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By Chen Xiaohong & Qi Changdong, Research Institute of Enterprises, DRC

Research report Issue No.141, 2017 (Total 5216) 2017-10-27

Abstract: At present, China has made tangible progress in overcapacity reduction, but in some places administrative measures are used for the elimination of excess production capacity. Such a practice has led to a number of defects. For instance, it distorts the market mechanism and deteriorates the allocation of resources, resulting in rewarding the bad and punishing the good; it plays a limited role in emission reduction; it causes huge economic losses in reducing the normal operation capacity; it doesn’t help to reduce the number of “zombie enterprises”; it is not conducive to innovation and structural upgrading ; and it undermines the trust of enterprises in the implementation of government relevant policies and the principle of ruling the country by law. Such a wrong practice is related to various subjective and objective factors. It is necessary for us to adjust our mindset and focus on establishing the sustainable development of the steel industry. We need to combine government intervention with market mechanism, and the structure adjustment with deepening reform, adhere to the set goal and approach of industrial overcapacity reduction, and give a highlight to the issue of emission reduction and structure upgrading. We need to cancel or adjust the inappropriate directive administrative orders and practice, launch technique reform campaigns in compliance with standards in most areas and steel industry cluster districts, perfect and enhance the regulation on emissions, strengthen supervision with a scientific attitude, pay attention to incentive mechanism, promote institutional reform, and address the issue of "zombie enterprise" with comprehensive measures.

Key words: overcapacity reduction, steel industry, development, long-term mechanism