China: policy to curb overcapacity to face implementation issues?

China: policy to curb overcapacity to face implementation issues?
Published: 22 September 2009

New policies meant to reduce overcapacity of cement production may not work for two or three years due to implementation difficulties and conflicts of interest among local governments, a market analyst said on Monday.

The National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) will pass new industry guidelines to phase out China’s 600 million tons of small-scaled production capacity over the course of three years starting 2010, reported the China Business News (CBN) citing unnamed sources yesterday.

This signifies a renewed effort to address overcapacity, said CBN.

Although capacity is increasing, profits are declining, said Zhu Hongren, the spokesman of MIIT during a press conference last month.

The average ex-factory cement price in July was about 277 yuan ($40.6), down 2.8 yuan ($0.4) from June.

Most of the regions except those in the Northwest and Northeast had a price drop, MIIT said.

Cement output in the first seven months was 878Mt, up 15.9 per cent YoY.