Chinese Ministries to Curb Overcapacity and Redundant Production

Several high level government ministries are working together to curb overcapacity and investment in some of China's largest manufacturing industries. The move comes amid the global economic crisis that has prompted China to launch its own stimulus package.

One of the side effects of stimulus spending is production overcapacity that will ultimately drive prices down and lower earnings in many industries.

Larry Chen has more.

Reporter:

The National Development and Reform Commission, along with the Ministry of Land and Resources, the Ministry of Environmental Protection, and seven other government ministries are joining together to curb production overcapacity and redundant construction in order to promote healthier growth.

The ten ministries will begin to regulate the overproduction in six manufacturing industries including steel, cement, glass, silicon products, wind power equipment and coke, used to make steel and aluminum products.

Dong Zuoji of the Ministry of Land Resources says its agency has already rejected numerous project proposals to curb overinvestment.

"In short term planning, we will prioritize land used by industries with high technical and high added value with that of low-cost and low emissions. No land can be granted to industries with production overcapacity and redundant construction. We will strictly abide by the government policy in approving land use, so as to prevent the land from being used in industries with overcapacity and redundant construction. We will speed up clearance of land used by enterprises with obsolete techniques and fight against illegal land use according to law."

The new restrictions are not only to prevent overcapacity and investment but they also aim to prevent further environmental degradation. The Ministry of Environmental Protection says it plans to bring tougher regulations for energy consuming industries and polluting factories while working to upgrade factories with more efficient and newer technology.

Zhu Xingxiang, head of the Ministry of Environmental Protection, says its department will play a vital role in curbing overcapacity that is not only hurting industries earnings but also the environment.

"We will raise the threshold of environmental protection standards; check environmental standards of enterprises with overcapacity and redundant construction. In principle, we will not accept or approve environmental assessments from new projects involved in expanding steel, cement and coal chemicals. We will strengthen environmental supervision during the project so as to crack down on illegal activities."

Many industries already feel the heat from the economic crisis such as steel manufacturers which have seen earnings dip as overcapacity and over-investment have lowered prices.

The National Development and Reform Commission has previously said it will restrict overcapacity and redundant construction through market forces and by increasing corporate mergers and restructuring industries in order to promote healthy industrial development.

Larry Chen, CRI News.