China douses overheating in steel, iron industries

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Last updated at: (Beijing Time) Friday, March 12, 2004

China douses overheating in steel, iron industries

After nearly a year of repeated warnings of overheating in the steel sector, the government finally retorted to administrative and financial solutions to stop soaring investments in production.

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After nearly a year of repeated warnings of overheating in the steel sector, the government finally retorted to administrative and financial solutions to stop soaring investments in production.

The National Development and Reform Commission, the country's most powerful cabinet department in charge of economic development, said it will generally stop approval of new construction projects by steel company groups, steel and iron mills.

An official from the commission's industrial development department said that his commission is co-operating with the banking sector to tighten credit requirements for steel projects.

The official, who declined to be named, said the banks will no longer provide loans for those projects that do not meet industrial policy or market accession requirements.

In 2002, China's fixed asset investment in steel industry stood at 70.4 billion yuan (US$8.48 billion), surging 45.9 per cent over the previous year. In 2003, the figure rose to 133.2 billion yuan (US$16 billion), up 89.2 per cent from 2002. It is estimated that by the end of 2005, China's annual steel output will reach 330 million tons, enough to meet the market demand of 2010.

"It's urgent to apply the brakes," said the official.

The government will no longer give tax rebates to imports of equipment for the construction of unapproved steel projects. The central government will urge local governments to abolish price discounts on electricity consumption for steel makers.

And officials are planning to raise the threshold for entering the steel sector by readjusting requirements on technology, energy consumption, safety and quality.

The official said similar measures will be adopted in the aluminum and cement sectors, which respectively grew by 92.6 per cent and 120 per cent last year, when compared with 2002.

The commission's minister, Ma Kai, said the strict measures are aimed at avoiding environmental, financial and social problems caused by blind investment and over-capacity in the steel industry.

At the same time, the commission has joined hands with relevant authorities to tighten examinations and approvals of land use for steel plants.

Meanwhile, similar investment in steel and other sectors has aroused heated debate among deputies and members of China's top legislature and top political consultative body attending the ongoing sessions of NPC and CPPCC.

They cautioned that blind surges of investments in the sectors could lead to environmental and economic problems.

Li Mingmin, general manager of Shandong-based Laiwu Steel Co, told China Daily that excessive investment in steel and iron production was partly caused by "all-time" high steel prices powered by strong demand from steel-consuming industries.

"They (investors) all elbowed in (steel sector) for money," said Li, who is a deputy of the 10th National People's Congress.

"Unfortunately, much of the new investment features low technology, serious pollution and abuse of natural resources," Li said.

Tang Yueming, president of Sichuan-based Shuangma Cement Co, said the similar situation happened in the cement sector.

"Take Sichuan for example," Tang, also an NPC deputy, said: "Many have planned to establish cement plants in Chengdu, the capital city and the economic hub of the province, on the forecast of a greater demand in coming years."

Source: China Daily

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