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October 20, 2009

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Home » Business » Economy

State vows to cut back industrial oversupply

CHINA has again promised to curb excess investment in its key industries as the government seeks to prevent a reckless investment spree from spoiling economic recovery.
The government will withhold approval for and curb lending to projects that don't conform to state guidelines in industries such as steel, cement and wind power equipment, according to a statement issued jointly yesterday by 10 ministries, including the National Development and Reform Commission, the Ministry of Finance, the land ministry and the banking regulator.
The rules also banned new projects in target sectors, tightened the offer of land for such investment and raised environmental and efficiency standards.
The guidelines are the latest effort to address government concern about overcapacity in less than a month. The State Council last month issued a directive to rein in overcapacity in industries including steel, glass and aluminum to prevent the government's stimulus package and record bank loans from spurring excess investment.
"While the government is ensuring economic growth, we are also concerned about overcapacity in some industries," Xiong Bilin, deputy director of the industry department under the NDRC, told a press briefing.
"Structural reforms in many industries have shown little progress in the past months," he said. "There are problems of overcapacity and duplication of facility construction. In some places, these problems are becoming even more serious."
Xiong added that the government will monitor market conditions longer before allowing construction to start on two new big steel mills along the coast, including a 10-million-ton-a-year mill to be built by Baosteel Group Corp in Zhanjiang, Guangdong Province. The NDRC gave approval for the two projects in early 2008, on condition outdated capacity would be closed.
Look overseas
Xiong also suggested that Chinese producers of steel and non-ferrous metals can implement a "go-abroad strategy" and explore overseas markets. He also denied reports that overcapacity was triggered by the country's 4 trillion yuan (US$586 billion) stimulus package.
"Some of China's stimulus spending is used in infrastructure construction like roads and railways," Xiong said. "It lifted the demand for steel and cement to some extent. But there is not much direct investment in these industries."
Xiong also said China should have no trouble achieving the government's economic growth target of 8 percent this year.



 

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