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August 27, 2009

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Home » Business » Economy

Curbs on overcapacity

CHINA'S Cabinet said yesterday it will try to curb overcapacity and excessive investment in industries including steel and cement - a possible side effect of its massive stimulus plan.

Regulators also will "enhance management" of areas including flat glass, chemicals, wind power and polysilicon production, according to a decision announced after a meeting of the State Council led by Premier Wen Jiabao.

"Overcapacity and redundant projects remain prominent because of slow progress in industrial restructuring in some of these sectors," a State Council statement said.

Measures to rein in overcapacity would include strict controls on market access, reinforced environmental supervision and tougher controls over land use, the statement said.

Banks were ordered to lend money for the targeted sectors only in strict accordance with industrial policies.

Government agencies will also strengthen monitoring of industrial capacity in these sectors and jointly release information on topics such as the current scale of operations, public demand and government industrial policies, the statement said.

Economists have warned China's stimulus and efforts to boost exports were creating a capacity glut in many industries.

China's 4 trillion yuan (US$586 billion) stimulus effort sees higher spending on construction of highways and other public works, which has encouraged steel and cement firms to expand production.


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