#industry rationalization

Chinese Government has to Close Down Steel Mills

From steelguru, Chinese Government has to Close Down Steel Mills 

According to one of the world’s leading advisers to China’s corporate sector, the Chinese government will push ahead with plans to rationalize the domestic steel industry by forcing a number of producers to close down, a move that will bolster demand for iron ore.

Mr Peter Fung the Beijing based global chair of KPMG’s Global China Practice said that “While there were concerns about the social consequences of closing big Chinese steel mills, the government was committed to industry rationalization.

Mr Fung said that “I believe there will be a process but when that process starts is difficult to guess. Some of these plants are big plants. We all agree they need to be closed but how to deal with the social issues when that happens is something that needs a lot of discussion and negotiation at both the central and local government levels.”

Mr Fung said that “This needs to be addressed and I think the government understands it needs to be addressed. How long it takes to get an agreement I don’t know, but this will happen. This trend would intensify. Chinese steel mills companies are still looking to acquisitions to secure the supply side. Chinese companies will continue to engage in acquisitions.”

Mr Fung said that “The issue of IP being stolen is still a real concern. But he noted that more and more companies, both domestic Chinese and multinationals, were willing to set up their own R&D centers in China and register their IP in China.”

He said that “The Chinese government is becoming more and more serious in IP perception. This is a real concern, not just to appease multinationals. That is a positive development and I am confident in time the whole mechanism will be better and more finetuned, and that should make multinationals more comfortable.’’

Mr Doug Ferguson head of KPMG’s China practice in Australia said “The Chinese had changed their approach over the past year. They are spending a lot more time strategically planning their investment partners and their local management. A massive difference is the recognition that they cannot go it alone.”