CRI听力:EUCCC Launches a Study on Curbing Industrial Overcapacity in China

The European Chamber of Commerce in China has recently launched a study examining the impact and influence of industrial overcapacity in China. The goal of the study is to promote an open and constructive dialogue with Chinese authorities in order reduce overcapacity and drive China's economy on to a new level of sustainable growth. Liu Yan has more.

Reporter:

The study entitled Overcapacity in China – Causes, Impacts and Recommendations were made by EU Chamber of Commerce in cooperation with Roland Berger Strategy Consultants. (www.hXen.com)

The study focused on several key industries affected by overcapacity, namely steel, aluminium, cement, chemicals, refining and wind power equipment. According to Joerg Wuttke, President of the EU Chamber of Commerce in China, there are several factors behind the overcapacity.

"There is a strong urbanization in China. Every year, one percent of the country's moving from the countryside to the cities, and companies are then preparing themselves in order to serve that market growth. The second point is that China produces too much and consumes too little. Another driver of overcapacity is that companies basically have too low ingot prices, meaning water, electricity and gas is too cheap."

Other factors such as the collapse of demand in export markets primarily in the US, local protectionism, and inexpensive and widespread availability of technology are all considered to have led to the overcapacity in China.

As a result of this overcapacity, China's economic growth is being hampered by industrial inefficiencies, resource wastage and the growing threat of non-performing loans, while trade tensions with major trading partners grow ever more fractious.

The Chinese government has been taking some measures in curbing the overcapacity. In August, the State Council released a statement noting that overcapacity had become a serious problem, and revised its policy with the goal of reducing the negative impact of overcapacity such as factory closures, job losses and mounting bad bank loans.

Through their study, the European Chamber also raised some recommendations, Joerg Wuttke says.

"China actually creates very little jobs when you look at the GDP growth. Focusing on the service sector and developing the service sector is very important. Then the ingot prices have to change. There has to be a rise in natural gas, water, end user consumer prices, in order to make the commodities valuable, and cut down the emission and the waste. So it's very important to increase the environmental charges to make the companies pay for what they do to the environment."

In addition, other measures are also offered such as allowing market access for specialised, efficient private financial service providers, reforming the fiscal system to give local regions more funding possibilities, improving intellectual property protection and so forth.

The European Chamber expressed that the goal of the study is to promote an open and constructive dialogue with Chinese authorities in order to initiate and pursue necessary structural changes to reduce overcapacity and drive China's economy on to a new level of sustainable growth.

Liu Yan, CRI News.