Reuters/Beijing
China said it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt.
In a statement on Friday from the State Council, or cabinet, Beijing laid out broad plans to ensure banks support the kind of economic rebalancing China’s new leadership wants as it looks to focus more on high-end manufacturing.
President Xi Jinping and Premier Li Keqiang have flagged for some time that the rapid growth of the past three decades needs to shift down a gear, and analysts said Friday’s announcement was a signal that they intended to press on with reforms despite evidence of a sharper-than-expected slowdown.
“The guideline shows China’s policymakers will focus more on economic restructuring to stabilise the economy rather than providing more liquidity to support economic growth,” said Li Huiyong, an economist at Shenyin Wanguo Securities in Shanghai.
The slowdown in the world’s second-largest economy has started to put pressure on some businesses.
On Friday, China Rongsheng Heavy Industries Group, China’s largest private shipbuilder, appealed for financial help from the government and big shareholders, after cutting its workforce and delaying payments to suppliers.
Analysts said the company could be the biggest casualty of a local shipbuilding industry suffering from overcapacity and shrinking orders amid a global shipping downturn. New ship orders for Chinese builders fell by about half last year.
The State Council said it would ensure credit kept flowing to businesses that it thought had competitive products, but it would work with banks to oversee a gradual winding down of other businesses.
“The government will adopt differentiated policies based on the varied situations in the industries plagued by overcapacity,” it said.