Page 220 - 2017 White Paper
P. 220
7 White Paper on the Business Environment in China
This projection appears to have been met a year the State Council issued guidelines in September 2010
early, with the China Cement Association reporting total aimed at promoting mergers and acquisitions within
production of 1.88 billion in 2010—more than half the the cement industry (China Daily 2010), and furthermore
world’s total output (Meng 2011). The government’s encouraged foreign investors to participate in the
increased investment in fixed assets is cited as the major process (China Cement 2010b). The Central Government
reason for the industry’s growth despite slowing export set the target to raise the total market share of the top-10
demands and the rising costs of both labor and materials cement producers to more than 45 percent by 2015 from
(Xinhua 2011a). 28 percent currently.
Overcapacity in cement production, however, remains In early 2011, three of the largest producers nationally
a serious concern. Despite the fact that only two-thirds of (China National Building Materials, Anhui Conch and
China’s cement production capacity was utilized in 2008, Sino Materials) announced their intent to expand their
investment in the sector grew by a staggering 67 percent production capacities to 300 million, 300 million and 100
in the first half of 2009, following a 60 percent year-on- million metric tons by 2012, respectively (Lam 2011).
year increase to 105 billion yuan in 2008 (China Cement
2009b). This reportedly led the Ministry of Industry and Consolidation and the elimination of excess,
Information Technology to release a “draft regulation on inefficient capacity continues; a 2012 report from the
the access threshold for the cement industry” in August NDRC indicated that in 2011 an additional 155 million
last year stipulating that the Ministry “will not approve tons of clinker and mill cement production capacity were
new cement production lines in provinces where clinker eliminated, helping to curtail CO2 emissions (Xinhua
output capacity exceeds 1,000 kg per capita during 2011 2012a).
to 2015” and that “it will lift requirements [for] cement
producer[s’] equity capital in new projects and raise the By the middle of 2012 total output growth was down
bottom line for daily production capacity” (Ibid.). All to 5 percent from a year prior—a decrease of fully 14.3
this took place after the NDRC had set out to eliminate percent year-on-year. According to Xinhua, “the sharp
50 million tons of outdated capacity each year between decreases came as economic slumps both at home and
2007 and 2010; a new announcement in 2009 indicated abroad have dampened market demands. The building
that another such program would be implemented to material sector has been particularly weighed down due
eliminate an additional 600 million tons of small vertical to the government keeping real estate controls in place”
kiln capacity over three years between 2010 and 2012 (Xinhua 2012b).
(China Cement 2009a). It was not immediately clear how
much of this additional capacity was genuinely additional In October 2013, the State Council issued a new plan to
overcapacity and how much was the same targeted by “tackle chronic overcapacity problems in sectors such as
the previous program but unsuccessfully eliminated. steel and cement by blocking approvals for new projects
Figures reported by Xinhua indicated that 74.16 million and by making better use of the market”, the latest in
and 91.55 million tons of inefficient production capacity the government’s long line of measures to address the
were eliminated in 2009 and the first three quarters of surprisingly-persistent problem (Stanway 2013). Reuters
2010, respectively (Xinhua 2010a). In 2011 further cuts to explains:
inefficient production capacity ordered by the Ministry of
Industry and Information Technology amounted to 133 The long-awaited plan, published by China’s cabinet,
million tons (Xinhua 2011b). said it would focus on “establishing and perfecting”
market mechanisms, marking a change of approach
In 2010 an additional 300 million tons of obsolete after years spent trying to strong-arm the sectors into
capacity were targeted for elimination in favor of dry submission.
process production by 2015, which is hoped to account
for 90 percent of production at that time (China Cement It would also set higher environmental and quality
2010a), presumably putting a 133-million-ton dent in standards for industries and encourage the private
that goal. sector to play a role in restructuring oversized firms.
Presumably to assist in the planned consolidation of As well as blocking new approvals, the new plan
the industry as smaller, more inefficient operations close, will seek to absorb overcapacity by stimulating
220
This projection appears to have been met a year the State Council issued guidelines in September 2010
early, with the China Cement Association reporting total aimed at promoting mergers and acquisitions within
production of 1.88 billion in 2010—more than half the the cement industry (China Daily 2010), and furthermore
world’s total output (Meng 2011). The government’s encouraged foreign investors to participate in the
increased investment in fixed assets is cited as the major process (China Cement 2010b). The Central Government
reason for the industry’s growth despite slowing export set the target to raise the total market share of the top-10
demands and the rising costs of both labor and materials cement producers to more than 45 percent by 2015 from
(Xinhua 2011a). 28 percent currently.
Overcapacity in cement production, however, remains In early 2011, three of the largest producers nationally
a serious concern. Despite the fact that only two-thirds of (China National Building Materials, Anhui Conch and
China’s cement production capacity was utilized in 2008, Sino Materials) announced their intent to expand their
investment in the sector grew by a staggering 67 percent production capacities to 300 million, 300 million and 100
in the first half of 2009, following a 60 percent year-on- million metric tons by 2012, respectively (Lam 2011).
year increase to 105 billion yuan in 2008 (China Cement
2009b). This reportedly led the Ministry of Industry and Consolidation and the elimination of excess,
Information Technology to release a “draft regulation on inefficient capacity continues; a 2012 report from the
the access threshold for the cement industry” in August NDRC indicated that in 2011 an additional 155 million
last year stipulating that the Ministry “will not approve tons of clinker and mill cement production capacity were
new cement production lines in provinces where clinker eliminated, helping to curtail CO2 emissions (Xinhua
output capacity exceeds 1,000 kg per capita during 2011 2012a).
to 2015” and that “it will lift requirements [for] cement
producer[s’] equity capital in new projects and raise the By the middle of 2012 total output growth was down
bottom line for daily production capacity” (Ibid.). All to 5 percent from a year prior—a decrease of fully 14.3
this took place after the NDRC had set out to eliminate percent year-on-year. According to Xinhua, “the sharp
50 million tons of outdated capacity each year between decreases came as economic slumps both at home and
2007 and 2010; a new announcement in 2009 indicated abroad have dampened market demands. The building
that another such program would be implemented to material sector has been particularly weighed down due
eliminate an additional 600 million tons of small vertical to the government keeping real estate controls in place”
kiln capacity over three years between 2010 and 2012 (Xinhua 2012b).
(China Cement 2009a). It was not immediately clear how
much of this additional capacity was genuinely additional In October 2013, the State Council issued a new plan to
overcapacity and how much was the same targeted by “tackle chronic overcapacity problems in sectors such as
the previous program but unsuccessfully eliminated. steel and cement by blocking approvals for new projects
Figures reported by Xinhua indicated that 74.16 million and by making better use of the market”, the latest in
and 91.55 million tons of inefficient production capacity the government’s long line of measures to address the
were eliminated in 2009 and the first three quarters of surprisingly-persistent problem (Stanway 2013). Reuters
2010, respectively (Xinhua 2010a). In 2011 further cuts to explains:
inefficient production capacity ordered by the Ministry of
Industry and Information Technology amounted to 133 The long-awaited plan, published by China’s cabinet,
million tons (Xinhua 2011b). said it would focus on “establishing and perfecting”
market mechanisms, marking a change of approach
In 2010 an additional 300 million tons of obsolete after years spent trying to strong-arm the sectors into
capacity were targeted for elimination in favor of dry submission.
process production by 2015, which is hoped to account
for 90 percent of production at that time (China Cement It would also set higher environmental and quality
2010a), presumably putting a 133-million-ton dent in standards for industries and encourage the private
that goal. sector to play a role in restructuring oversized firms.
Presumably to assist in the planned consolidation of As well as blocking new approvals, the new plan
the industry as smaller, more inefficient operations close, will seek to absorb overcapacity by stimulating
220
