China plans measures to cut overcapacity

China plans measures to cut overcapacity
Published: 01 February 2010

People’s Bank of China Deputy Governor Zhu Min said the government plans new measures to rein in overcapacity in steel, cement and other industries amid a surge in bank lending.

“This year is particularly important because the structural changes have become such a top priority, so we will have more policy issues to guide industry and the commercial banks to follow this policy,” said Zhu in an interview in Davos, Switzerland today at the annual meeting of the World Economic Forum.

The central banker’s comments come as China’s government attempts to stanch a surge in lending and shift the economy away from a decades-old reliance on exports. China has tried to rein in overcapacity in steel and cement in recent years by closing the most energy-intensive and polluting companies.

Vice Premier Li Keqiang, who also attended the annual gathering in Davos, said the government wants to keep growth intact while containing inflation risks.

‘Strike Balance’

“The goal is to strike a balance among promotion of steady and fast growth, readjustment of economic structure and proper management of inflation risks,” Li said in a Jan. 28 speech.

The Chinese economy expanded 10.7 percent during the last quarter of 2009 from a year earlier, the fastest pace since 2007, buoyed by new loans. The International Monetary Fund forecasts China’s growth will accelerate this year to 10 percent from 8.7 percent in 2009.

China wants to ensure the “growth path is stable all the year along,” between 8 percent and 9 percent, Zhu said in a Davos panel yesterday.

Speaking a panel discussion, Zhu also said governments need to coordinate efforts to bolster financial regulation. Proposals by President Barack Obama and French President Nicolas Sarkozy are “not in line with the G-20 spirit,” Zhu said.

“It’s absolutely essential for all leaders this year to push global coordination,” he said.

Source: Bloomberg