Authorities will stop banks from lending to steelmakers with unapproved capacity if the companies have failed to meet environmental and land use rules, the Shanghai-based newspaper reported, citing the person who has seen a plan drafted by the National Development and Reform Commission and the Ministry of Industry and Information Technology. The 400 million tons of unapproved capacity accounts for more than 40 percent of China’s total, according to the report.
Unapproved capacity operating within China’s environmental and land use standards may continue to be supported by banks because of considerations for local employment and tax revenue, the newspaper reported.
Premier Li Keqiang has pledged to curb excess production capacity, which Chinese authorities have cited for driving down the prices of industrial goods, eroding company profits and contributing to pollution. China last week ordered more than 1,400 companies in 19 industries including steel, aluminum and cement to cut surplus capacity by the end of this year.
The Communist Party’s official People’s Daily newspaper reported July 30 that authorities were studying a plan to reduce overcapacity in steel, cement, aluminum and other industries after output increased without effective supervision.
Of the 18 million tons of aluminum capacity added in the “past few years,” only 800,000 tons were approved by the central government, the People’s Daily reported. China also has 800 million tons of unapproved cement capacity, it said. The utilization ratio for steel plants has fallen to 72 percent, 71.9 percent for aluminum and 73.7 percent for cement, lower than the normal rates worldwide, the report said.
The government is looking to boost capacity utilization ratio of the industries to 80 percent by eliminating outdated capacities, the National Business Daily reported today.
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