Experts call for government incentives to absorb excess capacity

By Zhao Wen | April 10, 2014, Thursday |

Online Edition

Economic experts are calling for government incentives to stimulate domestic demand to consume excess capacity that has caused price declines and wasted resources.

The iron and steel, cement, shipping, automobile, nonferrous metal and photovoltaic industries are all facing severe excess capacity after high-speed development, experts said yesterday at a seminar at Shanghai University of Finance and Economics.

For example, the current production capacity of cement is nearly 3 billion tons, exceeding the demand of 2.5 billion tons set for 2015.

“Stimulating domestic demand is a feasible way and the practice of subsidizing consumers to buy new household appliances proved to be very successful several years ago,” said Gan Chunhui, director of the China Industrial Development Institute.

Gan said the government can eliminate companies facing the pressure of excess capacity but there must be a comprehensive aid program to help them withdraw instead of just using administrative powers to shut them down.

Gan suggested offering more beneficial policies to help companies develop high-margin products and encourage mergers and acquisitions. He also advocated providing job training to employees.

“Excess capacity will be a long-term headache for many Chinese companies. They need to look for overseas partners to absorb the excessive production,” Gan added.

Shanghai Electric has been shifting its focus to overseas projects in India, Vietnam and the Middle East while also offering technical support and services to make up for declining sales.

Business Manufacturing

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Experts call for government incentives to absorb excess capacity

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