The Chinese government says that overcapacity in the coal and steel sectors has been significantly curb since the start of 2018.
During the first seven months of 2018 around 80 million tonnes in coal capacity was removed, equal to more than half the full year target of 150 million tonnes according to a report from state-owned media.
Crude steel capacity fell by 24.7 million tonnes, equal to over 80% of the full year target of 30 million tonnes.
Overcapacity reductions have led to marked gain in the efficiency and capacity usage rates of key industries, with the profit margins of enterprises above designated size in the steel, coal and electricity sectors rising by 93.4%, 18.4% and 28.1% respectively in the first half of the year .
“Following the deepening of supply-side structural reforms, and in particular the further progress of capacity reductions and the clean up of ‘zombie enterprises,’ mechanisms for the market to determine the allocation of factor of production have gradually been formed, and the supply and demand structure is tending towards coordination and balance,” said Zhao Chenxin (赵辰昕), State Council media spokesperson and head of the Economic Operation Adjustment Department.
According to Zhao efforts to reduce overcapacity in the coal sector have focused on three key areas, including vigorous removal of ineffective supply, the orderly release of high-quality advanced capacity, alongside ensuring supply and stabilising prices.
Zhao said that despite the marked success in capacity reductions, China’s coal sector was still passing through a “painful period” of structural adjustments and a shift from old to new capacity, while a high-quality supply system had yet to be fully established.
