This paper first analyzes the transmission mechanism of excess capacity caused by intervention of local government, and then estimates the productivity utilization of 30 provinces, autonomous regions and municipalities directly under the central government from two dimensions of supply and demand side, and finally makes the empirical study of the spatial spillover effect of local government’s intervention on overcapacity, using the SDM model of the geographic distance matrix, the economic distance matrix and the gravitational model matrix. The result shows that local government’s intervention not only inhibits the development of capacity utilization in the local area, but also hinders the improvement of capacity utilization in neighboring areas and aggravates the degree of overcapacity. Among them, the impact of tax competition and environmental connivance on overcapacity in surrounding areas is greater than that of overcapacity in the local area, which indicates that the intervention of local government has the effect of imitation, trend or comparison. Eventually, the intervention with the spatial spillover effect of adjacent areas aggravated the degree of overcapacity.