Comment: Checking Repetitious Industry Growth

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Last updated at: (Beijing Time) Thursday, September 04, 2003

Comment: Checking Repetitious Industry Growth

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Measures should be taken to reduce the overlapping of projects in some overheated industries, which would help to restore order in market competition, according to a recent editorial by Economic Daily.

China's iron and steel, automobile, textile, nonferrous metals and construction materials industries have all witnessed steep investment rises since last year.

Such growth seems natural given the accelerated industrialization and urbanization at home and the economic integration taking place around the world.

However, repetitious projects are starting to appear.

Under the country's fledgling market economy, a commonly accepted standard for market access needs to be established. Also, second-rate groups need to be thrown out of the industry.

The lack of such moves means there are too many enterprises competing for a market share.

Only eight of China's more than 280 steel works have an annual output above 5 million tons. The others produce less than 700,000 tons each year on average.

Statistics show most of these steel factories only turn out low-end products. And the steel products badly needed in China still have to be imported.

Also, capital is poured into redundant projects without proper considerations.

The production capacity of electrolytic aluminium in 2002 exceeded demand, yet there are new projects starting this year to produce electrolytic aluminium. Worse, the raw materials for these projects have to be imported. It is foreseeable that the industry's growth will not be sustained, the editorial said.

The construction of duplicate infrastructure for industry can be found in different regions.

Though there are 23 provinces, autonomous regions and cities with their own automobile factories, few of them can design automobiles independently, let alone produce key components like engines.

Among the 123 auto works nationwide, only 18 have an annual output of more than 50,000 units. Some of them only produce 100 to 200 motors each year.

The article called for public vigilance against repetitious construction.

If not checked, the problem will become worse, leading to an oversupply of production by the processing industry.

The use of resources, pollution, technology standards and workplace safety will deteriorate.

It will not only slow down the country's industrial restructuring, but also bring about a remarkable waste of capital and resources.

Once the market climate changes, these industries and enterprises will find themselves in great difficulty. Loans will go bad and unemployment will follow, causing social instability.

Thus caution must be taken in choosing measures to rein in redundant construction.

They should not simply be orders and restrictions, but aim at the promotion of sustainable industrial growth and offer guidance for investment.

It means the authorities should play a bigger role in releasing information, drafting regulations and policies.

But a more urgent task, the editorial said, is to integrate government control in the market to force a balance between supply and demand.

One such method could be to set up a series of standards to assess the market.

The authorities should introduce rules about technology, environment, safety, quality and energy-consumption thresholds for producers. All of those who cannot meet the basic standards should be shut down.

In this way, orderly competition will be promoted and the market economy can advance soundly.

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