BEIJING: Chinese overcapacity in steelmaking and oil refining is once again in the government’s crosshairs.
Economic planners singled out the two sectors at the opening of the National People’s Congress yesterday with promises of orderly reductions in capacity, having made similar pledges at the 2025 meeting with mixed results.
China’s softer gross domestic product target this year might suggest there’s leeway to make more decisive cuts.
Although steel output last year dropped below one billion tonnes for the first time since 2019, analysts questioned the accuracy of the official figures.
Oil refiners, meanwhile, churned through more barrels than ever.
Both industries are struggling to accommodate the turn in the Chinese economy away from investment led by property and public works toward greener, higher-tech growth.
Parsing the language used this year, the stance on steel capacity “is marginally stricter”, said He Jianhui, an analyst at SDIC Futures Co. “But it still depends on how the policy will be implemented on the ground.”
For oil, Beijing clearly wants to stay on track with its programme of raising petrochemicals output at the expense of refining diesel and gasoline, said Liao Na, founder of GL Consulting. But the short term is complicated by the war in Iran and other geopolitical concerns, which means keeping fuel stockpiles elevated.
The longstanding effort to deal with excessive industrial production shifted into higher gear in July with the launch of the government’s anti-involution campaign.
But planners avoided hard targets, relying instead on policy signalling and regulatory fixes that would take time to play out.
Those included tougher rules on adding or maintaining capacity rather than ordering up sweeping cuts, a reflection of competing goals to support employment and regional economies. — Bloomberg