Overcapacity may return in heavy industries
China Watch |
Updated: 2018-05-21 09:50
Researchers with the State Council's Development Research Center examined data dating back to 2008 from the National Bureau of Statistics to compare and analyze the progress in efforts to reduce overcapacity in 16 key industries, including iron and steel, electrolytic aluminum, plate glass, and coal.
They concluded that overcapacity had been cut significantly in most of these industries since the latter half of 2016, although due to the slowdown in infrastructure investment, overcapacity will likely reoccur in some heavy industries, such as iron and steel, cement, and electrolytic aluminum.
This means China's supply-side reform must be deepened further, they said, adding that it is also critical to establish long-term mechanisms to reduce overcapacity.
The researchers found that government policy plays an important role in tackling overcapacity, while market mechanisms aid basic adjustments.
They also found that regulations — including those for environmental protection and quality inspection — that optimize market competition create favorable conditions for overcapacity reduction, while efficient and legalized bankruptcy as well as mergers and acquisitions accelerate reduction.
Researchers with the State Council's Development Research Center examined data dating back to 2008 from the National Bureau of Statistics to compare and analyze the progress in efforts to reduce overcapacity in 16 key industries, including iron and steel, electrolytic aluminum, plate glass, and coal.
They concluded that overcapacity had been cut significantly in most of these industries since the latter half of 2016, although due to the slowdown in infrastructure investment, overcapacity will likely reoccur in some heavy industries, such as iron and steel, cement, and electrolytic aluminum.
This means China's supply-side reform must be deepened further, they said, adding that it is also critical to establish long-term mechanisms to reduce overcapacity.
The researchers found that government policy plays an important role in tackling overcapacity, while market mechanisms aid basic adjustments.
They also found that regulations — including those for environmental protection and quality inspection — that optimize market competition create favorable conditions for overcapacity reduction, while efficient and legalized bankruptcy as well as mergers and acquisitions accelerate reduction.
