By Jiang Yu, Department of Macroeconomic Research, Development Research Center of the State Council (DRC)

Research report No 90, 2014 (Total No 4589)

Abstract:

China has seen some progress in reducing the amount of electrolytic aluminum capacity, since last year, but evidently still faces problems, for example, difficulties in enterprise debt, bank loans, and personnel.

And electricity pricing policies vary from place to place, going against the notion of survival of the fittest. Currently, the basic solution is to use reforms which, on the one hand, can make full use of the market role and industrial self-discipline, while at the same time getting the government, enterprises, and industrial organizations involved in industrial discipline. The different electricity prices and financial policies for enterprise discipline also need to change to encourage electrolytic aluminum companies to cut capacity on their own and getting enterprises that are being asked to shut down to cut capacity on their own. On the other hand, China needs to increase the use of aluminum and its demand as the fundamental way to deal the overcapacity.