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China to toughen efforts in cutting excess capacity

China to toughen efforts in cutting excess capacity

China to toughen efforts in cutting excess capacity
This picture taken on January 1, 2017 shows Chinese workers loading steel
pipes at a port in Lianyungang, east China's Jiangsu province.

BEIJING - China will carry on phasing out sub-standard production capacity, especially in fields of steel and iron, coal-mining and coal-fired power plants, to keep up with targets set for the year.

The decision was made at a State Council executive meeting, which was presided over by Premier Li Keqiang on Wednesday.

Li listened to reports on the latest progress of this year's campaign to cut excess capacities of steel, iron, coal-mining and coal-fueled power generation, as well as the findings of inspections over the drive in concrete and glass sectors.

Li said reforms offer the way forward in cutting overcapacity, which is a vital part of the supply-side structural reform.

"China takes the initiative to reduce production capacity based on its own national conditions. The efforts are to make the growth model and economic structure shift to new economic drivers," he added.

The government work report Li delivered in March set targets for this year to cut steel and iron overcapacity by 50 million tonnes and coal mining by 150 million tonnes respectively, as well as to phase out coal-fired power generation capacity of more than 50 million kilowatts.

As of Wednesday, 31.7 million tonnes of steel and iron capacity and 68.97 million tonnes of coal capacity have been cut, accounting for 63.4 percent and 46 percent of their annual goals respectively.

The meeting decided to adopt more methods based on market rules and related laws while phasing out outdated capacities. It also decided to eliminate illegal productions and prevent shutdown production from flaring up again.

By the end of June, all facilities to produce inferior-quality steel bars will be dismantled across the country. All coal mines scheduled to close this year will stop production by the end of August and will be phased out by the end of November. Close attention will be paid to prevent overcapacity of coal-fired power generation and make room for clean and better energy mix to develop.

The meeting called for support to set up platforms for startups in cities reliant on the steel and coal industries to increase employment opportunities. A new mechanism will be set up to help workers get jobs in regions with strong demand for labor. The central government will promptly allocate subsidies to guarantee welfare for relocated employees, in combination with local funds and other support.

Further endeavors will also be made to tackle debts incurred to companies with excess capacity.

The meeting also encouraged companies in these sectors to seek strength through mergers. Third-party assessment will be introduced to help strengthen governmental supervision.
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