As the gradual roll out of the country’s RMB4 trillion stimulus package starts to take effect on the Chinese economy, overcapacity has once again become a serious problem.
In late August, Chinese premier Wen Jiabao presided over an executive meeting of the State Council which ordered moves be taken to curb overcapacity and the presence of duplicate projects that exist in certain sectors.
The meeting produced a list of products that had already reached overcapacity, namely: steel, textiles (spun yarn), electrolytic aluminum, cement, plate glass, caustic soda (used by the chlor-alkali sector to produce PVC), chemically-processed coal, alumina (an aluminum oxide used to improve the durability of the light metal), shipbuilding and industrial chemicals.
In order to deal with the problems caused by overcapacity, the State Council has charged authorities with strictly enforcing limits to market access, intensifying environmental supervision and strictly controlling land supply for any new projects in these selected industries.
Economic Observer reported that not everyone agrees that there are problems with overcapacity in their sector.
Peng Xiaofeng, chairman of LDK Solar, a well-known domestic solar wafer producer, held that the central government’s warning about overcapacity in the poly silicon industry was targeted at those firms with outdated production facilities that produce excessive pollution.
He said, "The poly silicon industry in China is still in its infancy, and the country still lacks any large poly silicon manufacturing firms that are capable of catching up with world leaders."