Only by sticking to dissolving backward production capacity, can the upgrades of economy be achieved, and backward capacity can no longer crowd out advanced ones, said Premier Li Keqiang at an executive meeting.
The State Council meeting on Dec 21 focused on the illegal production of two steel producers in Hebei and Jiangsu provinces and heard their punishment report. Huada Iron & Steel Co Ltd in Jiangsu illegally produced non-standard steel, while Anfeng Iron & Steel Co Ltd in Hebei worked on iron and steel projects before getting approval.
While hearing the report, the Premier asked about inspection details, saying that the cutting capacity action centered on iron, steel and coal industries was the main point in deepening supply-side structural reform and carrying out the work of cutting capacity, inventory and deleverage, lowering costs and making up shortages.
He said the inspection of the State Council also revealed that the backward capacity was still disturbing the market and affecting the goal of reducing capacity.
Overcapacity and non-standard steel are totally against national standards, and the illegal enterprises not only violated national environmental and quality standards, but also lowered their costs by not giving security insurance to workers, so how can legal enterprises with advanced capacity compete with them, said the Premier.
As the prices of staple commodities is rising, more illegal producers should be punished to deter other illegal production actions and guarantee the work of cutting overcapacity and reducing backward capacity, the Premier added.
He also warned that some enterprises may lower standards while under construction, and the two illegal producers alerted the government to the need of tightening management standards while relaxing the market access levels and strengthening supervision to create a fair market environment.
He urged a more specific nationwide inspection on the overcapacity cutting progress, and asked related departments to take advantage of technology methods to strengthen supervision.
The backward capacity that is not in accordance with environmental and national standards should be cut, and those that already have been cut should not come back into the market, stressed the Premier.