Nation on drive to eliminate redundancy
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.