China Trying to Keep Industries Lean and Mean

China ordered more than 1,400 companies in 19 industries to cut excess production capacity this year, part of efforts to shift toward slower, more-sustainable economic growth.

Steelmaking, ferroalloys, electrolytic aluminum, copper smelting, cement production and papermaking are among areas affected, the Ministry of Industry and Information Technology said in a statement posted on its website yesterday. Excess capacity must be idled by September and eliminated by year-end, it said.

Premier Li Keqiang said last week that China will focus on economic restructuring when growth and inflation are within limits, which he didn’t specify. The ministry said on July 24 that China will accelerate the phase out of overcapacity in the second half of this year.

“This detailed list shows the government is serious in its efforts to restructure the economy and is prepared to tolerate the necessary pain.” Zhang Zhiwei, chief China economist at Nomura Holdings Inc. (8604) in Hong Kong, wrote in an e-mailed research note yesterday.

More than 92 million tons of excess cement capacity and about 7 million tons of excess steel production capacity are expected to be wiped out under the government’s plan, Zhang wrote. Nomura maintained its forecast of 7.4 percent economic growth for China in this quarter and 7.2 percent in the fourth quarter.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu