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 A joint statement issued by the central bank and several other
government bodies on Thursday said China would "strengthen financing
support for enterprises 'going out'", and use loans, export credits
and project financing to encourage coal and steel businesses to
build capacity abroad.
At the same time, it would strictly control credit available for new
capacity additions in China.
It was unclear whether this signals government encouragement for
more coal and steel exports from China, which has been widely blamed
for dumping its excess steel on world markets, depressing prices and
threatening thousands of jobs. Beijing says it has done what it can
on overcapacity, and the criticism is "lazy protectionism."
Earlier this week, China and other major steel producers failed to
agree on measures to tackle the overcapacity crisis, prompting the
United States, European Union and others to call for urgent action.
"I am cautious about China's move to shift overcapacity overseas as
this doesn't help, and just replaces exports," said Jiang Feitao, a
steel researcher with the China Academy of Social Sciences.
Japan, another big steel producer, expressed concern over rising
Chinese crude steel production and exports.
"We're not sure if the rise is because of a recovery in demand after
Chinese New Year or resumptions of production by local mills in the
face of higher steel prices. We need to closely look at China's
output and exports in April," Koji Kakigi, chairman of the Japan
Iron and Steel Federation, told a news conference in Tokyo.
'ZOMBIES' RETURN
While China has engineered some steel capacity cuts, its efforts
risk being undermined by a sharp rise in domestic steel prices that
has seen mills ramp up output. Even "zombie" mills, which had
stopped production but were not closed down, have been resurrected.
Chinese steel prices <SRBcv1> have risen by 77 percent so far this
year, as supplies tightened following plant shutdowns last year,
consumers restocked and seasonal demand picked up.
On Thursday, steel futures in China jumped nearly 9 percent to their
highest since September 2014. The price of rebar used in
construction for October delivery on the Shanghai Futures Exchange
rose to as much as 2,787 yuan ($430) a tonne. Iron ore futures on
the Dalian Commodity Exchange also rose to 19-month highs.
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Steel product inventories held by Chinese traders have fallen by
more than a quarter from last year's levels, said Helen Lau, an
analyst at Argonaut Securities. "Therefore, we are of the view that
steel prices may extend their rally through to the second quarter."
SERBIA BUY
Chinese steel firms have already ventured abroad, building plants in
South Africa and Eastern Europe.
Hebei Iron & Steel Group this week signed a 46 million euro ($52
million) deal to buy a loss-making Serbian steel plant, and pledged
to invest $300 million in the plant, which employs more than 5,000
workers.
China plans to shed 100-150 million tonnes of domestic crude steel
capacity in the next five years, and another 500 million tonnes of
surplus coal production, in a bid to tackle huge capacity overhangs
that have saddled domestic firms with losses and debts.
The government has earmarked 100 billion yuan ($15.45 billion) to
handle layoffs, and is promising measures to deal with the debt
problem.
Thursday's statement said the government would speed up the handling
of non-performing loans in the debt-ridden sectors, and extend
direct financing to support their restructuring. It would also work
to deal with possible default risks in the two sectors.
Banks would use a wide range of methods, including debt
restructuring and bankruptcy settlements, to handle the problem, it
said.
(Additional reporting by Manolo Serapio Jr in MANILA and Yuka
Obayashi in TOKYO; Editing by Ed Davies and Ian Geoghegan)
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