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Supply side structural reform gears up for high quality development

Steel News - Published on Wed, 03 Jan 2018

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Xinhua reported that two years on, supply side structural reform remains the centerpiece of China's economic agenda, but priorities have shifted as high-speed growth is giving way to high-quality development. Initiated in 2015, the reform has focused on five fronts pruning overcapacity, clearing up the large inventory of unsold homes, curbing debt levels, lowering business costs and tackling weak links. It has yielded the desired results, promoted economic restructuring, and stabilized growth in the world's second-largest economy. The country will deepen reform in 2018, focusing on eradicating ineffective capacity, fostering new drivers of growth and cutting costs in the real economy, the central authorities declared at a tone-setting economic meeting this month.

Like many other over-staffed steel producers, Magang (Group) Holding Company, or Masteel, is in the middle of downsizing. The steel complex in eastern Anhui Province has cut nearly 5 million tonnes of outdated capacity. The capacity reduction boosted the company's profitability. Net profit of the Masteel's Shanghai-listed branch more than doubled from a year earlier to 2.74 billion yuan (nearly 420 million US dollars) in the first three quarters.

The case is common in glutted steel and coal sectors, where the government is pushing for consolidation.

Pledging continued efforts to address overcapacity, policy makers agreed on measures to eliminate ineffective supply in 2018, at the Central Economic Work Conference, with dealing with debt-ridden, loss-making "zombie enterprises" highlighted.

China has made headway in phasing out overcapacity, a significant part of its ongoing economic restructuring. Annual targets of slashing steel capacity by around 50 million tonnes and coal by at least 150 million tonnes were fulfilled in August and October, respectively.

UBS economist Wang Tao said China was likely to start promoting capacity upgrades next year in addition to reduction and further restriction of coal and thermal power from 2018 to 2020.

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Posted By : Nanda Koijam on Wed, 03 Jan 2018
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