The Elimination Of Backward Production Capacity Is Close To &Nbsp; The Compensation System Has Attracted Much Attention.

Elimination of backwardness

After the repeated injunctions, the Ministry of industry and information technology finally put forward an unprecedented killer of how to quickly eliminate backward production capacity.

In August 5th, 18 industries were eliminated this year.

However, in the eyes of the "eliminated" people, what kind of compensation mechanism will the country use and how to solve the problem of resettlement, asset disposal and who will eventually take over the existing assets and capacity?

Who will be responsible for the compensation?

"In light of a small town in Fugu, Yulin, Shaanxi, 40 enterprises have been included in the Ministry of industry and commerce.

Fugu is one of the most concentrated areas of energy and chemical industry in Shaanxi province.

Public information shows that in 2010, the county arranged for energy chemical industry and supporting projects up to 66, of which 48 have been started in the first half, and the investment has been completed by 6 billion 190 million yuan.

A large scale coal chemical owner in Fugu spent hundreds of millions of dollars on a brand-new production line in 2010. What made him unprepared is that the new production line has not been built yet, and the old production line has been attacked by the government.

Mr. Gao, who is engaged in senior management in this private enterprise, told reporters: "no matter what the old line or the new line is, the government has agreed to build it. Now it is required to close it. We are consulting with the local government, and we want to give the economic compensation of the fixed investment total cost of more than 80%."

Mr. Gao said that as early as the end of April this year, a medium-sized Carbide factory invested by the boss in Shanxi province encountered the restrictions imposed by the local governments on differential electricity prices. For this reason, the group has demonstrated that 1 self contained power plants with a capacity of 125 thousand kwh have been planned so far, but now it seems that these measures that have been adopted by the government to adopt market control measures have encountered sudden death.

No one had thought that after implementing the killer power of differential electricity price, the Ministry of industry and commerce would explicitly request that it be closed at a limited time.

"Obviously, the previous market control measures failed to stop the desire to invest in excess capacity, and the government is killing the killer, hoping to fundamentally solve the excess contradiction."

Another analyst, who declined to be named, pointed out that the government must consider the possibility of further economic compensation and pfer of capacity in the later stage.

According to his estimate, the 2087 "eliminated" enterprises may eventually bring about more than 100 billion yuan of economic compensation costs.

As a matter of fact, how to solve the problem of economic compensation has been rather difficult since many ministries and commissions started to eliminate backward production capacity since the beginning of the year.

Inner Mongolia, Shanxi and other provinces have already introduced compensation standards or methods, but these standards are not open, and have a lot of black box operability.

On the other hand, in the elimination of backward capacity such as iron and steel, the Ministry of industry and Commerce began to coordinate with the national development and Reform Commission, the Ministry of finance, the Ministry of land and resources, and other ministries as early as 2009 to formulate specific compensation standards for backward production capacity elimination rules.

However, a local official in Hebei province told reporters that there were two kinds of enterprises that were shut down and eliminated. If some enterprises were legitimate, but because the production capacity did not conform to the industrial policy, they would be faced with a dismantling and shutting down. The government would give some compensation. The other situation was that the enterprises that were shut down were completely illegal, and there was no approval procedure before the production.

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Who will pick up the plate?

Who will take up the problem of resettlement of workers on the existing production line? The pressure on local governments to eliminate smaller numbers is not great. But how can we arrange tens of thousands of wealthy labor force in such provinces as Hebei, Henan and Shanxi?

"Local governments are most concerned about maintaining stability, but this time they are mostly private-owned enterprises. Compared with state-owned enterprises, the pressure of maintaining stability is smaller."

The Hebei official told reporters.

Jin Tao, a private equity manager who has long been concerned about eliminating backward production capacity, thinks that the land issue is more important than the above two points.

The equipment with backward production capacity is very well disposed, but it will not be sold at all. But the land is a construction land. No matter the local government or all kinds of enterprises, these valuable resources will not be idle.

"In short, the capacity that will eventually be eliminated will still be pferred to larger production lines, or elsewhere, to form new capacity."

Jin Tao said.

The list of 2087 "eliminated" enterprises is listed in China's aluminum industry.

The production line of an annual output of 40 thousand tons of electrolytic aluminum (100KA * 172 electrolyzer) of Liancheng branch, formerly Lianlian City, Lanzhou, was completely eliminated by the Ministry of industry and Commerce for two months.

"As China aluminum is such a big Mac, we think that eliminating 40 thousand tons of capacity will hardly have any impact on its performance. From another point of view, the 172 electrolysis cells may be removed, but it is hard to ensure that Chinalco will not mount a bigger electrolytic cell project in the area where these 100KA electrolysis cells are placed."

Jin Tao believes that the central ministries and local governments, local interests and various enterprises are going to enter a new game cycle.

There are indications that whether or not the economic compensation standard can satisfy the "eliminated" people, in order to solve the problem of labor resettlement left over from the production line left behind by the "disqualified" production line, and to revitalize the surplus assets such as equipment and land, as well as how the local governments ensure the financial revenue is not declining, the drumming of the Ministry of industry's strict elimination of backward production capacity has just begun, rather than the end.

But in the eyes of Wu Jiandong, a well-known strategic development expert, no matter what the economy is doing.