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5 White Paper on the Business Environment in China
capacity were targeted for elimination in favor of dry process e previous approach sought to encourage giant state-
production by 2015, which is hoped to account for 90
percent of production at that time, 16 presumably putting a owned rms to merge or swallow up smaller competitors
133-million-ton dent in that goal.
but it was not successful, with industry experts
Presumably to assist in the planned consolidation of the
industry as smaller, more ine cient operations close, the complaining that the focus on strengthening SOEs had
State Council issued guidelines in September 2010 aimed
at promoting mergers and acquisitions within the cement served to raise capacity, rather than reduce it.22
industry,17 and furthermore encouraged foreign investors to
participate in the process.18 e Central Government set the A separate e ort by the nation’s environmental ministry
target to raise the total market share of the top-10 cement to “raise standards for the production of cement, batteries,
producers to more than 45 percent by 2015 from 28 percent leather and heavy metals [in order to] to cut air, water and soil
currently. pollution” was launched two months later and stands to make
the lives of Chinese cement producers more interesting still
In early 2011, three of the largest producers nationally should it be e ectively enforced.23
(China National Building Materials, Anhui Conch and Sino
Materials) announced their intent to expand their production Paper products are another area where China’s growth
capacities to 300 million, 300 million and 100 million metric places it among the top producers in the world. According to
tons by 2012, respectively.19 some analysts, in fact, it is the largest producer of paper in the
world, although their claim that the industry has “unlimited
Consolidation and the elimination of excess, ine cient potential for growth” does invite some skepticism.24
capacity continues; a 2012 report from the NDRC indicated
that in 2011 an additional 155 million tons of clinker and Nonetheless, the China Paper Association reported
mill cement production capacity were eliminated, helping to that China’s production of paper products fully doubled
curtail CO2 emissions.20 between 1995 and 2005; furthermore, this growth has been
attributed to the use of high-tech manufacturing equipment
By the middle of 2012 total output growth was down to and techniques rather than the liberal use of cheap labor and
5 percent from a year prior—a decrease of fully 14.3 percent energy resources associated with other industries. While much
year-on-year. According to Xinhua, “ e sharp decrease came of the nancing of these projects has been domestic, foreign
as economic slumps both at home and abroad have dampened joint ventures and foreign technology has played a large role
market demands. e building material sector has been in the high e ciency and productivity, as has the widespread
particularly weighed down due to the government keeping reuse of waste paper products.25
real estate controls in place.”21
According to Ministry of Commerce statistics, in 2009
In October 2013, the State Council issued a new plan to there were 121 new foreign-invested projects in the paper
“tackle chronic overcapacity problems in sectors such as steel making industry (compared to 114 in 2008), with total
and cement by blocking approvals for new projects and by utilized foreign capital reaching $1.8 billion (an increase of
making better use of the market,” the latest in the government’s 17 percent year-on-year).26
long line of measures to address the surprisingly-persistent
problem.22 Reuters explains: Similar to actions taken in the cement industry, 500,000
tons of production capacity was eliminated with the closure of
e long-awaited plan, published by China’s cabinet, ine cient operations.27
said it would focus on “establishing and perfecting”
market mechanisms, marking a change of approach In May 2011, the Ministry of Industry and Information
after years spent trying to strong-arm the sectors into Technology announced its intent for the industry to further
submission. eliminate outdated production capacity amounting to nearly
7.5 million tons (roughly 7.4 percent of the nation’s total
It would also set higher environmental and quality production capacity) by the end of that year.28
standards for industries and encourage the private
sector to play a role in restructuring oversized rms. Meanwhile, a Deloitte report shows that local producers
are actively pursuing mergers and acquisitions in order to
As well as blocking new approvals, the new plan will expand their operations; the industry is so fragmented that the
seek to absorb overcapacity by stimulating domestic ten largest producers have a cumulative market share of only
demand, and will also o er tax incentives to encourage 10 percent, compared to 60-70 percent in North America.29
rms to relocate plants overseas. Finally, plastics continue to be both an important and
fast-growing sector, as well as one with relatively high
162 participation by foreign-invested enterprises. e average
growth of the engineering plastic sector between 2000 and
2005, for example was reported as 30 percent30—triple the
growth of China’s GDP. Furthermore, as China continues to
capacity were targeted for elimination in favor of dry process e previous approach sought to encourage giant state-
production by 2015, which is hoped to account for 90
percent of production at that time, 16 presumably putting a owned rms to merge or swallow up smaller competitors
133-million-ton dent in that goal.
but it was not successful, with industry experts
Presumably to assist in the planned consolidation of the
industry as smaller, more ine cient operations close, the complaining that the focus on strengthening SOEs had
State Council issued guidelines in September 2010 aimed
at promoting mergers and acquisitions within the cement served to raise capacity, rather than reduce it.22
industry,17 and furthermore encouraged foreign investors to
participate in the process.18 e Central Government set the A separate e ort by the nation’s environmental ministry
target to raise the total market share of the top-10 cement to “raise standards for the production of cement, batteries,
producers to more than 45 percent by 2015 from 28 percent leather and heavy metals [in order to] to cut air, water and soil
currently. pollution” was launched two months later and stands to make
the lives of Chinese cement producers more interesting still
In early 2011, three of the largest producers nationally should it be e ectively enforced.23
(China National Building Materials, Anhui Conch and Sino
Materials) announced their intent to expand their production Paper products are another area where China’s growth
capacities to 300 million, 300 million and 100 million metric places it among the top producers in the world. According to
tons by 2012, respectively.19 some analysts, in fact, it is the largest producer of paper in the
world, although their claim that the industry has “unlimited
Consolidation and the elimination of excess, ine cient potential for growth” does invite some skepticism.24
capacity continues; a 2012 report from the NDRC indicated
that in 2011 an additional 155 million tons of clinker and Nonetheless, the China Paper Association reported
mill cement production capacity were eliminated, helping to that China’s production of paper products fully doubled
curtail CO2 emissions.20 between 1995 and 2005; furthermore, this growth has been
attributed to the use of high-tech manufacturing equipment
By the middle of 2012 total output growth was down to and techniques rather than the liberal use of cheap labor and
5 percent from a year prior—a decrease of fully 14.3 percent energy resources associated with other industries. While much
year-on-year. According to Xinhua, “ e sharp decrease came of the nancing of these projects has been domestic, foreign
as economic slumps both at home and abroad have dampened joint ventures and foreign technology has played a large role
market demands. e building material sector has been in the high e ciency and productivity, as has the widespread
particularly weighed down due to the government keeping reuse of waste paper products.25
real estate controls in place.”21
According to Ministry of Commerce statistics, in 2009
In October 2013, the State Council issued a new plan to there were 121 new foreign-invested projects in the paper
“tackle chronic overcapacity problems in sectors such as steel making industry (compared to 114 in 2008), with total
and cement by blocking approvals for new projects and by utilized foreign capital reaching $1.8 billion (an increase of
making better use of the market,” the latest in the government’s 17 percent year-on-year).26
long line of measures to address the surprisingly-persistent
problem.22 Reuters explains: Similar to actions taken in the cement industry, 500,000
tons of production capacity was eliminated with the closure of
e long-awaited plan, published by China’s cabinet, ine cient operations.27
said it would focus on “establishing and perfecting”
market mechanisms, marking a change of approach In May 2011, the Ministry of Industry and Information
after years spent trying to strong-arm the sectors into Technology announced its intent for the industry to further
submission. eliminate outdated production capacity amounting to nearly
7.5 million tons (roughly 7.4 percent of the nation’s total
It would also set higher environmental and quality production capacity) by the end of that year.28
standards for industries and encourage the private
sector to play a role in restructuring oversized rms. Meanwhile, a Deloitte report shows that local producers
are actively pursuing mergers and acquisitions in order to
As well as blocking new approvals, the new plan will expand their operations; the industry is so fragmented that the
seek to absorb overcapacity by stimulating domestic ten largest producers have a cumulative market share of only
demand, and will also o er tax incentives to encourage 10 percent, compared to 60-70 percent in North America.29
rms to relocate plants overseas. Finally, plastics continue to be both an important and
fast-growing sector, as well as one with relatively high
162 participation by foreign-invested enterprises. e average
growth of the engineering plastic sector between 2000 and
2005, for example was reported as 30 percent30—triple the
growth of China’s GDP. Furthermore, as China continues to
