SHANGHAI Aug 8 China has issued an emergency
decree ordering officials to halt the development of new cement
and plate glass capacity, as it struggles to overcome entrenched
local government resistance to halting wasteful investment in
The statement, which was carried on the Ministry of Industry
and Information Technology's (MIIT) website www.miit.gov.cn,
ordered industrial regulatory departments around the country not
to approve any new projects in the steel or plate glass sectors
"for any reason".
China's State Council, the country's cabinet, made a similar
decree in October 2013, in which it mandated a freeze on cement
and glass among other industries, but analysts have said that
governments and government-connected firms have still tried to
evade the freezes and even build new projects.
"Total industrial capacity in cement and plate glass is
still growing, but the industry-wide sales rate is in decline
and accounts receivable are increasing," the MIIT statement
Cement output grew 3.6 percent in the first half of 2014,
the statement said, while plate glass capacity grew 4.7 percent.
"This trend, if not checked, will seriously interfere with
efforts to reduce serious excess capacity."
Critics of Chinese industrial policy have said that because
Chinese officials' career advancement is still largely tied to
their ability to produce economic growth, they are still
strongly incentivized to push through GDP-producing investment
projects whether there is consumer end-demand for the products
they produce or not. In addition, such projects can serve as
channels for corruption and political patronage.
This has made China's economy increasingly credit-intensive,
loading bad debts on domestic banks that have lent to such
projects, and has also been a major aggravator of China's air
and water pollution problems.
Investors have been heartened by signs that China's economy
may be turning around in the third quarter, with manufacturing
and export data surprising on the positive side, but some
economists warn that some manufacturing growth has been driven
by easing liquidity and pointless fixed-asset investment.
The cement and glass industries depend heavily on the real
estate sector and construction industries for sales, but housing
prices have been softening in China in 2014, although the stock
market has rallied in recent days on news that local governments
have begun to relax restrictions on new purchases.
Cement and glass still are still producing profits on paper.
The MIIT statement said the cement and glass sectors had seen
profits grow by 52 percent and 24 percent, respectively, in the
first half of 2014.
(Reporting by Pete Sweeney; Editing by Richard Pullin)