Senior Official at Economic-Planning Agency Calls Excess-Capacity Cuts the Nation’s ‘Top Priority’

(Beijing) — China’s targets for cutting excess capacity in coal and steel this year underscore the government’s determination to deepen structural reforms, a senior official of the country’s top economic-planning agency said Monday.

“All those (targets) demonstrate the firm determination of the Chinese government to press ahead with excess-capacity cuts,” said Ning Jizhe, a vice chairman of the National Development and Reform Commission (NDRC), China’s top economic-planning agency, at a briefing held on the sidelines of the National People’s Congress.

He stressed that the drive was Beijing’s “top priority.”

The country aims to trim steel capacity by about 50 million tons and close at least 150 million tons of coal production capacity in 2017, Premier Li Keqiang said in his government work report, delivered Sunday at the opening of the annual meeting of the NPC, China’s top legislature.

China will also suspend or postpone construction on or close no less than 50 million kilowatts (kW) of coal-fired power generation facilities to tackle an electricity supply glut and “make room for clean energy,” he said.

Ning said that China’s steel capacity will come down to about 1 billion tons after more than 65 million tons were curtailed last year and after this year’s goal of removing another 50 million tons is achieved.

National annual consumption had already hit 800 million tons and is expected to increase, meaning that 80% of China’s steel capacity will be in operation — “a normal level even for a market economy,” he said.

In spite of that, overcapacity cuts will continue this year and into the next, he said, adding that authorities will “by no means relax” on their past achievements.

A total of 290 million tons in coal production facilities were shut last year, official data showed.

Ning said the slashing of coal capacity will be “advanced effectively” this year, though he promised that “reasonable demand” for heating in winter will be ensured. This appeared to be an apparent attempt to address concerns over a possible repetition of a supply crisis last year that was sparked by government orders to close down coal mines.

This year’s goal to contain coal-fired power generation facilities is ambitious, as it is close to the national installed electricity generation capacity in Britain or France, which is 70 million to 80 million kW, Ning said.

The move will mitigate China’s power-supply glut, which saw total installed electricity generation capacity hitting 1.5 billion kW at the end of 2016, he said.

“Outdated, excessive capacity must be wiped out in a decisive manner to breathe new life into our steel and coal sectors, with the industries being consolidated, their production efficiency boosted … and the ecological environment improved,” Ning said.

Contact reporter Pan Che (chepan@caixin.com)