China to focus on solving excessive capacity problem in 2006
During the national development and reform meeting held on Saturday, December 3, Ma Kai, director of the National Development and Reform Commission, indicated that the excessive capacity that occurred in some industries last year is more obvious in 2005. Sharp declines in both prices and company profits coupled with an increase in product inventory are to blame for the excessive capacity in some industries. The problem could worsen in 2006. Ma Kai expressed that the National Development and Reform Commission will focus on solving the excessive capacity problem as way to restructure the industry. The government will play a role in deepening reform, standardizing the market order, creating opportunities for market forces and actively promoting the development of the industry using necessary economic and legal methods. Based on these, Ma Kai suggests that Beijing should take the following measures: 1. Perfect the industry policies and improve the cooperation between different departments. Fully implement the existing industry policies for industries such as iron and steel, electrolytic aluminum, coal and auto, and continuously improve these policies. For those policies that have not yet been released, efforts should be made to draft them and release them as soon as possible. For those enterprises that have not met the requirements of national industry policies and market accession, bank loans and land should not be provided. Furthermore, the environmental protection department and safety inspection departments should refrain from fulfilling the relevant formalities for such enterprises. 2. A strict market accession standard should be used to control new projects. This means stricter standards for environment, energy-consumption, water-consumption, security, quality and technology. Standards for coal-producing enterprises should be improved, and the recycling rate should be set clearly. Projects that are currently underway should be subject to restructuring if necessary. 3. Capacity that is outdated according to laws and regulations should be eliminated. Small enterprises that make inefficient use of resources, pollute the environment and do not meet production standards, should be phased out. This includes the capacity of shaft kiln cement, improved coke, small iron-producing furnaces, small electric arc furnaces and small-scale coal mines that do not meet safety standards. 4. Improve the technology and accelerate mergers and acquisitions. Encourage large iron and steel groups to improve their technology and develop new products. Strengthen the research and development of key technologies in the textile industry and support the garment industry. Encourage mergers and acquisitions of enterprises in the iron and steel, cement, coal and chemistry industries. SteelOrbis Shanghai