BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/08
A just-released report from the EU Chamber of Commerce in China recommends over two dozen measures to deal with these issues. Investment in overcapacity sectors need to be reined in, direct subsidies from local government to businesses need to be cut, and prices of electricity, gas and water need to be more market-based. The Chamber further proposes hikes in environmental fees in order to encourage decommissioning of the worst-polluting production facilities. Moreover, state enterprises should be required to pay dividends rather than invest in additional production capacity. China’s leadership has recently embraced several initiatives to shutter plants in overcapacity branches, but the results to date have been modest.