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Govt to intensify efforts to curb overcapacity
2009-12-04 09:24:35Source:Global TimesAuthor:
The National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) said Thursday they will step up attempts to curtail overcapacity, especially in the steel industry.
A series of policies unveiled this year to push structural reforms in 10 main industries have largely improved enterprise performance, yet overcapacity and redundant construction are still problems, said Xiong Bilin, an official with NDRC.
Seventy steel mills have wiped out deficits to go into the black since May. Their profits reached 37.59 billion yuan ($5.51 billion) in the first 10 months. And annual capacity of crude steel this year will still overpass that of last year, topping 700 million tons.
The steel capacity utilization rate was only 75.8 percent, 2.4 percentage points lower than the world average.
Wang Zhe, a steel analyst with CITIC China Securities Research, said fixed-asset investment over the last four years which boosted demand might be a reason for steel mills' increased capacity. But once investment slows, he added, the 700-million-ton capacity will be far too much for the country.
Xiong said a government document regarding industrial readjustment will be released soon; and projects involving expansion in the steel industry will not be approved.
Jia Yinsong, an official with MIIT, said entry criteria for cement and glass industries will be raised with higher requirements on energy efficiency and environmental friendliness.
Obsolete capacity elimination and mergers and acquisitions are also ways out of the overcapacity bind, said Xiong, citing the ongoing deal between Angang Steel and Panzhihua Iron & Steel.
Steel analysts, however, doubted the efficiency of phasing out obsolete capacity.
Song Yechun, an analyst at steel the research company Umetal, said it's not easy to phase out obsolete steel capacity because mills contribute a lot to local revenue and employment.
Both analysts said the free market, with its mechanisms of competition and survival of the fittest, is the best way to control overcapacity.
The EU Chamber of Commerce said in November that China must shift from export-led growth and focus more on domestic consumption and the service industry to address overcapacity problems.
A series of policies unveiled this year to push structural reforms in 10 main industries have largely improved enterprise performance, yet overcapacity and redundant construction are still problems, said Xiong Bilin, an official with NDRC.
Seventy steel mills have wiped out deficits to go into the black since May. Their profits reached 37.59 billion yuan ($5.51 billion) in the first 10 months. And annual capacity of crude steel this year will still overpass that of last year, topping 700 million tons.
The steel capacity utilization rate was only 75.8 percent, 2.4 percentage points lower than the world average.
Wang Zhe, a steel analyst with CITIC China Securities Research, said fixed-asset investment over the last four years which boosted demand might be a reason for steel mills' increased capacity. But once investment slows, he added, the 700-million-ton capacity will be far too much for the country.
Xiong said a government document regarding industrial readjustment will be released soon; and projects involving expansion in the steel industry will not be approved.
Jia Yinsong, an official with MIIT, said entry criteria for cement and glass industries will be raised with higher requirements on energy efficiency and environmental friendliness.
Obsolete capacity elimination and mergers and acquisitions are also ways out of the overcapacity bind, said Xiong, citing the ongoing deal between Angang Steel and Panzhihua Iron & Steel.
Steel analysts, however, doubted the efficiency of phasing out obsolete capacity.
Song Yechun, an analyst at steel the research company Umetal, said it's not easy to phase out obsolete steel capacity because mills contribute a lot to local revenue and employment.
Both analysts said the free market, with its mechanisms of competition and survival of the fittest, is the best way to control overcapacity.
The EU Chamber of Commerce said in November that China must shift from export-led growth and focus more on domestic consumption and the service industry to address overcapacity problems.
