China: Accelerating supply-side reforms – ING

Prakash Sakpal, Economist at ING, suggests that they think supply side reforms will take out some of China’s excess manufacturing capacity and the rest of the world will have to grow into the rest, which is going to prolong the slump in global manufacturing.

Key Quotes

“The State Council urged the central SOEs to increase their focus on core business as the authorities deepen the SOE reforms to improve the quality and profitability of these enterprises. A statement on the State Council’s website issued yesterday after the meeting with 106 central SOEs headed by Premier Li Keqiang also noted the plan to cut 10% of excess capacity for central SOEs in the coal, iron and steel sectors this year and next. This comes as the US announced a five-fold increase in import duties on Chinese steelmakers.

We reiterate our view that supply side structural reforms will take out some of China’s excess manufacturing capacity and the rest of the world will have to grow into the rest, which is going to prolong the slump in global manufacturing.”