China's overcapacity no relation to central government investment: Premier

08:26, December 28, 2009      

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The problem of overcapacity in China had no relation to the central government's investment in the 4-trillion-yuan (585.6 billion U.S. dollars) stimulus package, Premier Wen Jiabao said Sunday during an exclusive interview with Xinhua.

"I can guarantee that the 1.18-trillion-yuan investment the central government planned for 2009-2010 has not been and will not be spent on any industrial projects," he said.

About 590 billion yuan of the 1.18-trillion-yuan investment planned by the central government had been spent this year, mainly on affordable housing projects, infrastructure construction in rural areas, improving people's livelihoods, environmental protection, technological reform and building necessary infrastructure, such as the Beijing-Shanghai high-speed railway and major highway networks, he said.

"Industrial overcapacity has been a global issue, which fundamentally results from less demand and a shrinking market," Wen said.

In China, industrial overcapacity was also a result of the long-existing problem of an imbalanced economic structure, he said.

"To resolve the problem of overcapacity, the most important thing is to take economic, environmental, legal and, if necessary, administrative measures to eliminate backward capacity and, in particular, restrict the development of industries with excess capacity," he said.

"The other aspect is that, China should channel some excess capacity into new fields through technological innovation," Wen said.

Ten government departments, including the National Development and Reform Commission and Ministry of Industry and Information Technology, jointly warned in October that the country's economic recovery could be hampered with chaotic expansion in certain industries, especially in steel, cement, plate glass, coal chemical, poly-crystaline silicon and wind power equipment sectors.

In the latest effort to curb overcapacity, the government asked its financial institutions Wednesday to stop blind loan extensions to companies or projects in industries plagued by serious overcapacity.

Source: Xinhua
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