Beijing Commits to Clearance of Zombie Enterprises, Excess Steel and Coal Capacity


China’s central government says that it will continue to drive reductions in excess steel and coal capacity in 2018, as well as engage in the “firm clearance” of zombie state-owned enterprises.

The National Development and Reform Commission issued the “Notice Concerning Properly Undertaking Work for the Dissolution of Excess Capacity in Key Sectors in 2018” (关于做好2018年重点领域化解过剩产能工作的通知), which sets the targets of a reduction in steel capacity this year of 30 million tons, a reduction in coal capacity of around 150 million tons, as well as the closure of coal power plants that fail to meet standards and have a capacity of under 300,000 kilowatts.

The Notice also calls for the “firm clearance of zombie enterprises,” and making the disposal of zombie enterprises a “key fulcrum,” well as the maintenance of balanced capacity, the prevention of structural, regional or time-based supply constraints, and the guidance of steel and coal price stability within a rational range.

With regard to steel production, the Notice states that Chinese authorities will conduct special investigations to prevent the revival of production of poor-quality steel.

The authorities will also raise benchmarks for the withdrawal of coal mine capacity in southern China, conduct strict handling of illegal or illicit behaviour, and standardise procedures for the closure and withdrawal of coal mines.