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Thursday, May 19, 2016, 09:16

China sets up US$15.33b fund to curb overcapacity

By Xinhua
China sets up US$15.33b fund to curb overcapacity
State-owned enterprises directly administered by the central government are being urged to strip off sideline operations that distract from the focus on core businesses. (Photo / IC)

BEIJING - China's Ministry of Finance said Wednesday it has earmarked a special fund of 100 billion yuan (US$15.33 billion) to subsidize local governments and state-owned enterprises (SOEs) in reducing steel and coal overcapacity.

The ministry said in a statement that 80 percent of the funds will be distributed to local governments and centrally administered SOEs based on their respective capacity reduction assignments, as well as the number of laid-off workers that must be resettled and the difficulty of doing so.

The remainder will be allocated based on how well local governments and SOEs fulfill their assignments, the statement said.

The ministry added that it will continue to implement preferential taxation policies, including tax refunds for steel exports and tax preferences for urban land use by coal miners.

To encourage the development and use of coal bed gas between 2016 and 2020, the central finance subsidy for coal bed gas will be raised from 0.2 yuan to 0.3 yuan per cubic meter, the statement said.

Also on Wednesday, the Chinese government on Wednesday underscored the importance of major SOEs, pledging to strengthen their competitiveness to support economic restructuring.

SOEs administered by the central government play a pivotal role in the country's social and economic development. They should streamline their corporate structures and raise efficiency to become more competitive, according to a statement issued after a State Council executive meeting chaired by Premier Li Keqiang.

"The core business of centrally-owned SOEs is not good enough. Low efficiency and excessive human resources, especially in management teams, still plague those companies," it said.

The cabinet meeting asked the SOEs to cut redundant management by around 20 percent within three years. In two years, they should save on operational costs by at least 100 billion yuan (US$15.6 billion).

The SOEs should use market-based approaches in hiring and delivering payrolls, the statement said.

With the economy slowing, China has been looking to its SOEs to boost productivity and promote market-based reforms. The private sector has been welcomed to own stakes in SOEs.

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