Chinese Government Blocks New Projects for Troubled Sectors
Chinese Government Blocks New Projects for Troubled Sectors (Reuters)
China’s State Council announced a production plan for specific national industries to take on the country’s chronic overcapacity problem. In sectors such as steel, cement, shipbuilding, aluminum and glassmaking, the Council decided to block approvals for new projects, until such time as the back-up is resolved. A capacity glut has destroyed profit margins in these sectors, leaving companies reliant upon government subsidies to counter heavy losses. The new Council plan will focus on “establishing and perfecting” market mechanisms, instead of relying on trying to force feed these sectors’ production quotas. Investors will be watching intently to see whether or not the Council’s change of tactics smooths out these bumpy Chinese sectors.