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China has financially supported the merger of the steel companies

29 December 2016

It became known that the Chinese authorities intend to support mergers and acquisitions of steel companies. An official statement was published on the government website of China.

According to the statement, the government will pay about seventy percent of the cost of transactions. However, financial assistance bude strictly controlled by the state. This should prevent inappropriate use of funds. The authorities are afraid that the money will be used to create new enterprises in the coal or steel industry.

At the same time, financial institutions can not lend the illegal coal and metallurgical enterprises. In addition, the statement says that banks should immediately stop funding such productions.

China ranks first in production and export of coal and steel products. Now, however, the government is pursuing an active policy to reduce capacity and lower output. This people’s Republic of China, there are two main reasons. The first is the pressure from Europe and the USA. China has long been hopes to join the WTO, but this is impossible while production has not declined. The DPRK has already committed itself to reduce capacity. The plan will last until 2020, during this time, steel production has reduced by 150 million tonnes. As for the facilities in the coal mining industry, failure will bring half a billion tons. Two hundred and fifty tons of the planned volume will be reduced this year. This year’s reduction plan was intended to deal with forty-five tons capacity. On the early implementation challenges, the government reported in November.

The second important factor in stimulating the government to reduce production — economic growth. According to calculations the decrease in the number of metallurgical industries will stimulate the Chinese economy.

Will there be a new method of promoting the reduction effective, is still unknown. But apparently, the government really wants to struggle with overcapacity. Although some analysts that China does not intend to reduce exports. But all these measures just «blurry eyes» of the world community.

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