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Guidelines on China industry restructuring
http://www.ecns.cn/business/2013/01-25/47316.shtml
Jan 25th 2013, 07:34
2013-01-25 16:34 CRIENGLISH.com Web Editor: yaolan
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On Jan 22, China released guidelines on restructuring nine major business sectors including automobile, steel and cement. Twelve ministries combined to produce the guidelines, which will involve more than 900 listed companies worth over 400 million yuan, that's about 64 million U.S. dollars in total.
According to the guidelines which call for local governments to make policies to facilitate mergers and restructuring, the concentration ratio is required to reach 90 percent by 2015 in the top ten auto enterprises and 60 percent in the top ten steel companies.
The move was taken as a measure to prevent serious production overcapacity in the sectors.
There is obvious overcapacity in the country's steel sector, which has been struggling to deal with sharp declines in steel prices from the second half of 2008 and weak demand for steel starting from 2009 amid a global slump in the shipbuilding and manufacturing market.
Shanghai Baosteel Group, one of the largest steel manufacturers in China, launched a production line in 2008 which, however, suffered a deficit of 998 million yuan or about 160 million USD in 2009 and had to be stopped in September 2012.
Hu Xuefa, is the assistant to general manager of Shanghai Baosteel Group Corporation.
"The main products of the steel plant are medium and thick steel plates. Of all steel products, these types of steel plates face the most difficult situation because of excess production capacity, worsened by a slump in the global shipbuilding market after beginning of the financial crisis in 2008."
China's shipbuilding sector is facing a similar situation. In Ningbo City, east China's Zhejiang Province, a large shipbuilding company, which employed 5,000 workers to build 12 ships of 50,000 tons or above in its prime, has gone bankrupt.
Small and medium-sized shipbuilding companies are also struggling for survival. Pan Xuejian, president of a shipbuilding company in Taizhou City, says his company, with a capacity of building 10 ships, just received one order for one ship and other shipbuilding companies in Taizhou, have stopped production.
"I have never seen such a fast expansion of shipbuilding as I have in the past two decades. Many companies in Fujian Province, areas along the Yangtze River in Jiangsu and Zhejiang provinces, and even the coasts of Shandong and Guangdong provinces rushed to build ships," he said.
According to Shen Shilong, commissioner of Taizhou Customs, the export of ships from Taizhou rose 26 times to 520 million USD from 2006 to 2011.
The photovoltaic sector, which once promised to be a lucrative new industry, also fell into the predicament of overcapacity.
According to the local authority in Kaihua County, 31 out of 41 photovoltaic enterprises have shut down production.
In the first "photovoltaic industry base" of Zhejiang Province, which is situated in Quzhou City, all photovoltaic enterprises are distressed due to low prices and a sluggish market. Many have closed down, and a few that maintain production do not run at full production capacity.
The guideline says China will also slash the number of firms in the rare earth business through mergers and concentrate production capacity in the sector into a number of large enterprises.
The country aims to promote mergers in the remaining sectors, and will try to raise the concentration ratios of leading enterprises in those fields by 2015.
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