The enhancement of production capacity utilization through capital market liberalization plays a crucial role in supporting supplyside structural reforms and promoting highquality economic development. This paper comprehensively analyzes the theoretical mechanisms by which capital market liberalization affects corporate production capacity utilization from the perspectives of innovation effects, internal control effects, and export expansion effects. Based on data from Shanghai and Shenzhen Ashare listed companies from 2010 to 2021, and using the “ShanghaiShenzhenHong Kong Stock Connect” trading system as exogenous events to construct a quasinatural experiment, this study thoroughly examines the impact of capital market liberalization on corporate production capacity utilization and its operative channels. The research findings indicate that the implementation of the “ShanghaiShenzhenHong Kong Stock Connect” trading system has significantly improved corporate production capacity utilization levels. This effect is mainly achieved through enhancing corporate innovation capabilities, strengthening internal control, and promoting export expansion. Heterogeneity analysis reveals that the implementation of the “ShanghaiShenzhenHong Kong Stock Connect” trading system has a more pronounced effect on improving production capacity utilization in nonstateowned enterprises, enterprises in the eastern region, high customer volatility enterprises, and lowpollution enterprises. Furthermore, the increase in production capacity utilization driven by capital market liberalization is beneficial for enhancing corporate profitability and reducing financial risk. The studys conclusions provide important policy insights for steadily advancing highlevel capital market liberalization to support supplyside structural reforms.