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April 27, 2011

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New list to help investment decision

CHINA'S top economic planning agency yesterday published a detailed list of industries that it would encourage, restrict or ban, a blueprint that could have a far-reaching impact on investment activity in China over the coming years.

The 111-page list published by the National Development and Reform Commission ratcheted up the minimum size requirement for coal mines, oil refineries and steel-making blast furnaces while lending support to alternative energy sources.

The list, an update of one published in 2005, will serve as a guideline for Chinese regulators in making policies on tax, bank credit, land and trade, and will also be a reference for the country to decide which foreign investors are welcomed.

On the hit-list, the NDRC said it would get rid of oil refineries with capacity of less than 40,000 barrels per day, on-grid coal-fired power generators of up to 100 megawatts and coal mines below 30,000 tons per year.

Such efforts are part of a plan to clean up China's most polluting sectors, but also to increase efficiency by pooling control of many industries and reordering the distribution of resources across the country.

"Definitely, the launch of the detailed plan is a good thing to help upgrade industrial structure and may push domestic firms to move up the value chain, which is also in line with China's broader goal of transforming the economic growth model," said Sun Xuegong, an economist at a research body linked to the NDRC.

"But I think currently it is only a sketchy guideline and companies will have to wait and see more concrete steps, such as possible supportive measures or government subsidies."

Areas to be encouraged include nuclear power station construction and exploration of uranium as well as further development of advanced nuclear reactor technology, the NDRC said.

But China's past moves toward restructuring have sometimes had unintended consequences. The closure of small coal mines has turned China into a major coal importer, with a concomitant effect on world prices, and a crackdown on coal-fired power caused a run on diesel last winter, as big power users used diesel-powered generators.

The favored list did not only include new energy, but also big coal mines of 1.2 million tons per year.

Eager to increase its capability in offshore oil and gas drilling and production, the government will encourage building jack-up drilling platforms able to operate in water depth of 120 metres or more, drilling vessels with working water depth of 1,500 meters or more, semi-submersible rigs for operating at 1,500 meters, 150,000-ton floating, production, storage and offloading (FPSO) vessels, and large pipeline laying vessels.




 

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