According to the Guidelines, the Chinese Government will impose tight market admittance standards for the high-energy consuming industries, including steel, cement, plate glass and traditional coal chemicals.

The environmental protection bureaus will enhance their environmental impact assessment on polluting industries, requiring all projects to pass the assessment standard. Projects failing to meet these standards will be denied administrative approval.

The land management departments are also required to tighten their supervision over all construction projects. A notice released by the Ministry of Land and Resources on October 21 claimed that land management authorities at various levels must take efforts to curb overcapacity and redundant construction with an emphasis on combining GDP growth with economic structural adjustments.

For those industries faced with the excess capacity problem, no project shall be allocated land without direct approval by the State Council or ministries under its leadership. Land appropriation projects that break ground without prior approval and those involved with the projects will be punished for their actions. If the violation constitutes a crime, it shall be subject to criminal liabilities.

Demands were also made on the banks to strengthen their credit and supervision policies over micro credit. Banks should further optimize the credit structure in line with the plans to revitalize the 10 industries, while imposing strict restrictions over loan allocation to those industries involved in overcapacity and redundant construction, said Jiang Dingzhi, Vice President of the China Banking Regulatory Commission at the 2009 Third Conference on Bank Risk Analysis held in Beijing on October 14.

The Central Government will also impose an accountability system upon local administrations in order to prevent local authorities from forcing enterprises to invest in low-level and redundant industries, said Xiong Bilin.

All governmental departments should strictly adhere to regulations concerning land, environmental protection, credit, industrial policies and project approval, while seeking to enhance policy research, information sharing and coordination among the departments to control overcapacity and redundant construction. Those involved with work mistakes that resulted in major financial losses will be held personally responsible by the government.

"Regarding the measures controlling overcapacity, the 10 ministries have reached a consensus and will coordinate with each other to combat overcapacity and redundant construction," said Xiong.

Overcapacity Record

Steel: In 2008, China had a crude steel capacity of 660 million tons, while its demand stood at only 500 million tons. In the first half of 2009, the crude steel under construction would raise the country's capacity by 58 million tons. The total capacity will exceed 700 million tons, causing a sharp overcapacity problem in the crude steel industry.

Cement: In 2008, China produced 1.4 billion tons of cement with a total capacity of 1.87 billion tons. Currently, 620 million tons of cement are under construction, and another 210 million tons are waiting to start construction. When these producers complete their start-up constructions, the total cement capacity will reach 2.7 billion tons, a serious overcapacity compared with the market demand of 1.6 billion tons.

Plate Glass: China produced 574 million bins of plate glass in 2008, accounting for 50 percent of the world's total production, but its capacity reached 650 million bins. In the first half of 2009, 13 production lines, with a combined capacity of 48.5 million bins, were approved and completed. More than 30 production lines of float glass are under construction or preparing to be constructed. When completed, China will see a total capacity of plate glass of more than 800 million bins.

Coal Chemicals: By 2008, the coal chemical industry has seen an overcapacity of 30 percent. Under the impact of an export recession, in the first half of 2009, only 40 percent of methanol production equipment was put into operation. Currently, some areas are planning to launch coal chemical projects. If not adjusted timely, there will be a blind development of coal chemical industry.

Polysilicon: By 2008, China had the polysilicon capacity of 20,000 tons, while it only produced 4,000 tons that year. Capacity under construction numbers 80,000 tons, a sharp excess capacity over demand figures.

Wind Power Equipment: Currently, the number of enterprises engaging in the production of complete set of wind power equipment reached 80 in China, and more enterprises are vying to enter the industry. By 2010, China will have a total capacity of 20 million kw, a substantial excess in capacity compared with the annual installation of 10 million kw.

(Source: National Development and Reform Commission)