China's battle with overcapacity
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E-mail CNTV, August 17, 2016
China's National Development and Reform Committee has said it will implement stricter measures to cut excessive industrial production. But its spokesman added that China wasn't fully to blame for the overcapacity, saying it was a global problem.
China's aim is to cut steel production by 45 million tonnes in 2016. It managed to cut nearly half of that in the first seven months of the year, so there's still much work to do. The NDRC spokesman said it's a tough task which includes the realignment of staff and the disposal of assets, and steel companies have found these difficult to implement. Also, recent price increases have made some companies hesitant to cut production. But the Chinese government is determined to see the plan through.
"We will require local governments to hand in monthly reports on their progress. We will also send teams to different areas to supervise their work on cutting overcapacity," NDRC spokesperson Zhao Chenxin said.
Because of the slowdown in global economic growth, and with less infrastructure construction, demand for steel is declining. Competition in the market has become more intense as a result. Indeed there has been much friction between the European Union and China on the matter, and the bloc's trade commissioner has claimed China is promoting unfair competition with artificially cheap exports. The EU has also said the Chinese government is not doing all it can to address the issue
But the NDRC spokeman believes it's an issue facing many countries, not just China. Low utilization rates in steel production have been commonplace since the 2008 financial crisis. The world’s average rate was 73.4 percent in 2014 -- China's was only two points higher. He also pointed out that most of China's steel is for domestic consumption.
"Over the past 10 years, China has only exported about ten percent of its total steel output, which is much lower than some major steel exporting countries. The Chinese government has been taking action to limit the export of steel, such as imposing high duties," Zhao said.
The spokesman also said that overcapacity is a global challenge -- and all countries related are responsible for this. China opposes trade protectionism and zero-sum game. He believes all global cooperation can resolve the problem.
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