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Industrial dynamic crucial against economic slowdown

(Xinhua)
Updated: 2008-12-06 16:43

BEIJING  -- China's infrastructure construction has gone up a gear after the massive capital input announced by central government at the beginning of November. But still a number of industries are suffering the domino effect of the deepening global financial crisis.

Henan Provincial Statistical Bureau chief Liu Yongqi said that to give the Chinese economy "a boost strong enough", "the government needs to optimize its investment to facilitate industrial dynamic so as to secure production and employment."

CHAIN REACTION

Field survey by Xinhua reporters showed that even the less export-oriented central interior -- namely, Henan, Anhui, Shanxi, Hubei, Hunan and Jiangxi provinces -- have started to feel the pinch of slowing world economy. Industries like textile, automobile, steel, coke and coal, iron ore and minerals have seen many enterprises, especially private and smaller ones, slip into the doldrums over the past three months.

Immediate results are shrinking power consumption, rising inventory, more payment default and tighter capital flow on the corporate side and reduced tax revenue on the government side.

In Shanxi's Changzhi City where coal, coking and iron making generated 80 percent of local productive value, a slew of enterprises have ceased production since October or had to operate under capacity.

Changping Group, the city's largest private iron and steel maker, has lost so far more than 400 million yuan from a combination of raised production costs and shrinking market demand. The first 10 months have seen its iron and steel output decline by 80 percent over the same period last year.

In Tangshan of north China's Hebei Province, more than half of local blast furnaces have ceased production while the city of Handan, also in Hebei, has seen more than two thirds of its smaller iron and steel companies unable to sustain normal production.

Even larger competitors have reported declines in profits. The Wuhan Iron and Steel Group, for instance, has slashed its production by 30 percent so far, with its monthly profits plunging from 1.12 billion yuan in August to 46 million yuan in October.

WISDRI Engineering and Research general manager Xiao Bai said that the doldrums afflicting the iron and steel industry partly resulted from the blind investment and over capacity of the past few years. "The financial crisis simply accelerated the industrial cycle," he said.

Luoyang Development and Reform Bureau chief Li Shengping held that iron and steel was one of the worst affected industries. "But it did give us a clue that the global financial crisis had affected China's tangible economy."

From the export-oriented eastern coast to the central interior, a chain reaction to the deepening credit crunch is clearly in view. In October, the industrial power consumption, a key indicator for industrial dynamic, fell 50 percent from September in Zhejiang, 13 percent in Anhui and 11 percent in Henan.

Jiangxi Provincial Economic and Trade Commission director Tu Qinhua explained that market shrinking triggered by the financial crisis had forced many enterprises to sell off their products at lower prices, which further weakened industrial profitability and eroded investment confidence.

In a high-profile meeting last Friday, the Political Bureau of the Central of the Communist Party of China decided that the financial crisis would inflict much bigger losses over global tangible economy and that the impacts on the Chinese economy would become "increasingly noticeable".

With the annual central economic conference around the corner, Liu Yongqi of Henan Statistics Bureau expected the government to draw up more policies to maintain corporate dynamic, including easing capital strain and facilitating machinery manufacturing that might give a bigger drive to a broader sphere of industries.

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