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Support plan focuses on metals, logistics

CHINA yesterday unveiled a plan to increase support for nonferrous metals firms and logistics companies, the last in a series of sector-specific measures designed to help 10 top industries weather the financial downturn.

Among the efforts, the State Council said it will encourage consolidation in the nonferrous metals industry and strictly control capacity in the sector, which is struggling against a slump in commodity prices.

The industry will also receive tax breaks for its exports of high value-added products. A mechanism will be established for the purchase of nonferrous metals as state reserves, and subsidized loans will be given to companies for technology upgrades.

"Capacity control will help the industry in the long run, and state purchases could be a short-term catalyst to support prices and improve corporate earnings," said CITICS China Securities analyst Zhang Fang.

The Cabinet also is encouraging companies to fully tap resources from both home and abroad to secure supplies of these metals, which include aluminum and copper.

Like other previously announced industry-specific support packages, the government unveiled only broad directives yesterday.

"More details are needed to judge how companies will benefit from the support plan, although the package will surely help improve the industry," said Zhang Jinfeng, director of the strategic development department of Yunnan Copper, a leading business in the country.

The government also urged mergers and restructuring in the logistics industry to form larger firms that can compete against overseas rivals.

"Mergers of logistics companies can help avoid cutthroat competition, and the country may form regional logistics giants to compete with overseas companies," said Zhou Ning, an analyst at Dongxing Securities Co.

"But the declining demand is the major problem that hinders the industry from developing, so the country should prevent more companies from entering the sector," he said.

China's logistics industry is filled with small companies, which leads to ineffective management and high costs.

"It's good news for us that the country will encourage mergers in the industry, as we are seeking cooperation with companies to cut costs," said Shen Yan, president of Shanghai Xinyun International Transport Co, which generated 1.2 billion yuan (US$175 million) in revenue last year.

The measure also includes steps to boost demand, promote logistics services in energy, mining, autos, agriculture and medicine and invest more in infrastructure establishment.

The State Council also revealed nine key projects for the industry, including enhancing cooperation between manufacturers and logistics companies.


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