Chinese government approves investment in a steel project25 May, 2012, 13:04. Posted by Zarathustra
Wen Jiabao has talked many times of the same thing, that growth supporting is now a higher priority, and will fine-tune policy to stimulate growth.
To demonstrate the
desperation determination of the government to stimulate its crashing slowing economy as if there were not enough inventory of iron ore, steel, copper, cars, real estate, etc, the government just approved Baosteel to throw RMB69.68 billion to build a steel project with 10 million tons in annual capacity, including power plants and ports, according to Reuters. In hope that this will not produce more excess capacity, the local government is told to shut down 16.14 million tons of capacity. So this deal will destroy some 6.14 million tonnes of annual steel production capacity.
So you think that China is dealing with the problems of excess capacity across sectors? Reuters reminds us that with the net 6.14 million capacity destruction in this deal, the excess capacity is still extremely high:
total crude steel production capacity estimated at as high as 900 million tonnes, compared to last year’s output of 683 million tonnes
That is 217 million tonnes of excess capacity.
With the real estate market dying a slow death and the economy close to (if not already in) a hard landing, who cares about 6.14 million tonnes of capacity destruction?
China’s failed gamble for growth