State Council tackles over-supplied problems
Source: CCPIT TEX Date: 2006-03-24
CHINA'S central government said it will drastically implement macro-economic control measures in several industries, including steel, coking coal and automobile industries, because it believes the supply in these industries has significantly exceeded its demand, a document released by the State Council said.
It also said the supply and demand in cement, coal, electricity and textile industries are balanced at the moment, but are very like to have an exceeded demand in the future if no macro-control measures are taken.
The Ministry of Commerce released the results of a survey completed in February, based on 600 consumable products. The products with balanced supplies were 170; the over-supplied were 430. Electrical home appliances, automobiles and communication products were beyond the demand. Their prices are expected to decrease.
The State Council said that the markets, instead of the governments, should play the central role in the restructuring of these industries. The future costs of raw materials and resources should push companies to enhance their products and improve their technological levels.
It also said the government should roll out taxation and credit policies to channel investments and loans to support the restructuring. Authorities should also strictly implement a threshold in environmental protection, safety, technology, land and resource consumption to guide investments in the right direction.
Administrative measures should be carried out on a case by case scenario rather than by treating every company in the industry as one. Ailing companies in these industries should be taken over by a foreman, or simply be put out of business, it said.
It also announced its specific measures to tackle the problem, including:
* Prevent fixed asset investments from rebounding. The government should strictly control the supply of land and loans.
* Strictly control the approval of new projects. For example, the government will not approve new steel plants in principle. Any new automobile plants or automaker's expansions into other vehicle categories must have their own brands and self-designed models.
* Small companies that pollute the environment, cannot guarantee work safety or are found harming natural resources must be shut down; like small coal mines.
* The government supports technological innovations, especially any project which may influence and promote the industry as a whole.
* The government encourages large sturdy companies in taking over its counterparts in other industries or in other provinces.
