"Some enterprises in many areas invest but make loss every year." It is advised that the central government should lead industrial transformation and upgrading, and act early to eliminate backward production capacity," said Yan Ping, chairman of Guangxi Yuchai Machinery Group Co., Ltd. who came straight to the point in an interview.

Overcapacity does exist in China's traditional manufacturing industries such as iron & steel, metallurgy, cement and glass. Yan ascribed overcapacity to government drive--Given that these industries concern GDP and employment, local governments which know enterprises' backward capacity and year-round losses have offered financial support still, thus leading to vicious circles, serious waste of government funds and constant shrinkage of enterprises' market value. "Being late in eliminating backward production capacity will lead to more loss and waste, industrial transformation will be difficult when products lose competitiveness thoroughly."

Elimination of backward production capacity calls for enterprises' exploration and practice, and needs to be standardized and guided by the country. Yan suggested that the country should give priority to the elimination of backward production capacity while promoting industrial transformation and upgrading, raise specific requirements, and work out a plan systematically. On this basis, the country should assign the tasks of transformation and upgrading to provinces and autonomous regions, stipulate the targets of "elimination" and "transformation", and require local governments to conduct industrial transformation and upgrading with great determination.

"Eliminating backward production capacity is 'addition and subtraction'. It can free up environmental capacity and development space for characteristic advantageous industries and strategic emerging industries," Yan said, stressing that "backward production capacity" is different from "traditional industries", eliminating backward production capacity is not abandoning traditional industries, but renovating, improving, transforming and upgrading traditional industries, and manufacturing new products with new technologies and processes. He suggested that the country should offer financial and technical support to enterprises involved in transformation and upgrading. "Addition and subtraction" will give a new interpretation of eliminating backward production capacity.

(Source: Wang Minghao/Wang Yunna/People's Daily)