Shedding off unwanted production capacity is also "conducive to upgrading the industry in terms of geographical deployment and product structure", said the vice-premier.

China has more low-end steel supplies than it needs, while it still depends on imports for high-end supplies used for making automobiles and ships. Eliminating its low-end capacity can make the industry more competitive, and in some cases, more capable of financing their relocation programs, Zeng said.

Two years ago, two large I&S companies, Anshan and Benxi, both from Liaoning Province, merged into the Anben Steel Group Co to become the nation's largest steel maker.

In January 2007, however, Anben was overtaken by Shanghai-based Baosteel Group, after Baosteel acquired 69.6 percent of Urumqi-based Bayi Iron and Steel Co for 3 billion yuan.

Baosteel has also been in merger talks with Inner Mongolia-based Baotou Iron and Steel Group.

And for the newly relocated Shougang Corp, formerly based in Beijing, it is highly likely, industry sources say, that its first takeover targets will be some of the more than 300 steel companies in its nearby Hebei Province.

(China Daily 05/30/2007 page15)

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