The purpose of subsidizing the downstream processing industry is to speed up the destocking of the grain and promote the healthy development of grain industry. But the overcapacity of the grain and oil processing industry will make the subsidy policy in an awkward position. In this paper, listed grain and oil processing enterprises are divided into two types: primary and deep processing, and the production function method is used to estimate and analyze the overall utilization of grain and oil processing industry and its sub-categories. The results show that the grain and oil primary and deep processing enterprises have different degrees of excess capacity. The primary processing enterprises with higher capital contributions also have a higher degree of overcapacity. Although the capacity utilization level of deep processing enterprises is relatively high, it’s products are not obviously competitive and capacity continues to be excessive. For the grain and oil processing industry, government subsidies will positively promote the formation of its excess capacity. This phenomenon is more obvious in the field of deep processing. Enterprises with higher capital intensity are more prone to over-investment and result in overcapacity easily. Besides, the increased capital intensity of subsidized enterprises will exacerbate industrial overcapacity.
government subsidies, capital intensity, overcapacity, grain and oil processing industry