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Beijing has tried to prod producers in many industries into mergers to reduce output. But lower-level officials in many areas prop up unprofitable local companies with rent-free land and other aid. The conflict is fed by a political system in which Communist Party officials are judged on their role in economic development. Building steel mills or other industrial assets shows up quickly in local economic statistics, helping leaders win promotion. The rapid overexpansion of industrial capacity also was fueled by Beijing's multibillion-dollar stimulus in response to the 2008 global crisis, which was based on higher spending on building highways and other public works. That sent a flood of money to suppliers of steel, cement and other raw materials and helped them resist pressure to merge or reduce production. In some places, the Cabinet statement said, local leaders go through the motions of obeying orders to tear down older steel mills, but then replace them with bigger facilities.
[Associated
Press;
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