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A Chinese automaker's plant after being driven out of the market by regulators. Industry experts predict more firms will hit the same chopping block. / Jingji Ribao

According to a comprehensive review of recent reports from media outlets including the Beijing News (Xinjingbao), it was not an exaggeration to say that the Chinese economy has been facing difficulties due to overcapacity in each industry from several years ago. This could be said to be especially true in the automobile industry, where numerous companies are crowded together. If selling at a discount at a price that did not even meet the production cost was a daily routine, no further explanation is necessary.

In a word, it could be said that the competition in the automobile industry was not explained even by the term "chicken game." There was a good reason why a sense of crisis that "if things go on like this, everyone will ruin" was rampant in the industry. Finally, it is known that the Ministry of Industry and Information Technology recently held a knife. It seems certain that a decision has been made to drive out eight companies, including FAW Xiali (Yiqi Xiali) and Zotye (Zhongtai). It is also known that notifications have been made to the relevant companies. Naturally, the relevant companies are strongly denying this. Even some companies are expressing a position that competing companies are intentionally spreading groundless rumors.

However, the reaction of the market is different. An argument is rampant that it would not be strange at all even if more companies, not just eight, were driven out. Beijing-based economic commentator Mr. Peng Mingzhou emphasized, "A story is circulating in the market that it is natural even if 80 percent of the current internal combustion engine automobile companies disappear. I see that more companies will be driven out in the future," and he stressed that in order to solve the problem of overcapacity in the industry, the authorities must apply a scalpel more actively, which should be said is definitely not for nothing.

Currently, the problem of overcapacity is not a problem only for internal combustion engine car companies. The reality is that the indiscriminate overproduction of electric vehicle companies is also emerging as a serious pending issue. Even just looking at the fact that countless companies, which are difficult to count, have already disappeared from the market due to default, which is the natural result of self-destructive management that cuts their own flesh, this situation can be known too well.

Overproduction can become a fatal poison to the economy. The faster it is solved, the better. If so, the news that the authorities applied a scalpel to a representative overcapacity industry can be a good news for the entire economy, if not a gospel. Is it not precisely because of this that a positive analysis is circulating in the Chinese business circles that the authorities' scalpel will head to other fields following the automobile industry?

                                                                                                           Hong Soon-do