Nation drops steel industry consolidation target

China has dropped a long-standing target to bring 60 percent of its steel sector under the control of its 10 biggest enterprises by 2015, a goal that has been criticized by companies such as Baosteel for causing a build-up of unprofitable capacity.

The world's biggest steelmaking nation has in the past been accused of strong-arming State firms into pursuing unprofitable mergers, including the protracted takeover of Benxi Iron and Steel by its bigger local rival, Anshan Iron and Steel.

Facing flak for its failure to heed market signals, China has been trying to change the way it regulates its economy, and aims to stop interfering directly in the approval and construction of industrial projects and focus instead on macroeconomic regulation.

A new industry consolidation plan published on the website of theMinistry of Industry and Information Technologylate on Monday said China would continue to simplify approval procedures and also make it easier for firms in bloated sectors like steel, cement and aluminum to finance acquisitions.

But the plan did not include the target, last mentioned in official policy documents in January 2013, to put 60 percent of China's total steel production capacity in the hands of its top 10 steel mills by the end of 2015, up from the 40 percent they control now.

Officials acknowledge that attempts to force industries into complying with State targets have been counterproductive, with vice-industry minister Su Bo admitting in a Monday speech that "the government has interfered too much."

The 60 percent target was part of a strategy designed to help State-owned steel firms become more competitive by encouraging them to swallow smaller rivals, and led to a series of high-profile mergers in the sector.

But the approach has been heavily criticized within the industry, with big firms increasingly reluctant to take on more unprofitable capacity.

Xu Lejiang, chairman of Baoshan Iron and Steel Group (Baosteel), China's second-biggest producer by total capacity, said last year that the policy had created "huge monsters" lumbered with debt and unprofitable investments.