MIIT announces new capacity-cutting plan

China unveiled a detailed overcapacity replacement policy on Thursday that will promote cuts in the iron and steel, electrolytic aluminum, cement and glass industries.

In a key document last October, the State Council (cabinet) established the principle of replacing obsolete or excess capacity with an equal or smaller amount of new capacity. It said any region that wanted to establish new facilities in any of these sectors would have to shut outdated or excess factories before new lines would be permitted.

The idea was to create incentives for local governments to address concerns that despite years of talk about cutting excess production lines, new facilities were actually adding more capacity than was being eliminated. The result was unbearably high levels of capacity that squeezed manufacturers' profits.