China’s supply-side reform agenda was launched by President Xi Jinping in late 2015 with a view to stripping out excess capacity that had built up in key industries during China’s emergence as an economic power. Industries targeted in a five-year plan presented in 2016 by the country’s top economic planner, the National Development and Reform Commission, included steel, coal, cement and aluminum. These sectors were deemed to have become too big, too polluting, and in some cases too dependent on export markets. Beijing wanted to lift the quality of China’s industrial production, improve the environment and lower dependence on external markets. Supply-side reform was a key plank in China’s ambition to transition to a sustainable, consumption-driven economy – rather than one that relied on investment in heavy industry. To a large extent, the policy has been successful. Chinese companies became more profitable, helped by industry consolidation, capacity reduction initiatives and healthy domestic demand. But success has been a double-edged sword. Stronger margins and profits incentivized companies to lift production and build new capacity. Leaner, greener steel mills At the start of the millennium, China produced 129 million metric tons (mt) of crude steel but last year this rose to more… continue reading
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Source: CTRM Center