China setting performance standards for industry to reduce overcapacity problems

Girish Shetti writes a good article on the China Topix website about recent policy changes in China to impose stricter environmental, safety, and energy efficiency standards.

 

China to Impose Tough Environmental and Energy Efficiency Standards to Tackle Overcapacity

To overcome overcapacity across key Industrial sectors, the Chinese government has decided to impose stricter environmental, safety, and energy efficiency standards, Reuters reported.

The Ministry of Industry and Information published draft policy document on its website (www.miit.gov.cn), saying that it would “normalize the stricter implementation and enforcement of mandatory standards” to solve overcapacity problem plaguing various industries such as steel, coal, cement and aluminum.

Additionally, the Chinese government would impose a “tougher credit policy” that will cut off loans to firms that fail to comply with the new standards. However, firms would be given six months to meet the new standards. If they fail, shut down orders would be issued against them.

If the need arises, authorities would also resort to other punitive actions such as cutting off power and water supply and demolishing equipments of firms that fail comply with the new environmental and safety standards. Officials can also seal equipments and facilities to ensure that plants remain non-operational.

China plans to reduce its annual crude steel capacity by 45 million tones and coal production by 250 million tones by the end of this year. However, the Chinese government is very much behind in meeting these targets, the National Development and Reform Commission said.

Chinese authorities have expressed concerns that some local governments have been complacent in dealing with the issue of overcapacity. On Thursday, the state planning agency signaled out three regions – Mongolia, Fujian, and Guangxi – for not acting diligently on the issue of overcapacity.

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