Owing to the outbreak of the global financial crisis in 2008, the world economy suffers an unprecedented impact. In order to stabilize the economy, the central government of China launches a "four trillion" industrial revitalization plan, and clearly puts forward the economic growth target of 8 percent. In this situation, Chinese various local governments have launched their own supporting fiscal stimulus plans, making the final stimulus funds reach a staggering 20 trillion.

The central and local governments' double protection policy really makes a lot of enterprises resume production and stabilizes the employment in the short term. However, in the long term such a policy undermines the allocation function of market mechanism. A lot of resources have flowed into the central enterprises and state-owned enterprises, which severely crowds out investment and consumption of private enterprises and individuals. From 2010 when the State Council issued Notice of Further Strengthening the Work of Eliminating Backward Production Capacity to the December 2016 when the central economic work conference stressed again the importance of "removing capacity", overcapacity has become an urgent problem to be solved in Chinese comprehensively deepening reform.

There have been a lot of researches on overcapacity in academia, and most of them emphasize excessive government intervention as the most important factor. However, some scholars suggest the government guidance in the light of a general trend is an important basis for social development and progress. So, is it true that government protection is bound to lead to overcapacity? Or does the unreasonable degree and frequency of protection really account for this? Based on this thinking, this paper takes "official promotion tournament" system as the basic framework, and depicts a whole policy effect mechanism in which the central government raises the test weight of economic growth, then the local governments increase fiscal subsidies and finally enterprises expand production, thereby leading to overcapacity. It emphasizes the system defect is the reason for the implementation of repeated protection policy by local governments.

Then, this paper takes the industry incentive catalogues of 10th and 11th Five-Year Plans and fiscal subsidies as the proxy variables of central and local government policy protection respectively. Using the data of Chinese manufacturing listed companies, it employs the fixed effect model, propensity score matching method and event shock DID method to empirically test the hypothesis, from the perspective of state-owned and private property. It comes to the results as follows:firstly, single policy protection does not lead to serious overcapacity, but the mixed industrial encouragement policy issued by the central government and fiscal subsidy policy implemented by the local governments, actually account for overcapacity; secondly, when the central government clearly declines the task of economic growth, the firms are more prone to overcapacity where the local governments quickly launch a local version of the fiscal stimulus plan; finally, double protection effect is more pronounced in state-owned enterprises.

The marginal contribution of this paper is as follows:firstly, it presents a new view on the causes of overcapacity, and emphasizes that the single government protection does not lead to severe overcapacity, and double protection policy aiming at completing the assessment really accounts for overcapacity; secondly, it relies on the government evaluation system emphasizing economic growth, and then constructs a theoretical model of the interaction among a central government, local governments and enterprises, providing a theoretical basis for other studies; thirdly; it uses propensity score matching method and event shock DID method to deal with the endogeneity problem, providing a reference for technical methods of other researches.