Further signs have emerged that China’s authorities are serious about rebalancing the economy away from excessive production and investment, with the Ministry of Industry and Information Technology releasing a statement ordering more than 1,400 companies in 19 industries to cut excess production capacity this year. From Bloomberg:
Steel, ferroalloys, electrolytic aluminum, copper smelting, cement and paper are among areas affected… Excess capacity must be idled by September and eliminated by year-end, the ministry said, identifying the production lines to be shut within factories…
More than 92 million tons of excess cement capacity and about 7 million tons of excess steel production capacity are expected to be wiped out under the government’s plan…
Premier Li Keqiang has pledged to curb overcapacity as part of efforts to restructure the economy as growth this year is poised for the weakest pace since 1990.
“This is a real move and is very specific compared with previous high-level conceptual framework for economic restructuring,” said Raymond Yeung, a Hong Kong-based economist at ANZ Banking Group Ltd. “They maintain the overall tone that they’re not focusing on the quantity of growth but the quality of growth”…
The move, which follows the ban on the construction of government buildings announced earlier in the week, suggests that further aggressive stimulus is unlikely, and that Chinese growth should continue to trend downwards.
