started this year. Capacity is still expanding despite overcapacity. There is a very important issue here, which is the issue of investment. Investment has a very important characteristic: in steel, it creates demand and drives growth, but once the investment is completed and put into production, it becomes production capacity and increases supply. Therefore, excessive investment growth is a very important reason for exacerbating overcapacity.”

In addition, Zhang Shuguang also pointed out that by developing outbound investment, the overcapacity problem can be alleviated in many places.