China issued its first state policy on the iron and steel sector Wednesday, raising the industrial thresholds for foreign investors and imposing tighter controls on market access.

According to the new policy, foreign steel companies who plan to invest in China must have full intellectual property rights on their iron and steel products. Their output of common steel in the previous year must reach at least 10 million tons. That of high-alloy steel must reach one million tons.

If the foreign investor is not in iron and steel business, it must prove strong financial capability and high credibility by paperwork from the banks and accounting firms, said the new policy.

China is the world largest iron and steel producer as well as consumer, said Liu Tienan, director of the industrial department of the National Development and Reform Commission. But it is entering a critical moment when the whole sector is being strained by numerous problems like overheated investment, improper industrial structure, poor quality of products and worsening environmental pollution.

Through the new policy, China expects to guide the direction of foreign investment into China's steel and iron sector and put the sector on the right track of development, said Liu.

Liu stressed an important point in the new policy: foreign investors can not set up new conglomerates in China. Foreign capital should be invested in the upgrade or removal of existing conglomerates.

Actually, no more conglomerates, no matter if they are funded by domestic capital or foreign capital, will be approved in principle, said Liu.

China will tighten its control of the production capacity of the iron and steel industry to rein in the total output, said Liu. Conglomerates will assume a bigger role amidst a new round of industrial restructuring.

The aggregated steel output of China's ten biggest players is expected to make up 50 percent of the country's total by 2010, and over 70 percent by 2020, said the new policy.

China's daily crude steel production stands at around one million tons on average in the first five months, said Liu. This year's output is expected to exceed 3 million tons.

Source: Xinhua