China Publishes New Plan To Deal With Overcapacity

China will tackle chronic overcapacity problems in sectors such as steel and cement by blocking approvals for new projects and by making better use of the market, according to a new plan issued by the State Council on Tuesday.

Margins in the targeted sectors, which also include shipbuilding, aluminium and glassmaking, have been affected for years by a capacity glut that has left many firms suffering heavy losses and reliant on government subsidy.

The long-awaited plan, published by China’s cabinet, said it would focus on “establishing and perfecting” market mechanisms, marking a change of approach after years spent trying to strong-arm the sectors into submission.

It would also set higher environmental and quality standards for industries and encourage the private sector to play a role in restructuring oversized firms.

As well as blocking new approvals, the new plan will seek to absorb overcapacity by stimulating domestic demand, and will also offer tax incentives to encourage firms to relocate plants overseas.

via Reuters

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