In a narrow sense, destocking only refers to reducing the product inventory level. For example, the real estate industry has built a large number of houses, and no one buys/lives. De-stocking means trying to sell these existing houses and get rid of these large stocks.
In a broad sense, destocking means that the process of digesting excess capacity will not end soon. Excessive investment and insufficient consumption make it take longer and more painful to digest excess capacity than to destock in a narrow sense. This is a long process, and it takes time and practice to achieve a dynamic balance between production capacity and consumption.
Extended data:
Why can't we exaggerate the impact of destocking in a narrow sense on the economy?
First, China has also experienced destocking in a narrow sense in the past. For example, in 2005, enterprises reduced their inventory level, but during this period, the economy did not decline sharply, and the GDP growth rate continued to climb;
Second, the proportion of inventory changes in China's GDP has undergone structural changes since 2000, which has dropped to about 2. 1%, far lower than the levels of 1980 to 1990 before 2000, reflecting that the inventory management level of enterprises has been greatly improved due to scientific and technological progress, and this trend has also decreased. Therefore, it is not appropriate to simply blame the current economic downturn on destocking.
According to the CICC report, the production capacity of most industrial products in China has expanded several times in recent years, and the production capacity under construction in 2007-2008 is still huge, which will be gradually released in the future. The seriousness of this overcapacity can be seen from the macro-level imbalance between investment and consumption.
China's investment rate (the ratio of capital formation to GDP) has been rising to 43% in recent years, which is not only far higher than China's own average of 38% in the past few years, but also far higher than the peak level of other countries. On the contrary, the consumption rate in China has been declining, from an average of 59% over the years to about 50% at present, even lower than the normal level in other countries (about 70%).
Measures to solve the problem of destocking:
First, reduce the financing cost of the real economy, restore the vitality of enterprises, and naturally reduce the pressure of destocking;
Second, de-administration is conducive to giving play to the regulatory role of the market;
The third is to cancel some outdated restrictive measures.
References:
Baidu encyclopedia-destocking