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Steel-town shutdowns challenge China's growth as leaders convene for party congress-The 19th China(Guangzhou)Int’l
Metal &Metallurgy Exhibition-metal exhibition
10/18/2017 steel expo-metal &metallurgy expo |
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BLOOMBERG reported that in pockets of China''s industrial heartland, a government push to clean up the environment and cut excess output is starting to bite: Furnaces have gone cold, the lights have been switched off, migrant workers are drifting back home.
Mr Liu Xiaoping a resident of the sprawling, smoggy, steel-making hub of Jinan in the northeast is among the campaign''s collateral damage. Standing in a cul-de-sac where most factories were closed on a recent weekday visit, he says officials ignored his pleas for more time to comply with regulations at his 20-year-old plastic mould business. As officials threatened to cut off electricity, Mr Liu shut down his factory before they could do so.
Mr Liu said that "It was like a knife falling, claiming that the chop in mid-September left him with one million yuan (USD 205,473) of idle equipment and 10 unemployed staff in a city where more than 7,000 businesses labelled "messy and polluting" have been targeted for clean-up or closure. He added that "None of us know what to do.”
While it may be little consolation to Mr Liu, the impact from efforts to cut capacity is proving double edged factory profits have surged and reflation has taken root across industry, giving a much needed boost to indebted companies. Third-quarter gross domestic product numbers due on Oct 19 are likely to show the world''s second-biggest economy remains in a sweet-spot, with a 6.8 per cent pace of growth expected, according to a Bloomberg survey of economists.
Still, the drag may intensify. Economists estimate the expansion will slow to 6.4% next year and 6.1% in 2019.
For China''s leadership gathering this week at the 19th Communist Party Congress cleaning the noxious skies and filthy rivers has become a priority.
In contrast to previous leaders'' growth-at-all-costs approach, President Xi Jinping and his premier have declared war on pollution, spurred by the anger of citizens enshrouded in smog that''s sometimes more than 50 times more toxic than levels deemed safe by the World Health Organisation.
That political will overlaps with an economic need to rein in surplus production of steel, aluminium and other basic materials after years of over-investment. How and when that capacity gets replaced will be a key factor in the economy''s performance beyond 2017.
Vice-chairman Tao Dong for Greater China at Credit Suisse Private Banking in Hong Kong said that "The last time we saw this kind of effort to cut capacity was at the end of the last century, when premier Zhu Rongji was determined to shut down money-losing state enterprises. There''ll be short-term consequences for growth and jobs but it''s hard to quantify at this moment, all depending on whether the capacity will remain shut after the Party Congress."
-The
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