The article examines how China's regional industrial overcapacity is influenced by local governments. The researchers analyzed data from 29 provinces in China from 2002 to 2014 to understand the factors affecting industrial capacity utilization and market segmentation. They found that industrial capacity use decreases from east to west, with heavy industry areas facing severe overcapacity. Local government intervention negatively impacts industry utilization, while economic openness improves it. The study suggests that considering resources and environmental costs in overcapacity evaluations can help guide sustainable development in emerging economies.