Steel and coal com­pa­nies reach ca­pac­ity re­duc­tion an­nual tar­gets early

China Daily (USA) - - BUSINESS - ByWANG YAN­FEI wangyan­fei@ chi­

China is ex­pected to reach the an­nual tar­gets set for cut­ting over­ca­pac­ity ahead of sched­ule this year, but pres­sure of ex­ces­sive pro­duc­tion sug­gests no eas­ing up on the con­tin­ued ef­forts.

China is ex­pected to hit its an­nual tar­get to re­duce steel pro­duc­tion by the end of this month and is ex­pected to reach the goal for coal pro­duc­tion by the end of Novem­ber, ac­cord­ing to Xu Kun­lin, vice-min­is­ter of the Na­tional De­vel­op­ment and Re­form Com­mis­sion, cit­ing “strength­ened su­per­vi­sion and in­spec­tion.”

More than 80 per­cent of the tar­get re­duc­tions were al­ready reached in the two sec­tors by the end of Septem­ber and some large scale State-owned en­ter­prises have al­ready reached their year-end tar­gets, ac­cord­ing to Xu.

An­nual tar­gets set for coal ca­pac­ity and steel ca­pac­ity re­duc­tion are 280 mil­lion and 45 mil­lion met­ric tons, re­spec­tively, ac­cord­ing to Xu.

Xu­made­the re­marks after 10 in­spec­tion teams were de­ployed by the State Coun­cil ear­lier last month, when progress “fell far be­hind the ex­pected level.”

“But fun­da­men­tals of pro­duc­tion ex­ceed­ing de­mand have yet to be changed and we will not see a ma­jor im­prove­ment in the near fu­ture,” said Xu.

De­mand for coal is ex­pected to reach at most 4.1 bil­lion tons by the end of 2020, while ca­pac­ity will re­main at 4.6 bil­lion tons, ac­cord­ing to Xu, sug­gest­ing fur­ther ef­forts are needed to up­grade the in­dus­tries while cut­ting over­ca­pac­ity.

“Re­cent soar­ing coal prices have made the task more chal­leng­ing,” he added, as an ex­pected win­ter in­crease in de­mand for coal is push­ing up prices.

Ear­lier this month, the com­mis­sion al­lowed coal com­pa­nies in ar­eas with short sup­ply to in­crease pro­duc­tion and to ex­tend work­ing days from 276 to 330 this year.

Re­cent soar­ing coal prices have made the task more chal­leng­ing.”

Xu Kun­lin,

vice-min­is­ter of the Na­tional De­vel­op­ment and Re­form Com­mis­sion

Yang Fuqiang, a se­nior an­a­lyst at the Nat­u­ral Re­sources De­fense Coun­cil, warned that although gov­ern­ment su­per­vi­sion helped fa­cil­i­tate hit­ting the short­term tar­gets, a mar­ket-based ap­proach should al­ways be in place.

“Ex­tended work­ing days should only be al­lowed for com­pa­nies with high-qual­ity ca­pac­ity, and the mar­ket should speak it­self,” said Yang.

In line with his re­marks, Liu Shengjun, an econ­o­mist with Lu­ji­azui In­sti­tute of In­ter­na­tional Fi­nance, said too much gov­ern­ment in­ter­ven­tion may have sent wrong sig­nals to en­ter­prises.

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