Guiding Opinions of the State Council on Resolving the Conflict of Rampant Overcapacity
Guiding Opinions of the State Council on Resolving the Conflict of Rampant Overcapacity
Guiding Opinions of the State Council on Resolving the Conflict of Rampant Overcapacity
Guo Fa [2013] No. 41
October 6, 2013
The people's governments of all the provinces, autonomous regions, and municipalities directly under the Central Government, and all the ministries and commissions, and all directly-subordinate agencies, of the State Council,
Now and for some time to come, the work of promoting industrial restructuring will focus on resolving the conflict of rampant overcapacity. These Guiding Opinions are hereby formulated to resolve the conflict of rampant overcapacity in such industries as steel, cement, electrolytic aluminum, flat glass and shipbuilding in an active and effective manner and guide other industries with overcapacity to resolve the problems.
Article 1 Fully Understanding the Importance and Urgency of Resolving the Conflict of Rampant Overcapacity
In market economy, supply appropriately outweighing demand is a prerequisite to playing the function of the market competition mechanism, and is conducive to adjusting supply and demand, and promoting technical progress and management innovation. However, production capacity of products seriously exceeds effective demand, which will cause an extraordinary waste of social resources, reduce the efficiency of resources allocation, and hinder the grading of industrial structure.
As a result of the deep impact of the international financial crisis, the international market remains weak, and the growth of domestic demand slows down. The oversupply conflict in some industries of China becomes increasingly sharper, and the production capacity of traditional manufacturing industries, especially in the industries that are energy intensive or have high emissions, is universally excess. By the end of 2012, the production capacity utilization rates of the industries of steel, cement, electrolytic aluminum, flat glass and shipbuilding in China were 72%, 73.7%, 71.9%, 73.1% and 75% respectively, which were obviously lower than the international average rate. The profits of such industries as steel, electrolytic aluminum and shipbuilding significantly dropped, and enterprises generally had difficulty in operation. It is notable that there is a batch of projects that are under construction or proposed in these industries with rampant overcapacity, reflecting the tendency to spur overcapacity. If measures fail to be taken timely to resolve such problem, the cut-throat competition for the market will inevitably be aggravated, and such problems as more extensive range of deficits of the industries, unemployment of workers of enterprises, increased non-performing assets of banks, aggravated bottleneck in energy and resources, and environmental degradation arise, which will directly imperil the sound development of the industries, even impact the improvement of people's livelihood and the stability of the society.
At present, rampant overcapacity in China mainly results from many factors such as development stage, development concept, and institutions and mechanisms. At the development stage of accelerating industrialization and urbanization, the market demand grows rapidly, and some enterprises are overly optimistic about market expectations, and make haphazard investment, aggravating the expansion of production capacity; some industries are under an extensive development mode, have weak innovation and low industrial concentration, failing to form an industrial development pattern led by excellent or leading enterprises, resulting in the aggravation of serious disorderly competition and redundant construction of the industries; and some areas focus too much on development speed, heavily rely on investment-led growth, and boost overlapping investment and production capacity expansion by such means as cheap land supply, tax reduction and exemption, and low-cost resources allocated; meanwhile, the market-based reform of resource factors lags, the guidance and constraints such as policy, planning, standard and environmental protection are not strong, the investment system and management mode are incomplete, and the supervision, inspection and accountability are inadequate, which causes price distortion of the factors of production, imperfection of the market environment with fair competition, ineffective play of the function of the market mechanism, the poor exit channel of backward production capacity, and escalation of the conflict of overcapacity.
Rampant overcapacity has become a prominent conflict and the root of many problems in the operation of the economy of China. Enterprises have experienced difficulties in their business operation, fiscal revenues have fallen, and financial risks have been accumulated, which are closely related to rampant overcapacity. Resolving the conflict of rampant overcapacity inevitably leads to pains, even decimates some industries. However, from an overall and long-term viewpoint, preventing the conflict from being further aggravated and guiding investment orientation are important for accelerating industrial restructuring, promoting industrial transformation and upgrading, preventing systematic financial risks, and keeping the sustained and sound development of the national economy. Therefore, efforts shall be made to firmly control increment and optimize increment, deepen system reform and mechanism innovation, accelerate the establishment and improvement of a market-led permanent mechanism for resolving the conflict of rampant overcapacity. This is a complicated systematic project, and a completely difficult task. Efforts shall be made to make careful planning, overall scheme, and comprehensive arrangement and progress the project vigorously yet prudently.
Article 2 Overall Requirements, Basic Principles and Main Objectives
1. Overall requirements
Efforts shall be made to comprehensively implement the guiding principles of the Eighteenth National Congress of the Party; follow the guidance of Deng Xiaoping Theory, the important thought of Three Represents, and the Scientific Outlook on Development; take transforming development pattern as the underlying guideline and resolving the conflict of rampant overcapacity as the focus of industrial restructuring; according to the general principle of respecting law, implementing policies by industry, taking a multi-channel approach, and addressing both symptoms and root causes, concentrate efforts on strengthening macro-control and market supervision and firmly preventing blind capacity expansion by standing from the current and taking take a long-term perspective; concentrate efforts on playing the function of the market mechanism, improving supporting policies, and "relocating a batch of overcapacity upon absorbing them, and eliminating a batch of overcapacity upon consolidating them"; and concentrate efforts on innovating institutions and mechanisms, accelerating the transformation of government functions, establishing a permanent mechanism for resolving the conflict of rampant overcapacity, and promoting industrial transformation and upgrading.
2. Basic principles
-- To insist on combining respecting market discipline with improving macro-control. Efforts shall be made to play the main function of enterprises as market players, and strengthen the responsibility sense of enterprises; strengthen the trend research and information guide of market supply and demand, comprehensively use law, economy and necessary macro-control means, and intensify policy coordination, forming a joint force for resolving the conflict of rampant overcapacity and guiding the sound development of industries.
-- To insist on combining market demand development with industrial transformation and upgrading. Efforts shall be made to keep reasonable investment growth, foster new consumption growing points, expand the size of domestic market, consolidate and expand international market, and soak up domestic overcapacity; intensify the upgrading and orientation of demands, foster the high-end product market, promote capacity structure optimization and lead industrial transformation and upgrading.
-- To insist on combining strict increment control with increment adjustment and optimization. Efforts shall be made to strictly manage the supply and investment of factors, and prevent blind expansion and redundant construction; push forward merger and reorganization of enterprises, and integrate and reduce overcapacity; carry out outbound investment and industrial reorganization, and relocate domestic overcapacity; intensify hard constraints on resources, energy and environment, and accelerate the elimination of backward production capacity; and make an overall arrangement for balanced development between regions and optimize industrial layout.
-- To insist on combining improving policies and measures with deepening reforms and innovations. Efforts shall be made to improve the supporting policies and measures for resolving the conflict of rampant overcapacity and make them more meticulous, establish a link mechanism for the central and local authorities, strengthen coordination service, play the joint force of departments, and carry out local responsibility; and deepen reforms in key areas and institutions and mechanisms innovation, forming an environment of institutions and mechanisms conducive to playing the function of the market competition mechanism and effectively addressing rampant overcapacity.
3. Main objectives
After five-year efforts, significant progress is to be made in resolving the conflict of rampant overcapacity:
-- Production capacity size is basically reasonable.
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