The country is brewing heavy punches to control overcapacity and promote industrial transformation and upgrading

"This is one of the important tasks of the central 'heavy fist' governance this year. Except for industries with overcapacity such as steel, electrolytic aluminum, cement, shipbuilding, etc., overcapacity in emerging industries such as polysilicon, wind power equipment and new materials is also worthy of attention." The above said.

The reporter learned that since the beginning of this year, the relevant ministries and commissions have met and discussed with the Iron and Steel Association and the Nonferrous Metals Industry Association.

The above-mentioned person told reporters that the relevant departments have conducted long-term research. The current big problem is how to manage a large number of “unapproved first-build” projects, and what path and methods should be adopted to curb excess capacity. On the one hand, in recent years, most of the new production capacity is high in technical equipment, which is particularly obvious in the west; on the other hand, many enterprises are slowing down the old production capacity while building new capacity, which leads to the superposition of new and old production capacity, thus exacerbating excess.

"These surplus industries are concentrated in the basic manufacturing industry. In addition to involving a large amount of investment, it also increases local employment and solves problems such as personnel placement and local liabilities," said a government official who did not want to be named.

The reporter learned that according to the overall plan, in the future, new projects in overcapacity industries will be strictly controlled, and illegal construction projects will be severely rectified. On the other hand, through the energy consumption indicators, environmental verification standards, bank credit, accountability, etc. to raise the threshold of the industry, to achieve the survival of the fittest by means of market-based means, thereby preventing further deterioration of overcapacity.

Overcapacity has caused many industries to struggle on the verge of losses. Taking the steel industry as an example, W ind statistics show that the overall asset-liability ratio of the steel industry increased by 1.44 percentage points year-on-year at the end of 2012, and the average asset-liability ratio of 44 listed companies was 60.35%. At the end of the first quarter of this year, the steel industry's asset-liability ratio continued. The upward trend, the overall asset-liability ratio is as high as 61.52%.

According to the latest data of China Steel Association, in the first quarter of this year, the national average crude steel output was 2.132 million tons, a record high, overcapacity and oversupply became the primary difficulties in the steel industry.

Similar to the steel industry, flat glass, cement, electrolytic aluminum and other industries have experienced price declines due to overcapacity and large losses in enterprises. Statistics show that China's flat glass production increased from 202 million weight boxes in 2001 to 738 million weight boxes in 2011, an increase of 262.87%. Wind information statistics show that the asset-liability ratio of 15 glass industry listed companies at the end of 2012 increased by 6.16 percentage points year-on-year, of which Luoyang Glass's asset-liability ratio was as high as 94.58%.

In addition to traditional industries, the new energy and new materials industries are also beginning to show signs of overcapacity. Li Yizhong, former Minister of the Ministry of Industry and Information Technology, said at the two sessions this year that it is an indisputable fact that some industries have a serious overcapacity. Steel, aluminum, cement, coal chemical, flat glass, shipbuilding and even wind power equipment, photovoltaic cells, polysilicon and other industries are all over-supplied. Zhang Ping, former director of the National Development and Reform Commission, also said that the current overcapacity is particularly prominent in traditional industries such as steel, cement, electrolytic aluminum, flat glass, and coke. Also, in recent times, emerging industries such as photovoltaics and wind power equipment have also experienced production capacity. Excess, the photovoltaic capacity utilization rate is less than 60%, and the wind turbine capacity utilization rate is less than 70%.

According to statistics from the Silicon Industry Branch, at the end of 2012, domestic polysilicon production capacity has reached 190,000 tons/year. According to an industry source, the current PV cell operating rate is only 57%, and the polysilicon operating rate is as low as 35%, which is a “serious excess”.

"Since this year, the state has been resolute in controlling overcapacity." Li Xinchuang, deputy secretary-general of China Steel Association, said that overcapacity has become an unavoidable topic in the steel industry, and some regions and some varieties are seriously over-represented. The current pollution problem is very serious. The steel industry should further strengthen environmental governance in order to truly resolve the problem of overcapacity and promote fair competition among steel companies.

“Crushing through local protection is undoubtedly the key to solving the problem of overcapacity.” Zhang Hanya, president of the China Investment Association, said in an interview with the Economic Information Daily that some local governments tend to regulate and control under the pressure of GDP growth, employment, and taxation. Singing against the tone, therefore, to deal with overcapacity, we must define the responsibility system and prevent the policy from changing at the implementation level.

In order to resolve the problem of overcapacity, the Minister of Industry and Information Technology, Miao Wei, said that to solve this problem, it is necessary to change the management method relying on administrative examination and approval as soon as possible, and turn to actively promote the improvement of market mechanism and reduce government intervention. The most urgent task is to strictly enforce market access and promote Industrial policy, fiscal policy, land policy, and environmental policy linkage.