Focus of cuts turns to local levels

The nation's top economic regulator would enhance oversight over progress made in cutting steel overcapacity at provincial and municipal levels in order to meet reduction goals set for this year.

"China has been actively cutting overcapacity and takes the issue seriously," said Zhao Chenxin, spokesman of the National Development and Reform Commission, adding that the nation can, and would, make all-out efforts to meet this year's reduction goal.

Steel production capacity needs to be cut by 45 million tons and coal output capacity by 280 million tons by year-end.

Lian Weiliang, deputy head of the commission, said the central government would make more efforts to oversee the progress in the second half, after notable imbalance has been found across regions.

Data from the Ministry of Industry and Information Technology shows that by the end of July, the nation cut 38 percent of capacity in the coal sector and 47 percent in the steel sector. In minister Xu Shaoshi's words, efforts made so far "lagged far behind expectations".

Some old industrial bases with heavy industries, such as Liaoning and Heilongjiang province, have yet to achieve any progress, while some developed regions, such as Jiangsu province in the southern part of China, finished 80 percent of their yearly target by July-end.

Regions that have long relied on heavy industries are facing more difficulties compared to other developed places. "Cutting overcapacity is a must for all and the targets set earlier this year must be met," said Xu, who is also the chairman of the commission, adding that local governments, which are primarily responsible for achieving the goals, should quicken their pace of cuts while dealing with layoffs and debt issues.

Xu said local governments should not waver in their determination to cut overcapacity. Some regions' efforts have been found to be slowing due to concerns over unemployment and rising debt issues.

Lian said the central government would enhance inspection to see if local governments are keeping so-called "zombie enterprises" alive in order to avoid debt issues and job losses, referring to the loss-making firms in sectors riddled with overcapacity.

Meantime, the central government would offer a helping hand to local authorities to deal with difficulties arising from cuts to steel and coal capacities.

Apart from 100 billion yuan ($15.31 billion) of funds pledged to help industrial enterprises cut overcapacity in the next two years, the central government would continue to provide more financial support to resolve future problems, said Lian.

The central government is also drafting plans to help companies resolve debt issues based on market mechanisms like debt-to-equity swap programs, Lian said.

Xia Nong, deputy director-general of the department of industry under the commission, said that the government would also help companies resolve debt issues through mergers and acquisitions, which could become a future trend to facilitate the capacity reduction process.

wangyanfei@chinadaily.com.cn