Beijing to curb steel and cement industry overcapacity

The saying goes there can be too much of a good thing. And it looks likes Beijing’s US$586 billion stimulus package may have been too much of a good thing for China’s steel and cement industries as it’s helped lead to overcapacity. China’s cabinet said it will curb overcapacity and investment in the industries to prevent the sectors from overheating. The cabinet will also strictly enforce environmental standards and market access. That curbing of overcapacity may help conglomerate CITIC Pacific improve its earnings for the second half of the year. The company’s net profits for the first half of fell 43% year-on-year to US$318.7 million. CITIC Pacific attributes the drop to a decline in its steel business, which fell 72% to US$67.6 million due to weakened demand amidst the financial crisis. SAIC Motor Corp is in slightly better shape with revenue rising 6.9% to reach US$9 billion, but write-offs resulting from its South Korean unit Ssangyong Motor’s bankruptcy eroded its gains. That caused the company’s first half profits to fall 26% year-on-year to US$173 million.