Na­tion on drive to elim­i­nate re­dun­dancy

China Daily (Hong Kong) - - BUSINESS - By DU JUAN du­juan@chi­

Over­ca­pac­ity is one of the ma­jor prob­lems in the world’s eco­nomic cy­cles. Now it’s China’s turn to deal with it.

This year, the cen­tral govern­ment car­ried out a series of mea­sures de­signed to ease the prob­lem, try­ing to es­tab­lish a long-term sys­tem to solve it and ac­cel­er­ate in­dus­trial up­grad­ing.

Pres­i­dent Xi Jin­ping has stressed that the coun­try will no longer eval­u­ate lo­cal govern­ments’ per­for­mance by GDP growth alone.

In­stead, it will in­clude re­duc­ing over­ca­pac­ity among cri­te­ria for eval­u­at­ing the work of lo­cal of­fi­cials, the State Coun­cil an­nounced.

Bal­anc­ing en­vi­ron­men­tal car­ry­ing ca­pac­ity, mar­ket de­mand and re­source sup­ply within five years is the goal.

In Oc­to­ber, the govern­ment an­nounced guid­ance for re­duc­ing over­ca­pac­ity in five in­dus­tries — namely, steel, ce­ment, elec­trolytic alu­minum, sheet glass and ship­build­ing.

It was the first time that the State Coun­cil, the coun­try’s cabi­net, pub­lished a re­port of this kind to deal with the over­ca­pac­ity prob­lem.

The Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy is re­quir­ing 19 in­dus­tries com­pris­ing 1,569 com­pa­nies to cut pro­duc­tion ca­pac­ity.

The com­pa­nies must shut down part of their pro­duc­tion lines by the end of the year.

The China Bank­ing Reg­u­la­tory Com­mis­sion said in Novem­ber it is pro­hibit­ing any type of credit sup­port to new projects in in­dus­tries with a se­vere over­ca­pac­ity prob­lem.

It is ex­pected that 2014 will see even stricter stan­dards.

Over­ca­pac­ity oc­curs as a re­sult of fast eco­nomic growth, and it causes re­dun­dancy and waste.

Thus, deal­ing with the prob­lem is an in­evitable part of the coun­try’s eco­nomic up­grad­ing.

China’s pho­to­voltaic so­lar power in­dus­try is one that was re­born af­ter a reshuf­fle.

A year ago, all nine Chi­nese so­lar com­pa­nies listed abroad suf­fered huge losses.

This year, the same com­pa­nies achieved profit af­ter a strate­gic ad­just­ment driven by the mar­ket.

As 2014 ap­proaches, it prom­ises to be a tough year both for com­pa­nies strug­gling with over­ca­pac­ity and lo­cal govern­ments fac­ing the prob­lem.

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