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China to make deeper cuts in excess capacity

Hu Yongqi
Updated: May 10,2017 9:59 PM

China will continue retiring sub-standard production capacity, especially in the 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 May 10.

The Premier heard reports on the latest progress of this year’s campaign to cut excess capacities in steel, iron, coal-mining and coal-fueled power generation, as well as on the outcomes of checking on the efforts in concrete and glass sectors.

The Premier said reforms offer the way forward in cutting overcapacity, which is a vital part of 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 move to new economic drivers,” he added.

The Government Work Report delivered by Premier Li in March set targets for this year to cut steel and iron overcapacity by 50 million tons and coal mining by 150 million tons, as well as phase out coal-fired power generation capacity of more than 50 million kilowatts.

As of May 10, the progress was 31.7 million tons in steel and iron, and 68.97 million tons in coal, accounting for 63.4 percent and 46 percent of this year’s goals.

Future moves were decided at the meeting to adopt more methods based on market rules and the rule of law while phasing out outdated capacities. The meeting also decided to eliminate illegal productions and prevent shut down production from restarting. 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 in 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 business startups in cities reliant on steel and coal industries to increase employment opportunities. A new mechanism will be set up to help workers find jobs in regions that have a strong demand for labor. The central government will promptly allocate subsidies to guarantee welfare for transferred employees, in combination with matching and supporting local funds and other support.

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

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