China: new measures to curb overcapacity

China has announced new plans to curtail overcapacity that is persisting in a number of sectors and is offering fiscal incentives to encourage the removal of obsolete capacity.

New projects will be banned in sectors experiencing overcapacity including the cement, steel, aluminium, glass, and shipbuilding, and new fiscal incentives will be provided to encourage companies to phase out extra obsolete capacity on top of the original goals by 2015, the State Council said in a statement dated 6 October but was only available on Tuesday. The extra amount includes 100Mt of cement.

Beijing also asked companies to look to the domestic market to absorb part of the oversupply in those sectors – expanding use of steel in construction, public infrastructure, as well as applications of cement, aluminum and glass in rural areas.

Apart from the domestic market, corporates are also encouraged to expand in overseas markets as one way to use excess domestic capacity. Those areas include large infrastructure projects, energy, telecommunications, mining resources projects, among others, according to the statement.

Meanwhile, the plan repeats Beijing's previous calls for mergers and acquisitions in those sectors.