Structural investment addresses structural overcapacity
- By Shi Zhengfu
0 Comment(s)
Print
E-mail China.org.cn, February 12, 2016
|
|
|
Dyspepsia [By Zhai Haijun/China.org.cn] |
Recently, President Xi Jinping emphasized the importance of properly expanding total demand, enhancing the structural reform of the supply side and increasing the quality and efficiency of the supply system. The Central Economic Work Conference, held in late 2015, also proposed the five major tasks surrounding reform, namely, reducing overcapacity, destocking, deleveraging, reducing costs and shoring up weak growth areas.
Actually, overcapacity is the result of an imbalance in supply structures which reflects an excess in heavy and chemical industries and construction sectors, as well as a shortage and weakness in generalized production factors and areas of quality goods like ecological resources, human resources, clean energy, technology, infrastructure, and high-tech products.
Therefore, effective supply-side reform lies in combining overcapacity reduction with the development of weak growth areas, or by taking advantage of production capacity by shoring up weak growth areas in order to reduce overcapacity.
Overcapacity
Overcapacity has two types -- "standard overcapacity" and "relative overcapacity."
The former indicates productions with inefficient management, deficient environmental and safety measures as well as outdated techniques.The latter implies excess production, which is the result of a reduced global demand since the outbreak of the financial crisis in 2008.
The relative overcapacity is large in scale and often occurs in heavy, chemical industries and construction sectors, such as steel, concrete, coal and aluminum, and sometimes refers to massive inventories like in commercial residential housing.
Observers say overcapacity may account for 30% in these sectors, and may witness a rise due to a continued economic slowdown.
Go to Forum >>0 Comment(s)