China’s bid to cut production overcapacity in heavy industries ‘losing steam’, survey suggests
Production strong in sectors such as coal and steel as prices of commodities and raw materials rise amid shortages of supply and higher demand
China’s measures to cut industrial production overcapacity slowed significantly in the third quarter of the year as firms boosted output to meet increased demand for goods and raw materials, according to survey released by the Cheung Kong Graduate School of Business.
The quarterly survey, based on a sample of about 2,000 industrial firms with annual sales revenue of five million yuan (HK$5.5 million), found that more than half of China’s industries and provinces reported overcapacity, but the determination to shut down excess production capacity quickly fizzled away when there were prospects of turning a profit.
“Production has stabilised due to an expansion in consumer goods, but the weak demand remains a big challenge to the industrial economy,” said Professor Gan Jie, who was in charge of the survey. “There is still a long way to go before overcapacity is fully absorbed.”
The survey defined “overcapacity” as when 10 per cent of the organisations polled claimed excess capacity of more than 20 per cent in their sector or province.
The finding echoed longstanding questions over the effectiveness of the government-led campaign to reduce overcapacity in industries such as steel and coal, a top economic goal set for this year.