Premier Li Keqiang said that the central government will strengthen efforts this year to reduce overcapacity and overproduction. (Photo : YouTube)
Premier Li Keqiang recently said that the central government will strengthen efforts this year to reduce overcapacity and overproduction. During his trip to Shanxi Province, Li also said that the government will shut down small coal mines that do not meet safety requirements.
Li was speaking at a meeting in the provincial capital of Taiyuan meant to establish feasible solutions to overcapacity in the country's iron, steel, and coal industries, according to China Daily.
Heads of major companies in the three industries and governors from provinces rich in coal, iron and steel attended the meeting.
During the meeting, Li pointed out that stricter measures will be taken to control newly increased capacity and clear goals will be established to reduce overcapacity in the near future, while China requires setting limits on the maximum amount of production for iron, coal and steel industries according to market demand.
Furthermore, outdated overcapacity will be closed, particularly at iron and steel corporations that do not meet production safety, environmental protection and energy consumption standards.
The publication also reported that the government will shut down 13 types of old small coal mines, most of which are privately owned and produce coal on low safety standards.
More fiscal support from the central government will help stop overcapacity in the coal and mining industries as well as relocate employees and support them in starting their own businesses. Li emphasized that stricter supervision from the provincial governments is necessary to resolve overproduction and there should be strict policies to guard against excess production.
Meanwhile, a different report from the same publication revealed that a researcher at the Academy of Microeconomic Research under the National Development and Research Commission named Shi Yulong supported the measures. He pointed out that the main cause of price decline for the three products is insufficient market demand.
Yulong added: "Some coal, iron and steel has long been produced by using comparatively low energy consumption standards. Problems with this were not seen when market demand was strong, but have become more apparent in recent years as market demand has fallen sharply."
Apparently, overcapacity was caused by fast increase in large-scale production of iron, steel and coal in the past years, with many ventures failing to meet current production standards.
