COLUMN-China should follow Elvis’s advice for more action, less conversation – by Clyde Russell (Reuters U.K. – February 24, 2016)

http://uk.reuters.com/

Feb 24 – If you were to pick one thing that would do the most to help embattled commodity producers around the world, dealing with China’s massive over-capacity would probably rank highest.

It’s no secret that China’s surplus capacity in steel, aluminium, cement, flat glass and other intermediate commodities is keeping prices low and threatening the viability of global resource companies, as well as the health of the Chinese economy.

There certainly have been repeated statements from Beijing that the issues are being tackled, and it appears the authorities have realised that excess capacity is a far bigger threat than what it was during the prior boom years, when double-digit economic growth rates masked mounting problems.

But is China actually doing anything to address the issues, especially in the most affected sectors, such as steel and aluminium?

According to the European Chamber of Commerce in China the answer is a definite no.

“Central government efforts to address excessive production capacity have been ineffectual due to regional protectionism, weak regulatory enforcement, low resource pricing, misdirected investment, inadequate protection of intellectual property rights and an emphasis on market share,” the chamber said in a report released this week.

Leaving aside the obvious criticism that the chamber has a powerful self-interest motivation to see China cut capacity, there is fairly strong evidence that the actual rationalisation of capacity is far from what is needed.

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