In China, small steel mills have to shut down their production by the end of this year. They are being told to do so by the central government, who is planning to reduce the productivity of the industry with this measure to prevent overcapacity. This way, the government also wants to force the industry to upgrade its facilities.
The measure is taken because the industry has been facing an oversupply which have weighed on steel prices and made profit margins drop. By lowering the supply they hope that the prices and profit margins rise again.
China's government is also planning to shut down small and outdated places in other sectors including power, coal, calcium carbide, ... On the one hand to save energy, on the other hand to reduce emissions.
Afterwards the government will strictly control the region's projects assessments, by withholding approvals for new investments. This way the government will be able to control the demand and supply more efficient to prevent overcapacity from occuring.
Personally I think the Chinese government shouldn't interfere to much with the economic market. China should strive for a free market without major economic intervention and regulation by its governement. I think it is wrong that the government has the power to decide that companies have to end their affairs, it doesn't belong in the world of today. Furthermore, why do the small companies have to shut down and can the big ones continu their production? What gives those other companies more rights?
Geen opmerkingen:
Een reactie posten