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Premier Li Pledges to Cut Back on Overcapacity

Premier Li Keqiang has pledged "firmer resolve and greater efforts" to tackle the long-standing problem of industrial overcapacity as "old growth drivers" such as manufacturing and investment continue to struggle.

China is experiencing a tough time and pain in shifting to new growth drivers featuring high-tech and service industries, he said.

"We should strive to upgrade traditional industries," he told a seminar on the country's economic situation held in Beijing on December 2. The gathering was attended by economists and ministers.

Li highlighted the pressing need to curb industrial overcapacity, which has been blamed for surplus inventory and shrinking profits in the industrial sector and a drag on overall economic growth.

In the third quarter of this year, China posted a growth rate of 6.9 percent, the slowest since the 1998 financial crisis, amid challenging economic conditions globally.

"From next year, we should be determined to cut back on overcapacity in traditional industries as well as a large number of zombie enterprises," he said while pointing to the worst-performing steel and coal industries.

The seminar, held ahead of the upcoming Central Economic Work Conference, was aimed at seeking suggestions from economic researchers for next year's economic policymaking.

Li Daokui, director of Tsinghua University's Center for China in the World Economy and one of the six experts invited, warned that excess and backward industrial capacity is one of the major economic woes.

With China producing 800 million tons of steel a year, four times more than any other country has ever produced, the sector is experiencing overcapacity of about 400 million tons as construction slows.

Large and medium-sized Chinese steel companies saw overall losses in the first eight months of this year after recording profits a year ago, according to the China Iron and Steel Association.

Data last week showed profits earned by Chinese industrial companies fell by 4.6 percent year-on-year in October, declining for the fifth consecutive month due to soft demand and overcapacity.

Li said the mass new job opportunities generated by emerging industries over the past few years have helped to lay the ground for quickening the upgrading of traditional industries.

He called for the introduction of technical, safety, environmental and energy consumption standards, coupled with financial support and mergers and acquisitions, to speed up capacity consolidation.

He also stressed that restructuring reforms covering both supply and demand should be carried out next year.

Last month, a top-level meeting of the Central Leading Group on Finance and Economic Affairs, which was headed by President Xi Jinping, announced that China should strengthen structural reform on the supply front.

The move is aimed at increasing the quality and efficiency of the supply system and providing growth impetus for sustainable economic development.

Observers said this indicates the new thinking of China's top leadership on macroeconomic policy.

Premier Li also said at the meeting that reforms covering supply and demand should be handled in a balanced way, as the Chinese economy is still seeing a lack of demand in some sectors.

"Efforts to moderately expand demand should continue in future," he said.

Can China produce high-end consumer products such as ballpoint pens?

This question was posed by Premier Li Keqiang at a seminar in Beijing on December 2 that discussed ways to boost the economy.

Li used his own experience to explain how important it is to meet consumers' demands for high-quality products.

He said his writing is "rough" when he uses Chinese-made ballpoint pens, adding that he learned the reason from a recent TV program about Chinese manufacturing-a lack of core technology.

Although China produces 38 billion ballpoints annually and meets 80 percent of the global need, nearly 90 percent of its ballpoint pen nibs and refills are imported from Japan, Germany and Switzerland.

None of the country's 3,000-plus pen manufacturers have their own core technology for manufacturing high-end nibs and ink.

"That's the real situation facing us," Li said. "We cannot make ballpoint pens with a smooth writing function."

He said domestic manufacturers and entrepreneurs should focus on technological innovation and upgrading to meet market demands for high-end and high-quality products.

(China Daily  December 4, 2015)

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