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December 4, 2009

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Home » Business » Economy

Fast industrial growth has downside

SENIOR Chinese officials yesterday warned of industrial overcapacity, saying expansion of some industries has outrun market demand.

Boosted by government policies, domestic market demand increased rapidly, but industrial capacity expanded faster, Jia Yinsong, inspector of the raw materials division under the Ministry of Industry and Information Technology, told a press conference in Beijing.

The situation made industrial overcapacity more serious and caused price fluctuations, he said.

Steel, cement, and flat-glass industries were highlighted as among those with overcapacity problems.

In the first 10 months, crude-steel production reached 472 million tons, up 10.5 percent year on year. This compares with a 13.5 percent fall in global steel production at 982 million tons during the same period.

Cement production was up 18.7 percent at 1.34 billion tons, while production of flat glass was up2.5 percent to 469 million boxes, each of them weighing about 50 kilograms, Jia said.

Total capacity in China's steel industry reached 660 million tons by the end of 2008.

By October this year, excess capacity in the sector reached 200 million tons, with 58 million tons still under construction, according to MIIT figures released on October 27.

The cement sector also saw huge excess capacity.

Total capacity in the sector was 1.87 billion tons by the end of last year, but only 1.4 billion tons of cement was produced in 2008.

By the end of September this year, another 600 million tons of capacity were put to use or under construction, MIIT figures show.

Rising capacity has been accompanied by expanding investment in those sectors.

In the first 10 months, investment in the cement industry grew 64 percent while investment in the flat glass sector grew 35.3 percent and in steel businesses 3.8 percent year on year, Jia said. He gave no exact figures for investment.

About 27 percent of capacity in the country's cement sector was obsolete, Jia said.

He said the government would push forward mergers and acquisitions in the steel sector to increase industrial concentration.

Xiong Bilin, an official with the industrial coordination division under the National Development and Reform Commission, the country's top economic planning body, said at the press conference that the NDRC would join with the MIIT and other government departments to strictly control overcapacity in some sectors.

Xiong said government documents were expected to be released soon regarding industrial readjustments.

He said projects involving new capacity building in the steel industry would be refused government approval and support.

In January, the central government unveiled a support package for the auto and steel industries, which highlighted eliminating outdated capacity, promoting technological advancement, while warning against new projects in the steel sector.


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