Provinces push structural reforms

A steelworker at a steel mill of CITIC Heavy Industries in Luoyang, Henan province. [Photo by Huang Zhengwei/For China Daily]

Supply-side structural reform will continue to be a priority of provincial governments this year as China resolves to press ahead with the major tasks of reform amid downward economic pressure, said provincial governors and businessmen.

New targets in cutting excess capacity in major sectors such as steel and coal have been set this year, as unveiled at the annual sessions of provincial legislatures held in January, they added.

The local sessions, which review and approve government economic and social development blueprints, come ahead of the annual sessions of the national legislature and the top political advisory body in March.

After a reduction of 33 million metric tons in steel capacity last year, China's northern Hebei province, aims to further slash about 32 million tons of steel capacity in the current year, according to the provincial government work report earlier this month.

"2017 will be our toughest year in capacity reduction," said Governor Zhang Qingwei.

"No matter how difficult it is, we are determined to succeed," Zhang added. Hebei produces a quarter of the country's iron and steel.

Yu Yong, chairman of Hesteel Group, the biggest steel company in Hebei, said properly cutting capacity would make room for restructuring and upgrading of the steel sector.

The company cut 3.2 million tons of iron and steel capacity last year and is targeting a reduction of 4.4 million tons in the current year, Yu added.

Coal-rich Shanxi and central Henan both set the targets of cutting 20 million tons of coal capacity this year. The two provinces each slashed 23 million tons of coal capacity last year.

"Coal overcapacity reduction should be achieved through market means," said Lou Yangsheng, governor of Shanxi, adding that mergers and reorganizations would be encouraged.

Hubei said that it would close all its coal production firms in two years. Southwestern Guizhou province will slash 15 million tons of coal capacity by closing 120 coal mines this year.

As part of the reform, local governments will also focus on handling poor-performing zombie companies.

Eastern Zhejiang province plans to close 300 zombie companies and 1,000 firms with outdated capacity this year. Southern Guangdong province aims to close 74 private zombie firms after it closed more than 2,000 State-owned zombie companies and 39 private companies in 2016.

China achieved its 2016 target of cutting 45 million tons of steel and 250 million tons of coal production capacity, affecting nearly 800,000 workers.

This year the tasks will be heavier, and zombie companies will be focused on, according to Xu Shaoshi, head of the National Development and Reform Commission, the country's top economic planner.

So far, 27 provinces have unveiled growth rates for last year and their targets for 2017 at local annual legislative sessions.

Among them, 23 had growth rates higher than the national 6.7 percent, with Guizhou, Chongqing and Tibet all above 10 percent. Beijing and Shanghai both reported 6.7 percent.

Most of the provinces aim to maintain the same or slightly lower growth than in 2016.

With an estimated growth of 4.5 percent in 2016, lower than most other provinces, Shanxi set its GDP growth target at 5.5 percent this year to leave flexibility for transformation and reform.

Other reforms, such as market-oriented debt-for-equity swaps and administrative streamlining, are emphasized by many provinces to reduce corporate leverage and encourage businesses.

Besides structural reform in industry, officials said China also emphasized reform in agriculture in the current year.