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China Promises Further Cuts to Steel， Coal Capacity
Numerical targets to reduce coal and steel production capacity have， for the first time， been set in the annual Chinese government work report. China will reduce steel production capacity this year by around 50 million metric tons and shut down at least 150 million metric tons of coal production facilities， Premier Li Keqiang said Sunday in a government work report to the fifth session of the 12th National People’s Congress. Last year’s government work report promised capacity-cutting in the two industries， but did not specify targets. In 2016， the country reduced coal capacity by 290 million metric tons and steel capacity by 65 million metric tons for steel， said the premier. Continued capacity reduction is in line with market expectations. China is the world’s largest producer and consumer of steel and coal， but gluts can have implications such as depressed commodity and materials prices， reduced profits of debt-ridden firms， and increased non-performing loans that jeopardize financial stability. While capacity cuts are necessary and have long-term benefits for the economy， the process has not been without challenges. Capitalintensive industries present potential investment， taxation and jobs for local governments， which in at least two cases broke capacity-cutting rules set by the central government. One key initiative in excess capacity reductions is to shut down “zombie companies，” which are loss-making， debt-laden， and dependent on government subsidies or bank loans. For workers laid off because of capacity cuts， the central and local governments will allocate special funds and take measures to ensure they find new jobs. China Eyes Sustained Economic Growth through Reforms
Chinese Premier Li Keqiang pledged to continue reforms to attain the economic growth target of about 6.5 percent this year despite challenges ahead. The target， which Li said is “realistic and in keeping with economic principles，”is the lowest for more than 20 years for China. Nonetheless， China remains one of the world’s fastest-growing economies. The target will help steer and steady expectations and make structural adjustments as well as help achieve the goal of building a moderately prosperous society in all respects by 2020， Li said while delivering the report at the session， the first since Xi Jinping was endorsed as the core of the Communist Party of China （CPC） Central Committee last October. Li called for uniting more closely around the CPC Central Committee with Xi as the core and working hard to fulfill development targets. 2017 is of crucial importance for the country as the CPC will convene its 19th National Congress in the second half of the year to elect a new leadership for the next five years during which Xi’s vision of a well-off so- ciety will be achieved. Nearly 3，000 NPC deputies listened to Li’s report at the meeting chaired by Zhang Dejiang， chairman of the NPC Standing Committee， along with Xi and other leaders. Li also announced that in 2017， China will keep its CPI increase at around 3 percent， and create more than 11 million urban jobs with a registered urban unemployment rate within 4.5 percent. The country will also reduce its energy consumption per unit of GDP by at least 3.4 percent. Noting that China must be ready to face more complicated and graver situations including sluggish world economic growth and growing trend of protectionism， Li expressed his confidence that difficulties will be overcome as the country has a solid material foundation， abundant human resources， a huge market， and a complete system of industries.
Further Tax Reduction in 2017
China will pursue a more proactive and effective fiscal policy with government fiscal deficit projected to be 3 percent of its GDP， according to a government work report. While the deficitto-GDP ratio stays unchanged from last year， the government fiscal deficit volume is set at 2.38 trillion yuan （about 345 billion U.S. dollars）， a year-on-year increase of 200 billion yuan， said the report to be delivered to the national legislature annual session. In a breakdown， the projected deficit of the central government is 1.55 trillion yuan， and that of local governments is 830 billion yuan. Keeping the deficit-to-GDP ratio unchanged at 3 percent aims to “allow for further reductions in taxes and fees，” the report says. Tax burden on businesses is expected to be further eased by around 350 billion yuan， and business related fees will be further cut by around 200 billion yuan to benefit market entities. “We will keep government spending low and enrich our people，” says the report， promising that the government will squeeze out more funds to cover cuts in taxes and fees. China Swears to Make Skies Blue Again
China pledged to markedly bring down PM2.5 density in key areas in 2017 in a government work report. Sulfur dioxide and nitrogen oxide emissions will be cut by 3 percent this year， as part of the efforts to make the skies blue again， according to the report to be delivered by Premier Li Keqiang at the opening of the parliament’s annual session. China will work harder to address pollution caused by coal burning， the report said， adding that comprehensive steps will be taken to replace the use of coal with electricity and natural gas in more than three million households. All small coalfired furnaces in established districts of cities at the prefectural level and above will be shut down in 2017， it said. China will step up work on upgrading coal-fired power plants to achieve ultra-low emissions and energy conservation， the report noted， adding that upgrading should be completed this year in the eastern region， next year in the central region， and by 2020 in the western region. All key sources of industrial pollution will be placed under round-the-clock online monitoring， it said， noting that China will also strengthen research on the causes of smog to improve the scientific basis and precision of the steps taken.
