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November 25, 2016

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Coal, steel firms growing illegally to be punished

CHINA will send inspection teams to investigate and severely punish illegal expansion by coal and steel firms as part of its efforts to slim down the two industries, the country’s Cabinet said yesterday.

China is the world’s largest producer and consumer of steel and coal. Cutting overcapacity is a high priority as the two industries have become a major drag on growth.

With most of the country’s steel and coal enterprises making losses in 2015, China promised in February to slash 500 million tons of coal production capacity by 2020, including 250 million tons this year, and to cut 100-150 million tons of crude steel capacity over the next three to five years, with this year’s target at 45 million tons, in a bid to reduce price-sapping supply gluts.

The State Council said in a notice that this year’s targeted closures have already been “basically completed,” but some firms were still illegally expanding capacity.

The Cabinet named as culprits the Hebei Anfeng Steel Corp, based in Qinhuangdao City, as well as a small steel plant in Jiangsu Province.

China has traditionally struggled to rein in its massive steel and coal sectors, with local governments often turning a blind eye to expansion projects that provide additional local employment and economic growth.

But this year China has been trying to keep its regions on a tighter leash, and inspection teams from the Ministry of Environmental Protection have criticized several provincial authorities for failing to restrict capacity growth in the two sectors.

The Cabinet statement said it will also encourage “high-quality firms” in the two sectors to step up restructuring efforts along the lines of the merger between the state-owned Baoshan Iron & Steel and Wuhan Iron & Steel groups.

The statement asked local governments to give financial support to and create jobs for workers made redundant by the cuts. In May, the Ministry of Finance announced 100 billion yuan (US$14.5 billion) of aid for steel and coal companies to resettle laid-off workers.

It added that China would unveil financial incentives for regions trying to deal with overcapacity, and would provide more support when it comes to re-employing laid-off workers.

The notice summarized the proceedings of a meeting presided over by Premier Li Keqiang, which also canceled 114 administrative approval items on professional qualifications and passed a draft revision to the law on unfair competition.


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