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China Promises Further Cuts to Steel, Coal Capacity

Posted March 08, 2017

Under Economic Issues, International Trade Issues


Numerical targets to reduce coal and steel production capacity have, for the first time, been set in the annual Chinese government work report.

China will reduce steel production capacity this year by around 50 million metric tons and shut down at least 150 million metric tons of coal production facilities, Premier Li Keqiang said Sunday in a government work report to the fifth session of the 12th National People’s Congress.

Last year’s government work report promised capacity-cutting in the two industries, but did not specify targets.

In 2016, the country reduced coal capacity by 290 million metric tons and steel capacity by 65 million metric tons for steel, said the premier.

Continued capacity reduction is in line with market expectations.

China is the world’s largest producer and consumer of steel and coal, but gluts can have implications such as depressed commodity and materials prices, reduced profits of debt-ridden firms, and increased non-performing loans that jeopardize financial stability.

While capacity cuts are necessary and have long-term benefits for the economy, the process has not been without challenges. Click here to read more.