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China vows to curb industrial overcapacity

(Agencies)
Updated: 2009-09-30 14:09

The government said it planned to toughen regulatory standards to restrict entry in these sectors, strengthen environmental protection, control land use and limit access to bank loans, among other measures.

It also bans for three years new plants that produce only coke -- processed from coal and used as a fuel in smelting iron ore.

In unusually blunt wording, the cabinet also pointed its finger at local authorities.

"Some regions have acted illegally. We are once again seeing cases of illegitimate approvals, of construction starting before it has been approved, and of construction starting even as the approval process is underway," it said.

Also on the blacklist is cement of which China is the world's top producer and consumer: projects that had not kicked off construction as of September 30 would be halted and reviewed, the notice said. Certain provinces will also be asked to make plans to eliminate outdated capacity within three years.

Any additions of new capacity must be met by corresponding and equivalent cuts in outdated capacity, it said.

"China's cement production capacity will rise to 2.7 billion tonnes per year if all approved projects start operation, and market demand totals only 1.6 billion tonnes," it said.

For the wind power industry, it said that in 2010 Chinese companies would produce equipment equivalent to 20 million kilowatts of capacity, but that the country would install only 10 million kilowatts of actual capacity.

To tackle this oversupply, the cabinet said it would in principle refuse approval for the construction of complete wind-power equipment factories. It also banned investors in the sector from using locally produced equipment, aiming to prevent local governments from building their own equipment plants.

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