Li keeps China's focus on cutting excess capacity

A worker at a steel factory in Dalian, Northeast China's Liaoning province, Sept 1, 2016. [Photo/China Daily]

China will continue retiring substandard production capacity－especially in steel and iron, coal mining and coal-fired power plants－to keep up with targets set for the year.

The decision was made at a State Council executive meeting, which was presided over by Premier Li Keqiang on Wednesday.

Li listened to progress reports on this year's campaign to cut excess capacity in those four areas, as well as reports on cuts in the concrete and glass sectors.

The premier said reforms offer the way forward in cutting overcapacity, which is a vital part of supply-side structural reform.

"China is taking the initiative to reduce production capacity based on its own national conditions. The efforts are to make the growth model and economic structure move to new economic drivers," he added.

The Government Work Report that Li delivered in March set targets for this year to cut steel and iron overcapacity by 50 million metric tons and coal mining by 150 million tons, as well as phasing out over 50 million kilowatts of coal-fired power generation capacity.

As of Wednesday, the progress that had been made amounted to 31.7 million tons in steel and iron and 68.97 million tons in coal, accounting respectively for 63.4 percent and 46 percent of this year's goals.

Additional actions that were discussed and decided at the meeting included adopting more methods based on market rules and the rule of law while phasing out outdated capacity.

Meeting participants also decided to eliminate illegal production that adds to overcapacity and prevent production occurring after shutdowns from flaring up again.

By the end of June, all facilities producing steel bars of inferior quality will be dismantled across the country.

All coal mines scheduled to close this year will stop production by the end of August and will be phased out by the end of November. Close attention will be paid to prevent overcapacity in coal-fired power generation and make room for the development of a clean and better energy mix.

The meeting called for more support to help business startups in cities reliant on steel and coal industries as a way to increase employment opportunities.

A new mechanism will be set up to help workers get a job in regions that have a strong demand for labor. The central government will promptly allocate subsidies to guarantee the basic living standards of transferred employees, in combination with matching and supporting local funds and other assistance.

Further endeavors will also be made to tackle debts incurred by companies with excess capacity.

The meeting also encouraged companies in these sectors to seek strength through mergers. Third-party assessments will be introduced to help strengthen governmental supervision.