China to cut steel capacity by 45 million tonnes this year: state planner

27 June 2016

China plans to cut steel production capacity this year by 45 million tonnes and lower coal output capacity by 280 million tonnes, the head of the country’s top economic planner said ­yesterday.

The capacity cuts would involve relocating 700,000 workers in the coal sector and 180,000 workers in the steel industry, Xu Shaoshi, chairman of the National Development and ­Reform Commission, said at the World Economic Forum in ­the northern city of Tianjin.

Xu was “very confident” that China would achieve the 2016 targets.

“The most urgent task is reducing excess capacity,” he said.

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The government has vowed to tackle price-sapping supply gluts in major industrial sectors and said in February that it would close between 50 million to 100 million tonnes of steel capacity and 500 million tonnes of coal production within three to five years.

The government plans to allocate 100 billion yuan (HK$120 billion) to help local authorities and state-owned firms finance layoffs in the two sectors this year and in 2017, with 20 per cent of the total used to reward high achievers.

Layoffs from the two sectors are expected to total 1.8 million workers, according to official ­estimates.

Xu said China’s overall leverage levels were under control and the government may roll out policy steps to “actively and steadily” reduce corporate debt levels.

China’s total debt load rose to 250 per cent of gross domestic product last year and the IMF recently warned the high corporate debt ratio of 145 per cent of GDP could lead to slower economic growth if it was not addressed.

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The government would forge ahead with supply-side reforms while appropriately expanding aggregate demand to ensure economic growth was within a reasonable range, Xu said.

He reiterated that the ­government’s target was to achieve annual average growth of at least 6.5 per cent between 2006 and 2020.


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