Illustration: Chen Xia/Global Times

Since the outbreak of COVID-19, China's face mask production capacity has rapidly transitioned from being in short supply to relative over-capacity. As demand has saturate, a number of factories are facing the risk of having to shut down.

To solve the overcapacity problem, China should optimize industrial layout and coordinate domestic and overseas demand, to find a way out for domestic mask manufacturers while continuing to fulfill its role as the world's largest supplier of anti-epidemic materials.

The process of scaling down overcapacity is bound to cause restructuring pains. There are three types of mask manufacturers. The first type are medical equipment or textile factories that expanded mask production during the pandemic to serve as a major source of medical supplies in the fight against COVID-19. 

The second type are companies in other industries - such as auto manufacturers - that temporarily transferred production to mask-making in order to ensure self-sufficiency and make a profit. The third type of companies are following a trend to establish factories in order to profit from the outbreak. Limited in size but large in number, the product quality of the manufacturers is poor.

The first and second types are less vulnerable to overcapacity problems, but the third type belongs to the ones most likely to be eliminated when the overcapacity issue is resolved.

China is the world's leading mask manufacturer, supplying about 80 percent of the masks in the world. The domestic mask industry had entered into a process of eliminating redundant capacity even before the epidemic is contained, but speculators lacked production experience and the relevant certifications. As a result, most of them will inevitably be eliminated as overcapacity is lessened.

It's essential to manage the demand side, as mask capacity is scaled down. The Ministry of Commerce has provided a list of medical device and supplies companies that have been confirmed by them to have obtained foreign certifications or overseas registration. 

The "white list" measures introduced in April have played an important role in eliminating redundant capacity, expanding exports and building up brand image. As of August 18, the number of medical mask manufacturers included in the "white list" has increased to 2,118.

The COVID-19 outbreak has shown the Chinese manufacturing industry's strong capability to mobilize emergency supplies, but inefficiencies in the market mechanism have also been exposed. The bigger the demand gap, the higher the potential for profit, and the more speculative capital is pumped into the market; the greater the problems caused by scaling down overcapacity. 

To resolve this slew of problems, it's crucial to figure out the types of supplies needed for emergencies and whether the current capacity storage is needed.

The lesson we can draw from this coronavirus epidemic is that it's important to develop a cluster of personal protection equipment or PPE industries for emergency use. The epidemic has also created conditions for the industry to build up storage capability. And, while ensuring products can be stored, capacity storage and raw material storage needs more attention.

The author is a researcher with the China Center for Information Industry Development. bizopinion@globaltimes.com.cn