By Zhou Jianqi, Research Team on “Long-acting Mechanism to Cut Overcapacity”，Research Department of Industrial Economy of DRC

Research Report No. 47, 2016 (Total 4930) 2016-4-8

Abstract: In the context of overcapacity, China’s steel industry faces two major problems: poor performance of steel companies, and intensified export trade frictions. The fundamental reason is the mismatching between supply and demand which is attributed to the extensive development mode of the steel industry. One of the effective methods is to strengthen the whole industry’s ability to adapt to market demand through restructuring of the supply side, and the key to success is to lay equal stress on reform and development. The basic approaches are as follows: we should seize the opportunity of SOEs’ reform, increase the capital liquidity of steel industry, optimize the structure of supply side, and address the problem of overcapacity. Besides, we should lay emphasis on the normalization of market order and the innovation of cooperation mode between supply and demand, so as to promote industrial development under the new normal. Policy suggestions are: we should have a clear understanding of the reduction direction in steel industry; set up inter-regional state-owned steel companies under the joint management of the central and local governments；support the annexation and reorganization of private steel companies featured by the reduction of general capacity; enhance the regulation of both the supply and the demand sides; promote the joint innovation of enterprises on both sides to dissolve weak links relating to supply and demand.

Key words: restructuring of the supply side; reform and development; steel industry