By Bloomberg News
Nov. 13 (Bloomberg) -- China, the world’s third-largest economy, rejected requests to build industrial projects worth almost 200 billion yuan ($29 billion), and said it plans new measures to close factories to curb overcapacity and pollution.
The government will target the steel, aluminum, coke, cement, paper and utility industries, Zhu Xingxiang, director of environment evaluation department at the Ministry of Environmental Protection, said today in Beijing.
“This shows China’s confident enough about the momentum of growth to begin addressing structural excess capacity problems,” said David Cohen, an economist with Action Economics in Singapore. “One of the motives will be to improve the profitability of existing companies.”
The measures underscore China’s determination to prevent record bank lending from fueling an investment bubble without imposing restrictions that may endanger an economic rebound. Overcapacity is stalling a profit recovery at steelmakers including Baoshan Iron & Steel Co. with prices falling 18 percent since touching a 10-month high on August 4.
“The steel industry is the focus of our supervision,” Zhu said. “There is too much capacity being built without government approval.”
Baoshan Iron & Steel, the largest Chinese mill, dropped 2.6 percent to 7.45 yuan at 1:34 p.m. local time in Shanghai trading. Aluminum Corp. of China Ltd., the biggest maker of the metal in the nation, fell 1.4 percent to HK$8.64 in Hong Kong trading.
Stable Growth
“Industry restructuring is a long, tough and important task,” Li Pumin, a spokesman at the National Development and Reform Commission, the country’s top economic planner, said at the same conference today. “The purpose of that is to ensure the stablilty and continuity of economic growth.”
Urban fixed-asset investment surged 33.1 percent in the first 10 months of the year, the Chinese government said this week. Officials have indicated they plan to tighten lending terms after an 8.92 trillion yuan ($1.31 trillion) boom in new loans in January to October.
The government’s 4 trillion yuan stimulus spending has spurred overproduction of steel and rising inventories has led to lower prices, the China Iron & Steel Association said this month. The U.S. this year imposed antidumping charges on some Chinese steel products, which U.S. Commerce Secretary Gary Locke said today weren’t protectionist measures.
The proposed policies may include closing or relocating “seriously-polluting” plants, helping factories upgrade their technology, and offering compensation to companies and workers for closures, Zhu said today. Trials will be conducted before the measures are implemented nationwide, he said.
Tighten Approval
“In the future, we are also tightening approval for hydropower projects as they will damage local biology and fishing,” Zhu said.
The ministry is also conducting an environmental review of planned steel projects in Shandong province after local governments approved construction without proper evaluation, Zhu said. The environmental protection bureau in June suspended works at Shandong Rizhao Steel Holding Co.’s steel plate project and Weifang Iron & Steel Group’s 5-million-ton project.
The Chinese government banned the expansion of coke projects for three years in September, and has said it will eliminate 800,000 metric tons of aluminum smelting capacity. Coke is used to make steel and aluminum is used in car parts and packaging.
China’s plans to close more coke plants may inflame an existing trade dispute with the U.S. and the European Union, which last week filed a World Trade Organization complaint over the Asian nation’s export restrictions on the product.
The Ministry of Land and Resources has rejected almost half of the 431 applications made this year for land usage, including requests from the steel, cement and glass industries, Dong Zuoji, director of land planning, said at the same conference.
--Xiao Yu and Kevin Hamlin. Editors: Tan Hwee Ann, Jacob Lloyd- Smith.
To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing at yxiao@bloomberg.net; Kevin Hamlin in Beijing at khamlin@bloomberg.net
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