Cement, more than any other trade, permeates life in Xiancun. Clusters of belching cement factory smokestacks jut from the hillsides of this Guangzhou suburb, cement dust clogs the air and shrouds nearby fields, and the business of cement employs thousands of local workers. But all of that is about to change. Under guidelines issued by the central government last month, small cement factories of the kind that dominate Xiancun's economy are to be closed by the end of next year. Since last month, many of Xiancun's 48 cement companies have been shut down and more are awaiting government closure orders. The decision to close factories in Xiancun is part of Beijing's larger plans for restoring profitability to a catalogue of industries that are suffering from over-capacity, low efficiency and the use of outdated technology. Earlier this week, the State Economic and Trade Commission (SETC) announced it was targeting 10 manufacturing sectors, with 114 products, for immediate action. Included on the list were coal mining, steel making, textiles and power production. As a first step, the SETC said it would shut small cement, coal, oil and glass producers. Xiancun, which has risen from obscurity to the front lines of government policy, is only one small illustration of how the mainland's stop-and-start economic boom of the late 1980s and early 1990s has left a trail of small and non-competitive manufacturing companies in its wake. According to Zengcheng Cement deputy general manager Yuan Julun, Xiancun's cement trade turned from a sideline enterprise into a village obsession at the start of the decade, when scores of smaller factories opened to help feed the frantic building and road construction then taking place in Shenzhen and Guangzhou. 'Demand was far greater than supply,' Mr Yuan said. 'At that time even small factories were making 100 yuan [about HK$93.1] profit on each tonne of cement they produced.' However, as the regional economy subsided, vast over-capacity sent the entire sector into recession. For example, state-owned Zengcheng Cement - the area's largest producer, with an annual capacity of 300,000 tonnes - has not reported a profit since 1995. Losses last year stood at about two million yuan. As a result, management has been forced to lease a company mine, a subsidiary cement factory, and retrench some of its labour force, which now stands at 340 workers. Similar difficulties are reported throughout Guangdong province and the mainland at large. A recent survey conducted by the Guangdong Construction Committee concluded over-investment and repetitive construction were driving the entire industry into ruin, with as much as 67 per cent of production capacity in places such as Maoming City standing idle. Nationwide, the mainland now boasts cement production capacity of about 700 million tonnes per year - more than any other country in the world. However, output last year reached only 500 million tonnes. The entire cement business was in disarray, said Wang Hongwei, of the Guangzhou Construction Commission's Building Material Department. 'Supply exceeds demand, there are too many small factories, and as a result larger factories do not have the space they need to make profits.' To implement Beijing's measures, Guangdong's construction committee this year will grant production licences only to those cement-manufacturers who are qualified under national guidelines, Mr Wang said. Those guidelines stipulate that factories producing less than 44,000 tonnes per annum must close. The aim is to shed 100 million tonnes of national production capacity immediately. Moreover, stricter environment-protection regulations will be implemented - cement factories are among the worst polluters in the province - in a move that is certain to provide cement companies further inducement to raise their production standards. 'In this way, small enterprises will gradually close and the quality and competitive power of the entire sector will improve,' Mr Wang said. Mr Yuan believed the measures should help restore the economic vitality of medium-sized enterprises such as Zengcheng Cement. His business has started to gain market share in the few weeks since the plant closures began. But the true test, he added, would come over time. 'There is still a long way to go,' he said. 'There are still many problems in implementing the new policy. Many of these smaller cement factories were set up with bank loans, and if [the factories] are closed immediately, the money will be lost.'