Resolving excess capacity is one of the priorities of the State Council this year. Premier Li Keqiang has stressed efforts to cut overcapacity on many occasions.

Determination on overcapacity cut

During his meeting with United States Secretary of State John Kerry and Treasury Secretary Jacob Lew on June 7, 2016 in Beijing, Premier Li Keqiang said with the slowdown of the world economy, shrinking international trade and decline in market demand, overcapacity has become a common challenge faced by many countries. China is determined to cut overcapacity by upgrading traditional industries and weeding out outdated ones, while keeping employment stable, he added.

Balance among overcapacity cut, development and employment

When meeting with Chinese and foreign press during this year’s Two Sessions, Premier Li said we need to achieve a balance with cutting capacity, promoting development and stabilizing employment so as to realize a sustainable and healthy development in the heavy industry field.

Follow market principles

Premier Li emphasized the role of market principles in cutting overcapacity with more rigorous standards on quality, safety and energy consumption when he met with Chinese entrepreneurs at the Summer Davos forum in Tianjin.

Strengthen policy measures

Speaking at a meeting aimed at finding viable solutions to resolve overcapacity in the nation’s iron, steel and coal industries in Jan 2016, Premier Li stressed that the central and provincial governments should strengthen supervision and policy support, and adopt differentiated measures suitable for local conditions.

Focus on iron, steel and coal industries

In this year’s report on government work, Premier Li said the government plans to focus on addressing the overcapacity in steel, coal, and other industries facing difficulties. In this process, the market should serve as a check, enterprises should be the major actors, local governments should play a coordinating role and the central government should provide support.

We will use economic, legal, technological, environmental, quality inspection and safety-related means to strictly control the expansion of production capacity and eliminate overcapacity in a planned way, said the Premier.

No job losses

Premier Li Keqiang said enterprises should ensure that redundant staffers don’t end up unemployed during the process of cutting excess production capacity during an inspection tour to Wuhan Iron and Steel Corp (WISCO) on May 23. WISCO will cut steel production capacity by 4.42 million tons this year. We have to ensure basic pensions for those facing difficulties, the Premier said.

Foster new growth engines

During an inspection tour in North China’s Shanxi province in early January, Premier Li said China must put “unyielding effort” into eliminating excess industrial capacity to make way for new growth engines, especially mass entrepreneurship and innovation.

And companies should work hard to enhance technology, quality and management to expand the country’s effective supply with more quality products, the Premier added.