Numbers of the Week

700 million

The number of Chinese mobile phone users rose to 700 million after adding 61.4 million new accounts from January to July.

100,000 tons

Chinese engineers have discovered rare metal deposits of more than 100,000 tons of niobium, the country's largest untapped reserve, in northwest Xinjiang Uygur Autonomous Region.

TO THE POINT: China vows to keep a stringent handle on the industrial overcapacity that is draining life from the economic revival. China Mobile pushes forward OPhone and its operating system in an aggressive push into the 3G market. As its tight grip over the market slips, the wireless titan cannot wait to regain lost ground. China's manufacturing sector continues to pick up steam as evidenced by the climbing PMI. Soaring prices of pork and eggs reignite fears over inflation. The buoyant real estate market appears to be nearing a turning point as sales cool down.

By HU YUE

Combating Overcapacity

Drawing strength from a government spending spree, the Chinese economy is sparking fresh growth momentum, as well as an intractable conundrum over industrial overcapacity from steel to aluminum.

Over the past several years, the country got hold of the problem by becoming a substantial exporter—but the sharp recession in the West took that protection away, said Zuo Xiaolei, chief economist with the Beijing-based China Galaxy Securities Co. Ltd., in an interview with Beijing Review.

It is getting worse as local governments rush to approve big projects, and many plants restart idled production in response to a slight recovery of demand, she said.

According to data from the China Iron and Steel Association, the nationwide capacity for crude steel production hit 660 million tons by the end of 2008, but only 453 million tons were sold. In the saturated aluminum market, a build-up of inventories has been depressing prices and casting an ominous shadow over the sector.

More disturbing, though, are the signs that the ailment is rippling through a number of emerging industries like wind turbine and solar energy business, said Zhu Hongren, a researcher with the Chinese Academy of Social Sciences, in a report.

Recognizing the daunting challenges, the State Council in a recent meeting vowed to increase restrictions over licenses and land supply for polluting and energy-intensive projects. This comes on the heels of a sweeping campaign to precipitate industrial consolidation and phase out outdated capacities.

Tackling overcapacity may be a tough job when spurring growth is a top priority, but given its positive implications for economic sustainability, it is well worth the effort, said Zuo.

Racing Toward 3G

One may wonder exactly how important 3G (third-generation) technology is for Chinese wireless providers. Just take a look at how fast they are racing to launch 3G smart phones.

Barely one week after China Unicom introduced the iPhone handset to the Chinese mainland, China Mobile launched its own—the OPhone smart phone that can run on its homegrown TD-SCDMA 3G network, as well as the smart phone operating system. The gadget was developed by Lenovo Mobile Communication Technology Co. Ltd., a subsidiary of Lenovo Group Ltd.

China Mobile has a deep commitment to 3G as intensifying competition is eating away at its subscriber base. Past torrid growth in the number of its new users is fizzling out, and subscribers are also paying less. Its net profit in the first half of this year grew a minimum 1.44 percent year on year, the slowest the company has recorded since 1997 when it was first listed in Hong Kong.

The downturn occurred partly because government-led restructuring allowed China Telecom into the wireless market. Besides this, China Mobile still needs time to secure 3G market penetration. Compared with the established 3G standards adopted by its smaller rivals, there are much fewer advanced handsets available for its nascent TD network. By promoting its OPhone devices, China Mobile obviously hopes to deliver itself a boost.