Mergers in 9 industries to be encouraged
By Lu Nengneng |
January 23, 2013, Wednesday
|
Print Edition
Print Edition
CHINA will encourage mergers in nine industries which are facing large overcapacity risks amid the country's economic cyclical slowdown.
One of the industries is car manufacturing that will see 90 percent of China's vehicle production capacity coming under the control of its top 10 companies by 2015, which may lead to five giant auto groups, the Ministry of Industry and Information Technology announced yesterday.
This target for industrial consolidation also applies to electrolytic aluminium smelting, the ministry added.
The other seven industries to be restructured before 2015 include cement, shipbuilding, rare earths, pharmaceuticals, electronic information, agriculture, and steel.
"All the nine industries have one thing in common: their economies of scale are phenomenal, but their organizational structures are not reasonable," said Zhu Hongren, the ministry's chief engineer.
Zhu also said that the industries suffer from "redundant development, overcapacity and malicious competition."
China's auto-production capacity, for example, is creeping toward 35 million units annually though the industry delivered under 20 million units last year amid cooling demand following the end of a double-digit growth era.
For the already restructured steel industry, its 10 biggest mills account for only around half of the industry total capacity. Many of them still bear losses from steel-making because of thin profit margins. The new target for the industry's consolidation is to let the top 10 mills control 60 percent of the total capacity by 2015.
Overcapacity has been identified as one of the biggest problems facing the sector and the reason why profit margins remain perilously thin.
Chi Jingdong, vice secretary-general of the China Iron and Steel Association, said earlier that total steel capacity now stands at 980 million metric tons - a surplus of nearly 300 million tons.
China said last month that it would also winnow down the number of small and private mills by raising environmental requirements, forcing steel producers to improve efficiency and install new equipment.
According to new guidelines included in a "five-year plan" to combat pollution, steel mills will not be permitted to build new capacity in 47 large cities, including Beijing, Shanghai, Tianjin and Chongqing.
The ministry said that companies are encouraged to acquire out-of-town rivals while regional protectionist rules over mergers and restructuring should be revoked.
One of the industries is car manufacturing that will see 90 percent of China's vehicle production capacity coming under the control of its top 10 companies by 2015, which may lead to five giant auto groups, the Ministry of Industry and Information Technology announced yesterday.
This target for industrial consolidation also applies to electrolytic aluminium smelting, the ministry added.
The other seven industries to be restructured before 2015 include cement, shipbuilding, rare earths, pharmaceuticals, electronic information, agriculture, and steel.
"All the nine industries have one thing in common: their economies of scale are phenomenal, but their organizational structures are not reasonable," said Zhu Hongren, the ministry's chief engineer.
Zhu also said that the industries suffer from "redundant development, overcapacity and malicious competition."
China's auto-production capacity, for example, is creeping toward 35 million units annually though the industry delivered under 20 million units last year amid cooling demand following the end of a double-digit growth era.
For the already restructured steel industry, its 10 biggest mills account for only around half of the industry total capacity. Many of them still bear losses from steel-making because of thin profit margins. The new target for the industry's consolidation is to let the top 10 mills control 60 percent of the total capacity by 2015.
Overcapacity has been identified as one of the biggest problems facing the sector and the reason why profit margins remain perilously thin.
Chi Jingdong, vice secretary-general of the China Iron and Steel Association, said earlier that total steel capacity now stands at 980 million metric tons - a surplus of nearly 300 million tons.
China said last month that it would also winnow down the number of small and private mills by raising environmental requirements, forcing steel producers to improve efficiency and install new equipment.
According to new guidelines included in a "five-year plan" to combat pollution, steel mills will not be permitted to build new capacity in 47 large cities, including Beijing, Shanghai, Tianjin and Chongqing.
The ministry said that companies are encouraged to acquire out-of-town rivals while regional protectionist rules over mergers and restructuring should be revoked.
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