China Tightens the Screws on Overcapacity Industries

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China’s central government has indicated that it is intent upon tackling chronic overcapacity in the steel, glass and cement sectors in 2018.

On 8 January China’s Ministry of Industry and Information Technology (MIIT) issued the “Steel Sector Capacity Replacement Implementation Measures” (钢铁行业产能置换实施办法) and the “Cement and Glass Sector Capacity Replacement Measures” (水泥玻璃行业产能置换实施办法》).

Xu Wenli (徐文立), head of the steel office of the raw material industry department of MIIT said that “there is only one goal [of the measures], which is to strictly prohibit further increases in productive capacity.”

Xu Xiangchun (徐向春), steel analyst with www.custeel.com, said to 21st Century Business Herald that the new  steel sector measures are far stricter than the preceding version issued in 2015.

“The release of this document sends the signal that in 2018 the key theme of reducing overcapacity in sectors such as steel remains unchanged, and the vigour of overcapacity reductions won’t dwindle” said Xu.

Beijing first launched supply-side structural reforms of overcapacity sectors such as cement, coal, glass and steel in 2016, following a slump in commodity prices the previous year.

According to official data steel sector reform measures implemented over the past two years have removed 115 million tons in industrial capacity, well within the bounds of the 100 million – 150 million ton reduction envisaged by the 13th Five Year Plan.

 

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