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6 White Paper on the Business Environment in China
2.5 Products Classified by Materials
China’s rapid, continuing growth has indis- 107 million tons; nevertheless, research cited by China Daily
putably fueled domestic demand for both raw and pro- suggested that overall volume would reach 1.85 billion* tons by
cessed materials. While relative domestic scarcity of some ma- 2011.9
terials has led to import-driven markets, China continues to be
self-sufficient in many categories. For example, in 2007 China This projection appears to have been met a year early, with
produced an estimated 1.3 billion tons of cement domestical- the China Cement Association reporting total production of
ly1—approximately half of the world’s total production—and 1.88 billion in 2010—more than half the world’s total output.10
has been the world’s largest producer of cement since 1985. In The government’s increased investment in fixed assets is cited as
contrast, China has been a net-importer of rubber products, the major reason for the industry’s growth despite slowing ex-
with the total consumption of 5.5 million tons in 2006 out- port demands and the rising costs of both labor and materials.11
stripping domestic production of only 2.3 million tons, with
Thailand ranking as the top exporter to China.2 Overcapacity in cement production, however, remains a
serious concern. Despite the fact that only two-thirds of China’s
Through the global economic slowdown, domestic con- cement production capacity was utilized in 2008, investment
sumption (and production) of cement remained mostly insulat- in the sector grew by a staggering 67 percent in the first half of
ed from global trends due to continuing demand for construc- 2009, following a 60 percent year-on-year increase to 105 billion
tion in China. yuan in 2008.12 This reportedly led the Ministry of Industry
and Information Technology to release a “draft regulation on
In the coming years, the best use of resources for cement the access threshold for the cement industry” in August last
production will likely be achieved by continuing efficiency-re- year stipulating that the Ministry “will not approve new cement
lated reforms; it is estimated that in 2006 cement production production lines in provinces where clinker output capacity
accounted for total energy consumption equaling 131 million exceeds 1,000 kg per capita during 2011 to 2015” and that “it will
tons of coal3—approximately 6.6 percent of an estimated 2.1 lift requirements [for] cement producer[s’] equity capital in new
billion tons consumed in total4. Historically, inefficient oper- projects and raise the bottom line for daily production capacity.”12
ations, small-scale production and procedural issues have led All this took place after the NDRC had set out to eliminate 50
to low energy efficiency in domestic production, although new million tons of outdated capacity each year between 2007 and
guidelines and regulations such as those promulgated in 20073 2010; a new announcement in 2009 indicated that another
detailing new, higher standards for technology- and process-re- such program would be implemented to eliminate an additional
lated energy efficiency will improve the yield of cement pro- 600 million tons of small vertical kiln capacity over three years
duced per energy unit. These adjustments, detailed as far back between 2010 and 2012.13 It was not immediately clear how much
as 2002, indicate that the replacement of plants producing #325 of this additional capacity was genuinely additional overcapacity
cement with more efficient varieties would alone save approxi- and how much was the same targeted by the previous program
mately 15 million tons of coal per year.5 but unsuccessfully eliminated. Figures reported by Xinhua
indicated that 74.16 million and 91.55 million tons of inefficient
Despite cement exports from China declining by nearly 13 production capacity were eliminated in 2009 and the first three
percent in 20086, actual output reportedly grew by 5.2 percent quarters of 2010, respectively.14 In 2011 further cuts to inefficient
to top 1.38 billion tons in 2008 and consumption was forecast- production capacity ordered by the Ministry of Industry and
ed to grow by 6.3 percent in 2009.7 Later reports indicated that Information Technology amounted to 133 million tons.15
production had surpassed 1.65 billion tons that year the largest
volume of any nation in the world.8 In 2010 an additional 300 million tons of obsolete capacity
were targeted for elimination in favor of dry process production
In 2010, the PRC government’s “[accelerated] phasing out by 2015, which is hoped to account for 90 percent of production
of energy-wasting and outdated production capacity” (includ- at that time, 16 presumably putting a 133-million-ton dent in
ing the mandated closure of “700 polluting and energy-inten- that goal.
sive” plants) was reported to lower overall production by some
* We suspect there to have been a conversion error in the original China Daily article; although the original sentence reads the sentence reads “The country’s cement
production was 163 million tons in 2009 and will stand at 185 million tons this year with China’s fixed assets investment and property market cooling down, ac-
cording to the research,” these figures are strikingly small compared to other sources reports of PRC cement production (another source, for example, reported 1.38
billion tons produced in 2008). This, combined with the fact that this sort of conversion error from the 10,000-based “万” used when articulating large numbers in
Chinese to the English format of counting by thousands is not uncommon, has led us to choose the value of 1.85 billion as most likely to be correct.]
176
2.5 Products Classified by Materials
China’s rapid, continuing growth has indis- 107 million tons; nevertheless, research cited by China Daily
putably fueled domestic demand for both raw and pro- suggested that overall volume would reach 1.85 billion* tons by
cessed materials. While relative domestic scarcity of some ma- 2011.9
terials has led to import-driven markets, China continues to be
self-sufficient in many categories. For example, in 2007 China This projection appears to have been met a year early, with
produced an estimated 1.3 billion tons of cement domestical- the China Cement Association reporting total production of
ly1—approximately half of the world’s total production—and 1.88 billion in 2010—more than half the world’s total output.10
has been the world’s largest producer of cement since 1985. In The government’s increased investment in fixed assets is cited as
contrast, China has been a net-importer of rubber products, the major reason for the industry’s growth despite slowing ex-
with the total consumption of 5.5 million tons in 2006 out- port demands and the rising costs of both labor and materials.11
stripping domestic production of only 2.3 million tons, with
Thailand ranking as the top exporter to China.2 Overcapacity in cement production, however, remains a
serious concern. Despite the fact that only two-thirds of China’s
Through the global economic slowdown, domestic con- cement production capacity was utilized in 2008, investment
sumption (and production) of cement remained mostly insulat- in the sector grew by a staggering 67 percent in the first half of
ed from global trends due to continuing demand for construc- 2009, following a 60 percent year-on-year increase to 105 billion
tion in China. yuan in 2008.12 This reportedly led the Ministry of Industry
and Information Technology to release a “draft regulation on
In the coming years, the best use of resources for cement the access threshold for the cement industry” in August last
production will likely be achieved by continuing efficiency-re- year stipulating that the Ministry “will not approve new cement
lated reforms; it is estimated that in 2006 cement production production lines in provinces where clinker output capacity
accounted for total energy consumption equaling 131 million exceeds 1,000 kg per capita during 2011 to 2015” and that “it will
tons of coal3—approximately 6.6 percent of an estimated 2.1 lift requirements [for] cement producer[s’] equity capital in new
billion tons consumed in total4. Historically, inefficient oper- projects and raise the bottom line for daily production capacity.”12
ations, small-scale production and procedural issues have led All this took place after the NDRC had set out to eliminate 50
to low energy efficiency in domestic production, although new million tons of outdated capacity each year between 2007 and
guidelines and regulations such as those promulgated in 20073 2010; a new announcement in 2009 indicated that another
detailing new, higher standards for technology- and process-re- such program would be implemented to eliminate an additional
lated energy efficiency will improve the yield of cement pro- 600 million tons of small vertical kiln capacity over three years
duced per energy unit. These adjustments, detailed as far back between 2010 and 2012.13 It was not immediately clear how much
as 2002, indicate that the replacement of plants producing #325 of this additional capacity was genuinely additional overcapacity
cement with more efficient varieties would alone save approxi- and how much was the same targeted by the previous program
mately 15 million tons of coal per year.5 but unsuccessfully eliminated. Figures reported by Xinhua
indicated that 74.16 million and 91.55 million tons of inefficient
Despite cement exports from China declining by nearly 13 production capacity were eliminated in 2009 and the first three
percent in 20086, actual output reportedly grew by 5.2 percent quarters of 2010, respectively.14 In 2011 further cuts to inefficient
to top 1.38 billion tons in 2008 and consumption was forecast- production capacity ordered by the Ministry of Industry and
ed to grow by 6.3 percent in 2009.7 Later reports indicated that Information Technology amounted to 133 million tons.15
production had surpassed 1.65 billion tons that year the largest
volume of any nation in the world.8 In 2010 an additional 300 million tons of obsolete capacity
were targeted for elimination in favor of dry process production
In 2010, the PRC government’s “[accelerated] phasing out by 2015, which is hoped to account for 90 percent of production
of energy-wasting and outdated production capacity” (includ- at that time, 16 presumably putting a 133-million-ton dent in
ing the mandated closure of “700 polluting and energy-inten- that goal.
sive” plants) was reported to lower overall production by some
* We suspect there to have been a conversion error in the original China Daily article; although the original sentence reads the sentence reads “The country’s cement
production was 163 million tons in 2009 and will stand at 185 million tons this year with China’s fixed assets investment and property market cooling down, ac-
cording to the research,” these figures are strikingly small compared to other sources reports of PRC cement production (another source, for example, reported 1.38
billion tons produced in 2008). This, combined with the fact that this sort of conversion error from the 10,000-based “万” used when articulating large numbers in
Chinese to the English format of counting by thousands is not uncommon, has led us to choose the value of 1.85 billion as most likely to be correct.]
176
