ANNUAL REPORT

106
able), China’s Ministry of Industry and Information Technology
identified 15 industries suffering from continued excess capacity.*
Because there are significant gaps in China’s official data reporting
about capacity utilization, however, overcapacity levels should
also be assessed based on other indicators. 128 One observable
symptom of Chinese overcapacity is the country’s declining Producer
Price Index (PPI), which measures the change in prices received
by producers for their goods and services over time. Due to
downward pressure on industry profits as a result of overcapacity,
China’s heavy industry PPI has declined 11 percent since 2010, indicating
producers were continually receiving lower and lower
prices for their products every month through January 2016 (see
Figure 3). 129
Figure 3: Chinese PPI, January 2010–April 2016
Source: China’s National Bureau of Statistics via CEIC database.
Although domestic prices have declined below production costs,
the state continues its unsustainable support for China’s unprofitable
industrial sectors, propping up unviable companies at the expense
of the global market. 130 In China’s steel industry, for example,
50 percent of domestic producers are state-owned. 131 Chinese
steel producers experienced losses of $15.5 billion in 2015, a 24-fold
increase from 2014. 132 In December 2015, approximately half of
China’s medium- and large-sized steel firms were unprofitable. 133
Despite the record losses, subsidies and financial support from
state banks allowed many of China’s largest state-owned steel
firms not only to endure losses, but also to continue to increase
their production. 134 Meanwhile, China’s 2015 utilization rate for
steel dropped to 71 percent, down 9 percentage points from 2008
dkrause on DSKHT7XVN1PROD with USCC
* The industries identified as suffering from overcapacity include iron, steel, coal, ferroalloys,
calcium carbonide, aluminum, copper, lead, cement, glass, paper, tannery, dye, chemicals, and
lead batteries. China’s Ministry of Industry and Information Technology, 2014 List of Industries
and Companies with Excess Production Capacity, July 18, 2014.
VerDate Sep 11 2014 12:16 Nov 02, 2016 Jkt 020587 PO 00000 Frm 00016 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2016\FINAL\06_C1_C2_M.XXX 06_C1_C2_M
C1S2Fig3.eps