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Premier Li’s instructions on cutting overcapacity

Updated: Aug 16,2017 10:03 AM

The Central Economic Work Conference at the end of 2015 decided to promote supply-side structural reform, with cutting overcapacity as the top priority. Since then, cutting overcapacity has always been one of the most important tasks for the State Council, especially in the steel and coal industries, as emphasized by Premier Li Keqiang.

During his inspection tours to Taiyuan, Wuhan and Jinan, and at many State Council executive meetings, Premier Li paid close attention to the progress made in weeding out backward production capacity and demanded enhanced supervision over the process.

In 2016, China reduced more than 65 million tons of steel and 290 million tons of coal, which outperformed the original target of the year. The Government Work Report of 2017 stated that the steel production capacity should be cut by 50 million tons this year. As to the coal industry, the amount is 150 million tons. Meanwhile 50 million kW of coal power generation capacity should be sifted out, halted or postponed.

By May, steel capacity weeded out 31.7 million tons and coal capacity 68.97 million tons, accomplishing 63.4 percent and 46 percent of the annual task, respectively.

Cutting overcapacity is a vital part of supply-side structural reform. The efforts are to make the growth model and economic structure shift to new economic drivers.

— At a State Council executive meeting, May 10, 2017

Local governments should hold a sense of urgency and a new development concept in carrying out the guidelines of the Central Economic Working Conference in pushing forward supply-side structural reform. Market power can be wielded to cut overcapacity. Funds, re-employment, and debt should be properly handled while directing corporations onto a new development model.

— At a seminar on cutting overcapacity for steel and coal industries in Taiyuan, Shanxi province, Jan 4, 2016

To dissolve excess capacity, corporations should play the main role, while central and local governments should play the supportive role in policy making and coordination. Combination methods concerning economy, law, technology, environmental protection, quality, and safety should be used in accordance with local conditions.

— At a seminar on cutting overcapacity for steel and coal industries in Taiyuan, Shanxi province, Jan 4, 2016

It takes effort to forge high-quality steel, and superior capacity should prevail.

— Visiting Taiyuan Iron and Steel Group Corp, Shanxi province, Jan 4, 2016

Taking cutting overcapacity and promoting industrial upgrade as an urgent task, we should put unyielding effort into restructuring by eliminating outdated capacity and forbidding the construction of new capacity. And efforts also should be made to foster new industries and new types of business.

— Visiting Taiyuan Iron and Steel Group in Shanxi province, Jan 4, 2016

We hope to make it (cutting overcapacity) a win-win process and will strive to strike a proper balance among cutting overcapacity, promoting development and ensuring employment. In the process we hope that by cutting overcapacity in heavy industries and petrochemical industries, we will bring about a sustained and sound growth in these sectors.

— At a news conference at the end of the annual meeting of the National People’s Congress, March 16, 2016

Redundant workers must be transferred to other jobs instead of being laid off during the process of cutting excess production capacity.

— Inspecting Wuhan Iron and Steel Corp (WISCO) in Hubei province, May 23, 2016

Overcapacity is a global challenge. The fact that we have taken the initiative to cut overcapacity demonstrates that China is indeed a responsible country.

— Addressing the opening ceremony of the Tenth Annual Meeting of the New Champions in Tianjin, June 27, 2016

We should resolutely eliminate outdated production capacity in a market-oriented and lawful manner. The government is responsible for protecting workers’ legal rights.

— Meeting with business leaders attending the Annual Meeting of the New Champions 2016 in Tianjin, June 28, 2016

Enterprises and local governments that have done a good job in cutting overcapacity should be praised. And those who broke the rules must be held accountable and punished.

— At a State Council executive meeting on Nov 23, 2016

Only by sticking to dissolving backward production capacity, can the upgrades of economy be achieved. And backward capacity should not crowd out advanced ones.

— At a State Council executive meeting on Dec 21, 2016

Helping laid-off workers find new jobs is the most important issue for China as it works to reduce industrial overcapacity.

Last year, the central government set up a 100 billion yuan ($14.4 billion) fund to help workers and also asked local governments to set up similar funds.

— At a news conference at the end of the annual meeting of the National People’s Congress, March 15, 2017

The workers’ legal rights and basic livelihoods must be protected. And the company must ensure redundant staff be transferred to other jobs instead of being laid off.

— Visiting Jinan Steel Group in Shandong province, April 20, 2017

We must stand firm in rooting out substandard steel products and cutting overcapacity to prevent shutdowns in production from flaring up again. Those breaking government rules should be strictly punished, and authorities with weak supervision will be held accountable.

— In an instruction note on the findings of illegal production of substandard steel by the State Council’s fourth inspection, July 2017