Cutting overcapacity

With only two months of the year to go, more efforts are badly needed to curb local governments' urge to boost growth through investment, particularly in those sectors with severe overcapacity.

China's gross domestic output grew 7.7 percent in the first nine months, which has secured the government's full-year target of 7.5 percent.

Faced with an economic slowdown, the central government will implement measures to boost consumer spending and push forward the urbanization drive, a top economic official said on Wednesday. [An Xin / China Daily]

However, while most developed areas in this country such as Guangdong province, Beijing and Shanghai have recently cut their growth targets to expand their room for economic restructuring, a number of local governments still seem to be fixated on GDP growth.

In view of the increasing damage excess production capacity is causing China's environment and economic transformation, the government last month issued a guideline to tackle serious production overcapacity, particularly in the cement, electrolytic aluminum, sheet glass, shipping and steel sectors.

Statistics indicate that the cement production capacity being used was only 72 percent by the end of 2012, electrolytic aluminum's was 73.7 percent, sheet glass 71.9 percent, shipping 75 percent and steel 73.1 percent.

Yet, in spite of warnings that excess capacity will lead to a drop in revenues and growing risks, an array of projects remain under construction in less-developed areas, further aggravating the current overcapacity.

As the country promotes strengthened environmental awareness and higher living standards among local residents for pursuit of sustainable growth, the vast but less-developed central and western areas face a harder battle to balance growth with environmental protection and industrial upgrading.

It is obvious that any substantial reduction in capacity in those industries that have transferred from the developed coastal areas to less-developed inland areas in recent years will incur heavy job losses. Hence, to adequately compensate less-developed areas for the sacrifices they make during the nationwide reduction of overcapacity, the central government should come up with more targeted support.

The green loans that Shang Fulin, chairman of the China Banking Regulatory Commission, called for on Monday to facilitate the reduction of overcapacity is a worthwhile proposal. More and cheaper credit should be a must for the success of less-developed areas' greening efforts.

(China Daily 11/05/2013 page8)