Thursday, December 3, 2009

Admitting Economic Mistakes

The National Development and Reform Commission (NDRC) is a national planning body and today one of its officials admitted at a press conference that China has a serious problem of overcapacity.

This comes over a week after the European Chamber of Commerce in Beijing released a report saying overcapacity was hindering China's economic development and creating more pollution.

Xiong Bilin, from the NDRC said the problem of overcapacity had been happening in China for a long time. And although the global financial crisis exacerbated overcapacity, other internal factors such as weak innovation, low international competitiveness, and products were mostly at the low-end of the market. He cited the sectors in steel, cement and glass were particularly affected.

He blamed distorted market information for making it difficult for enterprises to anticipate market demand, resulting in companies blindly making investments.

In order to tackle overcapacity, Xiong said the NDRC would tighten supervision over the steel, cement and glass industries, encourage more mergers and not approve those projects that are purely for increasing capacity.

While the European Chamber suggested some of these actions, it also said that China should increase the costs of electricity and water for industrial use in order to stop pollution and also add value to products.

A reporter brought this up at today's press conference, but Xiong chose not to answer it.

This is an indication that either China has not considered this proposition, or environmental protection is not related to controlling overcapacity.

Sounds like developing the economy at almost any cost is still on the agenda. In the lead-up to Copenhagen, China is going to continue using the excuse that it is a developing country and it has a right to pollute to a certain extent. But now is the perfect opportunity for the country to produce things at a higher quality, and find ways to pollute less into the environment, and still make a profit.

Xiong's excuse of having disorted market information is absurd; in the age of the Internet and so many channels of communication, how could companies have the wrong market information? Pleading ignorance is a weak plea for sympathy. Once the global financial crisis started, we all knew we would be impacted in one way or another.

Hopefully the government will adjust its large-scale industries soon and the public will encourage the government to find more sustainable ways to develop China's economy.

That really is the only solution if China wishes to have a history of another 5,000 years...

1 comment:

ChopSuey said...

I loved reading the diverse topics that you post, ranging from dining to economics to politics. Enjoy the relatively warm weather, it's also 6C here in Toronto!