The closure of the Chinese capacities to use the stick or the carrot?

The national Commission for development and reform Commission of China made a statement. It concerns the elimination of excess capacity of Chinese iron and steel sector. The statement highlights the new financial incentives. Also examines the sanctions applied to the companies and local administrative authorities. The penalties for those who ignore the decisions taken by the Central government of the country. Special attention is given to allocation of additional funds. They should be sent to Finance projects for the employment of workers of enterprises shut down. This refers to the production of coal-mining and metallurgical sector. Earlier for these purposes the government expects to allocate about 15 billion USD. Also consider the possibility of government cover bad debts of the steel companies.

Among the priorities identified by the Commission — the closure of companies, «zombie». Such a definition is given hopelessly unprofitable organizations. However, they kept afloat with new loans. They can be considered definitely irrecoverable, however, local authorities tacitly support the results. It is assumed detecting and removing of such enterprises. It is planned to use stricter environmental standards. Will be held to improve standards of safety, quality, efficiency. In cases of illegal construction or expansion of the metallurgical industry is provided by repressive measures.

The Chinese Ministry of industry gave to the consideration of their own data. They take into account the period from January to June 2016. Down only brought 13 million tons annual capacity, producing steel. And in accordance with the plan, this figure should reach 45 million tons. The established plan is not fulfilled even a third. In 2016−2020, the planned figure is 140 million tons. Given the situation, it is necessary to accelerate the process of eliminating excess capacity.

The reorganization of the metallurgy sector of the PRC suggests not reduce output. Provides for consolidating and improving the international competitiveness and efficiency of companies. In June 2016, it was announced the merger of Wuhan Steel and Baosteel. Apparently, the procedure can be considered under this policy.