Since 2005, Lafarge of France has conducted operations in China with its joint venture partner, Shui On. Initially Lafarge Shui On had a production capacity of 12 million tonnes annually, a figure that increased to 24 million tonnes last year.

Last December, Lafarge Shui On signed an agreement with the Yunnan provincial government to produce cement, ready-mixed concrete, aggregates and plasterboard, all of which will require 10 million tonnes of new cement capacity by 2010.

The State-owned Assets Supervision and Administration Commission said early last year that the cement industry should be led by 12 pillar companies, a policy that would require industry consolidations through mergers and acquisitions.

'Mergers and acquisitions will enhance efficiency with the small and medium-sized companies being swallowed up by the big companies,' said Lu Xingui, an official of the building materials division of the National Development and Reform Commission.

The central government hopes that the top 10 cement companies, including Lafarge Shui On Cement, Anhui Conch Cement and China National Building Materials, will have a 30 per cent share of the cement industry, up from 23 per cent last year.

China has 5,000 cement companies, down from 8,000 two years ago.

The Finance Ministry announced in June last year that tax rebates would be removed on 553 types of goods, such as cement, chemical goods and fertilisers, as a way to curb over-capacity.

Lei Qianzhi, president of the China Cement Association, said Beijing was not going to encourage cement exports because it is a high-pollution industry.

Mr Lu said the NDRC is proposing to use money originally earmarked for export tax rebates to subsidise the structural adjustment of the industry.

'Hopefully that could hasten consolidation in the industry,' he said, though he did not offer a time line for when that would become official policy.

Solid ambition

The amount of cement Lafarge plans to produce annually by 2010, in tonnes: 50m