Tackling overcapacity will be top priority next year: MIIT
China has eliminated more than 73 million tons worth of industrial production this year to cope with growing downward pressure, and tackling the supply glut will be a top priority in 2016, the Ministry of Industry and Information Technology (MIIT) said Thursday.
Efforts to reduce backward production capacity and oversupply has yielded "positive results" in 2015, the MIIT said in a statement following an industry meeting in Beijing on Thursday.
The MIIT forecasts that the country will eliminate production of 13 million tons of iron, 17 millions tons of steel, 300,000 tons of aluminum, 38 million tons of cement, and 15 million tons of shipbuilding capacity by the year's end.
Although industry faces intensified downward pressure in 2015, it maintained stable growth, the MIIT said. Annual industrial output will grow by 6 percent year-on-year, according to data given by the ministry.
China's industrial output picked up in November, growing at 6.2 percent year-on-year, accelerating from the 5.6 percent a month earlier, according to data from the National Bureau of Statistics Saturday.
However, a year-on-year growth of 6 percent is "a bit too optimistic" because monthly reports in the first 10 months of the year "doesn't seem to add up to that number," said Tian Yun, director of the research center of the China Society of Macroeconomics.
Challenge persists
The outlook for next year seems to be even worse, Tian told the Global Times on Thursday. He said industrial firms will continue to face challenges in 2016 due to weak demand.
The MIIT forecast that the country's industrial output is likely to grow 6 percent in 2016 from a year earlier, the same pace as this year.
However, that figure is also over-optimistic, according to Chen Yao, a research fellow at the Chinese Academy of Social Sciences.
"Given the overall economic climate in China, demand for industrial products won't improve and might even weaken further," Chen remarked.
"The export of industrial products won't help overcapacity issues in China, Tian noted, "There is an oversupply issue globally, not just in China."
Top priority
As the overcapacity is likely to continue, the Chinese government has been determined to cut outdated industrial capacity and has set tackling the issue as a top priority for next year.
The MIIT said on Thursday that it would help to push forward reconstructing plans and eradicate nonperforming "zombie enterprises."
It would also introduce pilot programs for each industry to reduce production capacity, inventory and cost, according to the ministry.
In addition, during the Central Economic Work Conference that ended Monday in Beijing, the central government put tackling industrial overcapacity issue high on its agenda for 2016, according to a statement following the key meeting, where policymakers chart the blueprint for economic growth for the new year.
The government putting such a high emphasis on the issues, it might help the situation, said Chen.
"But overcapacity isn't an easy task that we can solve in a year," he noted.
"The only way to effectively reduce production capacity is to push industrial firms to merge and restructure," Tian argued, "But local governments are a major obstacle, since such mergers and restructures would result in losses in tax revenue and GDP growth for local governments and higher unemployment."
Resolving these issues, he concluded, would required confronting these problems at a local level.
