China Seeking to Streamline Production With Lower Capacity

China will push ahead with efforts to cull excess industrial capacity a year earlier than planned even as economic expansion slows, and will promote spending on information products to stabilize growth, an official said.

The government will complete by the end of 2014 its overcapacity reduction plan for the five years through 2015, and will seek to cut further outdated capacity, China National Radio said yesterday, citing Industry Minister Miao Wei

Premier Li Keqiang has avoided economy-wide stimulus and instead issued targeted policies, including tax breaks and support for small companies, while curbing overcapacity and reining in financial risks to aid economic restructuring. Industrial output rose more than economists estimated in July, the National Bureau of Statistics said Aug. 9, adding to signs the economy is stabilizing.

“One of the long-term issues that China has faced is excess investments in some segments, and this results in having too much productive capacity, and it’s inefficient,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. Government efforts are “important as part of a larger effort to provide a stronger foundation for long-term growth in China, and stability.”

The process is in its earlier stages, and it “remains to be seen how far they’ll go with this,” Hensley said in a phone interview yesterday. Still, the government is doing more than was expected, he said.

Bloomberg

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