Abstract: Chinese-style overcapacity, caused by the superposition of cyclical overcapacity and institutional overcapacity, has plagued the development of domestic steel industry and the adjustment of economic structure. Based on 1999-2013 data of Chinese steel enterprises, this paper examines the impact of demanding and government intervention on firm capacity and capacity utilization. The cyclical overcapacity is asymmetric and institutional overcapacity accelerates the formation of cyclical overcapacity,external demand and government intervention are important reasons for Chinese-style overcapacity; increase in demanding has stimulated the expansion of production capacity, while also improving the capacity utilization rate of enterprises,however, the increase in production capacity caused by government subsidies has intensified the overcapacity of enterprises;unlike state-owned enterprises, the cyclical overcapacity for non-state-owned enterprises is not obvious, unless demand will work together with government subsidies.

Key words: demand, government subsidies, capacity utilization, cyclical overcapacity, institutional overcapacity