In a bid to avoid environmental, financial and social problems caused by blind investment and over-capacity in the steel industry, the Chinese government is to take strict measures with the steel sector.

The State Development and Reform Commission (SDRC) said in a news release Wednesday that the government is to raise the threshold for entering the steel sector by readjusting requirements on technology, energy consumption, safety and quality.

The SDRC said it will basically stop approval of new construction projects of steel company groups, steel mills and iron mills.

The SDRC is cooperating with the banking sector to tighten credit requirements for steel projects. The banks will no longer provide loans for those projects that do not meet industrial policy or market accession requirements.

At the same time, the SDRC has joined hands with relevant authorities to tighten examination and approval of land use of steel plants. The government will not approve the land developmentand construction of steel projects that are not in line with the industrial policy and development plan.

The government will no longer give tax rebates to imports of equipment for the construction of unapproved steel projects. The central government will urge local governments to abolish price discounts on electricity consumption.

According to the State Development and Reform Commission, the central government has ordered local governments to conduct a survey of the steel industry and submit the result at the end of February.

After that, a nationwide scrutiny of the industry will be conducted to check whether laws have been violated in environment protection, land use and energy consumption.

In 2002, China's fixed assets investment in steel industry stood at 70.4 billion yuan, surging 45.9 percent over the previous year. In 2003, the figure rose to 133.2 billion yuan, up 89.2 percent from 2002. It is estimated that by the end of 2005, China's annual steel output will reach 330 million tons, enough to meet the market demand of 2010.

"This indicates that there is an over-heating in investment in the steel industry," said a spokesman.

The Commission is revising its policies and development plans for the steel industry.

(Xinhua News Agency 11, 2004)