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China cuts more overcapacity in H1

Posted on July 18th, 2017 in Industry News

BEIJING - China has cut more overcapacity in the first half of this year thanks to government efforts amid a stabilizing economy, said a senior official on Tuesday.

In the first half, authorities used market power and law enforcement to cut overcapacity, making notable progress, said Yan Pengcheng, spokesperson with the National Development and Reform Commission (NDRC), citing latest indicators.

For the steel industry, outdated production capacity continued to be eliminated and newly increased capacity was strictly controlled. In particular, producers of substandard steel bars were banned at the end of June, leading to a planned industry-wide investigation scheduled for later this year.

In terms of coal production, about 111 million tons of backward capacity was forced out of the market, completing 74 percent of the annual target.

The efforts to cut excessive coal capacity prompted the healthy and sustainable development of the sector. Specifically, the business conditions of coal companies were improved, said Yan.

In the first five months, the country's large coal companies registered total profits of 123.4 billion yuan ($18.13 billion), 120 billion yuan more than the same period last year.

With continuous overcapacity reduction, the positive effects of supply-side structural reform were expanded as market conditions improved significantly.

"As a large number of zombie companies withdraw from the market, major industry players will have a bigger role in allocating resources and planning production, which further improves their business performance and market expectations," said Yan.

China's economy expanded by a faster-than-expected 6.9 percent in the first half, setting the country on course to comfortably meet its 2017 growth target.