Gov't bodies join forces to eliminate outdated industrial capacity

14:59, April 07, 2010      

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China's State Council issued a notice on the further enhancement of eliminating outdated industrial capacity on April 6. Led by the Ministry of Industry and Information Technology (MIIT), 18 ministries and commissions will jointly eliminate the outdated industrial capacity in electricity, coal, iron and steel, cement, nonferrous metals, raw coke, paper making, tanning, printing and dyeing sectors.

According to Shanghai Securities News, the Chinese government will speed up the elimination of outdated industrial capacity through incentives and restrictions.

A national wide campaign

The country will eliminate by the end of 2010 more than 50 million kilowatts of small coal-fired power generators and 8,000 small coal mines which are lacking in work safety standards, overly energy-intensive or not environmentally friendly.

Small coking coal makers with a coking chamber height of less than 4.3 meters will be closed by the end of 2010, the statement said.

It said the country will phase out mill furnaces below 6,300 kilovolts in the ferro-alloy sector and calcium carbide by the end of 2010.

In the steel industry, furnaces smaller than 400 cubic meters will be shut down by the end of 2011.

The country also plans to close outdated capacity in the construction materials sector, light industry and textile industry sectors, the statement added.

The government has been stepping up the shutdown of outdated production capacity, which has been blamed for pollution and the holding back of industrial upgrading.

Three restrictive policies

The Chinese government will establish and implement strict market access systems by perfecting market access standards for relevant sectors and setting standards for outdated industrial capacity. Government bodies will enhance the examination and control of investment projects and cut off land supply to construction projects in sectors with backwards or seriously wasteful production capacity.

Second, the Chinese government will use price mechanisms, such as differentiated electricity prices and flexible prices for resource products, to eliminate outdated industrial capacity. It will perfect and implement a green tax system, enabling taxes to play a more important role in energy conservation and emissions reduction, and raise the costs for the use of energy, resources, environment and land for relevant enterprises and projects with or related to outdated industrial capacity.

Third, if regions cannot complete the tasks of eliminating outdated industrial capacity as scheduled, the central government will strictly control investment projects and suspend the environmental evaluations, reviews and approvals of projects. If enterprises fail to eliminate outdated industrial capacity within a given period as required, their sewage discharge permits will be withdrawn and banking institutions will not give them any types of new loan support.

In addition, those regions' investment projects will not be approved, they will be unable to get new land-use approvals and departments will not issue them new permits and withdraw production and safety permits previously issued.

Positive central fiscal support

To perfect the policy-related incentive mechanism, the Chinese government will use the existing capital flow channels to comprehensively support each region for the work of phasing out outdated industrial capacity. The allocation of funds will be linked with each region's performance, focusing on the effectiveness of attempts by companies and local governments to switch from outdated forms of production.

Meanwhile, the Chinese government will support enterprises to upgrade and advance by comprehensively allocating funds for technological upgrades. Furthermore, the Chinese government will give support to the implementation and perfection of relevant preferential tax and financial support policies.

If regions and enterprises can eliminate their outdated industrial capacity, they will have priority in terms of the allocation of funds for technological upgrade, land development and financing. If enterprises actively eliminate outdated industrial capacity, they will have priority to gain support in land development and utilization under the prerequisite of abiding by national land-management policies.

By People's Daily Online

(Editor:祁澍文)

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