Circular of the State Council on Approving and Forwarding the Several Opinions of the Development and Reform Commission and Other Departments on Restraining Overcapacities and Redundant Constructions in Certain Industries and Guiding the Healthy Development of Industries

Circular of the State Council on Approving and Forwarding the Several Opinions of the Development and Reform Commission and Other Departments on Restraining Overcapacities and Redundant Constructions in Certain Industries and Guiding the Healthy Development of Industries

Guo Fa [2009] No. 38

September 26, 2009

To the people's governments of all provinces, autonomous regions and municipalities directly under the Central Government and the ministries, commissions and offices directly under the State Council:

The Several Opinions on Restraining Overcapacities and Redundant Constructions in Certain Industries and Guiding the Healthy Development of Industries formulated by the National Development and Reform Commission and other departments has been approved by the State Council and is hereby forwarded to you for conscientious implementation.

In order to cope with the blow and impact of the international financial crisis, the Party's Central Committee and the State Council, judging the time and sizing up the situation, have developed and implemented a package plan to expand domestic demand and promote economic growth in a timely manner. In accordance with the general requirements of "protecting growth, expanding domestic demand, adjusting structures", the restructuring and stimulus plans for ten key industries, such as the iron and steel industry, have been introduced, and a series of solutions and measures relevant to the promotion of structural adjustment have been put forward, such as controlling the overall amount, eliminating the backward, mergers and restructurings, technological transformation and independent innovations. All regions have also successively taken some policies and measures in support of industrial development. At present, the initial policy effects have surfaced. Production and operation difficulties of enterprises have eased to some extent and the overall industrial development is showing signs of improvement. However, from the perspective of the current situation of industrial development, although some progress has been made in structural adjustment, the overall progress is slow and unbalanced in different regions and industries. The problem of overcapacities and redundant constructions is still very prominent in many sectors with some even aggravating. Some issues need particular attention: Not only traditional industries with overcapacities, such as the iron and steel industry and the cement industry, are still expanding blindly, emerging industries such as wind power equipment and polysilicon are also showing the tendency of redundant constructions. The phenomena of examination and approval in violation of laws and regulations, construction before approval, construction along with approval have again appeared in some regions.

The overcapacities and redundant constructions in certain industries, if left uncontrolled, unchecked and unguided, will inevitably result in vicious market competition and difficulty in improving economic efficiency, and will also lead to a series of problems, including enterprises closing down or operating under capacity, employees being laid off or losing jobs and surge in non-performing assets of banks, which will not only seriously affect the implementation effect of the State package plan to expand domestic demand and the hard-earned good situation of enterprises stabilizing and showing signs of improvement, but also the historical opportunity to take advantage of the market conditions caused by the international financial crisis to promote structural adjustment will also be lost.

All regions and departments shall effectively unify thinking and actions into the strategic decisions and arrangements of the Party's Central Committee and the State Council in accordance with the spirits of this Circular, earnestly and thoroughly implement the Scientific Outlook on Development, further enhance the overall awareness, the sense of responsibility and the sense of crisis, put more emphasis on promoting structural adjustment when ensuring growth, adhere to industry policy orientations, strictly enforce relevant provisions on environmental regulation, land use administration, financial policies and project investment management, and do a good job in resolutely restraining overcapacities and redundant constructions in certain industries as the focus of structural adjustment, vigorously develop high-tech industries and service industries in line with the market demand, grasp well the direction, intensity and rhythm of the adjustment, effectively transform the mode of economic development, improve the quality and efficiency of economic development, and promote comprehensive, coordinated and sustainable development of the economy and the society at large.

Several Opinions on Restraining Overcapacities and Redundant Constructions in Certain Industries and Guiding the Healthy Development of Industries

The National Development and Reform Commission
The Ministry of Industry and Information Technology
The Ministry of Supervision
The Ministry of Finance
The Ministry of Land and Resources
The Ministry of Environmental Protection
The People's Bank of China
The State Administration of Quality Supervision, Inspection and Quarantine
The China Banking Regulatory Commission
The China Securities Regulatory Commission

The following opinions are put forward for the purpose of effectively and thoroughly implementing the package plan of the Party's Central Committee and the State Council to cope with the international financial crisis, consolidating and developing the current momentum of economic stabilization and improvement, expediting the promotion of structural adjustment, resolutely restraining overcapacities and redundant constructions in certain industries and guiding the orderly development of emerging industries:

I. The overcapacities and redundant constructions in certain industries require high attention.
In order to cope with the blow and impact of the international financial crisis, the Party's Central Committee and the State Council, judging the time and sizing up the situation, have developed and implemented a package plan to expand domestic demand and promote economic growth in a timely manner. In accordance with the general requirements of "protecting growth, expanding domestic demand, adjusting structures", the restructuring and stimulus plans for ten key industries, such as the iron and steel industry, have been introduced, and a series of solutions and measures relevant to the promotion of structural adjustment have been put forward, such as controlling the overall amount, eliminating the backward, mergers and restructurings, technological transformation and independent innovations. All regions have also successively taken some policies and measures in support of industrial development. At present, the initial policy effects have surfaced. Growth of the industries has been rising steadily. Production and operation difficulties of enterprises have eased to some extent and the overall industrial development is showing signs of improvement.
However, from the perspective of the current situation of industrial development, although some progress has been made in structural adjustment, the overall progress is slow and unbalanced in different regions and industries. The problem of overcapacities and redundant constructions is still very prominent in many sectors with some even aggravating. Some issues need particular attention: Not only traditional industries with overcapacities, such as the iron and steel industry and the cement industry, are still expanding blindly, emerging industries such as wind power equipment and polysilicon are also showing the tendency of redundant constructions. The phenomena of examination and approval in violation of laws and regulations, construction before approval, construction along with approval have again appeared in some regions.
1. Iron and steel. The crude steel production capacity of our country in 2008 was 660 million tons while the demand was only approximately 500 million tons, with about a quarter of the iron and steel as well as the finished products dependent on the international market. The entire industry completed an investment of RMB 140.55 billion in the first half of 2009. Crude steel production capacities of projects currently under construction are 58 million tons, mostly being constructions in violation of regulations.
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