China's overcapacity cut efforts will not generate a drag effect on the country's growth or harm the world economy, an official from the country's top economic planner said on Tuesday.
Zhao Chenxin, spokesperson for the National Development and Reform Commission (NDRC) made the remarks at a news briefing when responding to concerns raised by a Reuters correspondent.
Overcapacity is a global problem as a result of the 2008 financial crisis and occurs in many industries such as crude oil, iron ore and auto making, causing shale oil and gas stockpile in the United States and iron ore overproduction in Australia, Zhao said.
Even in the steel sector, overcapacity is not just a "China problem."
"Many countries are confronting the problem. It is a global issue," said Zhao. In 2014, China's rate of capacity utilization of crude steel was about the same as the world's average of 73.4 percent.
Moreover, China's iron and steel products are mainly for the domestic market to support the country's urbanization, manufacturing and infrastructure development.
China had long been a net importer of iron and steel products before 2006. Even during the 2006-2015 period, China's steel exports only accounted for 10 percent of its production volume, far less than other exporters' exporting scale, said Zhao.
The government does not encourage steel exporting. On the contrary, China levied taxes on steel exports and lowered tax rebate in order to restrain exporting of high energy consuming products, including steel.
China takes an active and serious attitude to reduce overcapacity. In the coming five years, the country will further cut crude steel capacity by 100-150 million tonnes, according to Zhao.
Confronting the global problem of overcapacity, China suggests relevant countries to cooperate for multi-win results instead of criticizing and buckpassing to play a zero-sum game and implement protectionism.
By the end of July, capacity reductions in China's steel sector amounted to just 21 million tonnes or 47 percent of the annual target, Zhao said. This marked substantial progress given China completed only about 30 percent of the planned cuts for the whole year in the first six months.
Yet the country is still facing daunting tasks for the rest of 2016 despite an acceleration in speed in July.
To fulfil the annual target, local governments were urged to be more resolute in capacity cutting and introduce more measures such as accountability system, public exposure and blacklisting, according to Zhao.
In terms of coal capacity reduction, China has finished 38 percent of annual target by the end of July, Zhao added.
Zhao attributed the default largely to a spike in steel and coal prices this year and local governments' reluctance in capacity cutting to protect jobs and local economies.