After nearly a year of repeated warnings of overheating in the
steel sector, the government finally retorted to administrative and
financial solutions to stop soaring investments in production.
The State?Development and Reform Commission, the country's
most powerful cabinet department in charge of economic development,
said it will generally stop approval of new construction projects
by steel company groups and steel and iron mills.
An official from the commission's industrial development
department told China Daily that his commission is
cooperating with the banking sector to tighten credit requirements
for steel projects.
The official, who declined to be named, said the banks will no
longer provide loans for those projects that do not meet industrial
policy or market accession requirements.
In 2002, China's fixed asset investment in the steel industry
stood at 70.4 billion yuan (US$8.5 billion), surging 45.9 percent
over the previous year. In 2003, the figure rose to 133.2 billion
yuan (US$16.0 billion), up 89.2 percent from 2002. It is estimated
that by the end of 2005, China's annual steel output will reach 330
million tons, enough to meet the market demand of 2010.
"It's urgent that we apply the brakes," said the official.
The government will no longer give tax rebates to imports of
equipment for the construction of unapproved steel projects. The
central government will urge local governments to abolish price
discounts on electricity consumption for steel makers.
Officials are planning to raise the threshold for entering the
steel sector by readjusting technology, energy consumption, safety
and quality requirements.
The official said similar measures will be adopted in the
aluminum and cement sectors, which saw year-on-year growth of 92.6
percent and 120 percent, respectively, in 2003.
The commission's minister, Ma Kai, said the strict measures are
aimed at avoiding environmental, financial and social problems
caused by blind investment and excess capacity in the steel
industry.
At the same time, the commission is working with related
entities to tighten inspections and approvals of land use for steel
plants.
Meanwhile, investment in steel and other sectors has aroused
heated debate among those attending the ongoing sessions of the
National People's Congress (NPC) and Chinese People's Political
Consultative Congress (CPPCC), China's top legislature and top
political consultative body.
They cautioned that blind surges of investment in the sectors
could lead to environmental and economic problems.
Li Mingmin, general manager of Shandong-based Laiwu Steel Co.,
told China Daily that excessive investment in steel and
iron production was partly caused by record-high steel prices
powered by strong demand from steel-consuming industries.
"They (investors) all elbowed in for money," said Li, who is a
deputy at the 10th NPC.
"Unfortunately, much of the new investment features low
technology, serious pollution and abuse of natural resources," Li
said.
Tang Yueming, president of Sichuan-based Shuangma Cement Co.,
said the situation is similar in the cement sector.
Tang, also an NPC deputy, said, "Many have planned to establish
cement plants in Chengdu, the capital city and the economic hub of
the province, on the forecast of greater demand in the coming
years."
(China Daily March 12, 2004)