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China vows tougher measures on overcapacity

China’s Industry and Information Technology Ministry (MIIT) on Tuesday pledged tougher measures to cut overcapacity in bloated sectors as the problem has become a severe drag on economic growth.

China will ban new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding industries before 2017, while gradually eliminating existing projects that were found to be below standards, MIIT vice minister Mao Weiming revealed at a press conference.

While placing stricter standards in environmental protection, energy efficiency and safety, China will also encourage mergers and acquisitions in industries to crowd out outdated capacities, Mao said.

The government has been at pains to digest production gluts from an investment boom and generous subsidies in the past few years that saw producers in “favored” sectors expand rapidly with little regard to real market demand.

As China’s economy is slowing down, overcapacity is posing an increasing challenge for policymakers to balance growth and reforms.

The country’s economy grew 7.7 percent in 2013, overshooting the government target of 7.5 percent. The growth target for 2014 will be announced in March, which analysts largely expect to be kept at 7.5 percent.