MIIT takes aim at inefficient companies
By Richard Fu |
August 10, 2010, Tuesday
|
Print Edition
Print Edition
IN a major move to cut energy intensity and eliminate outdated industrial capacity, China has ordered more than 2,000 companies to shut inefficient and polluting facilities by the end of September in a wide range of sectors.
Should these companies fail to meet the deadline, they could face penalties, including suspension of new bank loans, revocation of their business licenses or even a cut in power supply, the Ministry of Industry and Information Technology said. They will also be barred from getting approval for new projects and new land from authorities.
The 2,087 companies, whose names were released by the ministry on Sunday, come from 18 industries ranging from cement, paper to steel and include the subsidiaries of domestic industry leaders such as Aluminum Corp of China and Hebei Iron and Steel Group.
Showing its firm resolve, the MIIT also released detailed information about facilities that will be closed.
Although the move should have a direct impact on the readings of key economic indicators such as industrial production and power consumption, economists say it's unlikely to hurt China's economy, given its underlying strength.
Analysts say the magnitude of the latest shutdowns in obsolete capacity is larger than what the government had previously suggested in May.
For example, the MIIT named 762 firms in the cement sector asking them to eliminate 107 million tons of obsolete capacity by September, up from May's order of 91.5 million tons.
Beijing Gao Hua Securities, which forecast an oversupply of 22 million tons of cement volume this year in China, said the gap between supply and demand will narrow to nil if the government order is fully executed.
"A more balanced supply/demand scenario may lead to higher profitability for the cement companies," Gao Hua's analyst Rowena Chang said.
The capacity-closure campaign will also have limited impact on the nonferrous metals sector, as the capacity affected is not very sizable compared with the nation's total and some facilities on the list have actually been shut down for years, according to the Shanghai Metals Market, which follows the industry.
Should these companies fail to meet the deadline, they could face penalties, including suspension of new bank loans, revocation of their business licenses or even a cut in power supply, the Ministry of Industry and Information Technology said. They will also be barred from getting approval for new projects and new land from authorities.
The 2,087 companies, whose names were released by the ministry on Sunday, come from 18 industries ranging from cement, paper to steel and include the subsidiaries of domestic industry leaders such as Aluminum Corp of China and Hebei Iron and Steel Group.
Showing its firm resolve, the MIIT also released detailed information about facilities that will be closed.
Although the move should have a direct impact on the readings of key economic indicators such as industrial production and power consumption, economists say it's unlikely to hurt China's economy, given its underlying strength.
Analysts say the magnitude of the latest shutdowns in obsolete capacity is larger than what the government had previously suggested in May.
For example, the MIIT named 762 firms in the cement sector asking them to eliminate 107 million tons of obsolete capacity by September, up from May's order of 91.5 million tons.
Beijing Gao Hua Securities, which forecast an oversupply of 22 million tons of cement volume this year in China, said the gap between supply and demand will narrow to nil if the government order is fully executed.
"A more balanced supply/demand scenario may lead to higher profitability for the cement companies," Gao Hua's analyst Rowena Chang said.
The capacity-closure campaign will also have limited impact on the nonferrous metals sector, as the capacity affected is not very sizable compared with the nation's total and some facilities on the list have actually been shut down for years, according to the Shanghai Metals Market, which follows the industry.
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