The State Council recently issued the Opinions on Resolving Excess Capacity in the Steel Industry to achieve Development, requiring that on the basis of eliminating backward steel production capacity in recent years, starting from 2016, it will take 5 years to reduce crude steel production capacity by 100-150 million tons, and substantial progress will be made in industry mergers and acquisitions, industrial structure will be optimized, and resource utilization efficiency will be significantly improved. The utilization rate of production capacity tends to be reasonable, the quality of products and the supply capacity of high-end products have been significantly improved, the economic efficiency of enterprises has improved, and the market expectations have been significantly improved.

The guideline also called for accelerating the reform of the iron ore resource tax based on value, and expanding the scope of replacing business tax with value-added tax to the construction industry and other fields.

The full text is as follows:

Opinions of The State Council on Resolving excess capacity in the iron and steel industry to achieve development

Guofa (2016) No. 6

People's governments of provinces, autonomous regions and municipalities directly under the Central Government, ministries and commissions under The State Council:

The iron and steel industry is an important basic raw material industry of the national economy, which has a large investment driving effect, strong employment absorption ability and high industrial correlation degree, and has made important contributions to China's economic and social development. In recent years, with the increasing downward pressure on the economy, the steel market demand has fallen back, and the contradictions and problems accumulated in the process of rapid development of the steel industry have gradually exposed, of which the problem of overcapacity is particularly prominent, and the production and operation difficulties of steel enterprises have intensified, and the loss surface and loss amount have been expanding. In order to implement the decision-making and deployment of the Party Central Committee and The State Council on promoting structural reform, grasping the task of reducing overcapacity, further resolving excess capacity in the steel industry, and promoting the development of iron and steel enterprises, the following opinions are put forward:

I. General requirements

(1) Guiding ideology. Fully implement the spirit of the 18th CPC National Congress and the Third, Fourth and Fifth Plenary Sessions of the 18th CPC Central Committee as well as the Central Economic Work Conference, firmly establish and implement the development concept of innovation, coordination, green, open and sharing in accordance with the overall layout of the "five in one" and the "four comprehensives" strategic layout, focus on promoting the supply-side structural reform of the steel industry, adhere to the market force and enterprise main body, and promote the development of the steel industry. Local organizations, central support, focus on key points, according to law and regulations, comprehensive use of market mechanisms, economic means and legal methods, according to local conditions, classified policies, and both symptoms and root causes, actively and steadily resolve excess capacity, establish a long-term mechanism for market-oriented adjustment of production capacity, and promote structural optimization, upgrading, quality and efficiency of the steel industry.

(2) Basic principles.

Adhere to the market force, enterprises as the main body. We will improve fair, open and transparent market rules, strengthen market competition and coercion mechanisms, increase effective supply capacity, and guide the upgrading of the consumption structure. We will give play to the principal role of enterprises and ensure their right to make independent decisions.

We will support local organizations and the central government. We will strengthen policy guidance, improve institutions and mechanisms, standardize government behavior, and eliminate undue government intervention in the market and local protection for enterprises. We will give full play to the initiative of both the central and local governments to actively and orderly reduce excess capacity and ensure social stability.

We will focus on key areas and follow the law. Overall deployment, key breakthroughs, coordinated and promoted the work of resolving excess capacity in all regions, and key steel-producing provinces and regions with a good work foundation took the lead in making breakthroughs. We will strengthen our awareness of the rule of law, reduce overcapacity in accordance with the law and regulations, effectively protect the legitimate rights and interests of enterprises and employees, implement all employment and social security policies, and properly dispose of enterprises' assets and debts.

(3) Work objectives. On the basis of the elimination of backward steel production capacity in recent years, starting from 2016, it will take five years to reduce crude steel production capacity by 100-150 million tons, and substantial progress has been made in industry mergers and reorganizations, industrial structure has been optimized, resource utilization efficiency has been significantly improved, capacity utilization has become reasonable, product quality and high-end product supply capacity have been significantly improved, and enterprise economic benefits have improved. Market expectations are clearly positive.

Ii. Main tasks

(4) New production capacity is strictly prohibited. Strictly implement the "Guiding Opinions of The State Council on Resolving the Contradiction of Serious Excess Capacity" (Guofa [2013] No. 41), all regions and departments shall not record steel projects with new capacity in any name or in any way, and relevant departments and agencies shall not handle land supply, energy assessment, environmental assessment approval and new credit support and other related businesses. Those who violate laws and regulations should be held accountable. The retired production capacity that has enjoyed the award and subsidy funds and relevant policy support shall not be used for replacement.

5. Reducing overcapacity

1. Exit according to law and regulations. Strictly implement environmental protection, energy consumption, quality, safety, technology and other laws and regulations and industrial policies, and steel production capacity that does not meet the standards must be withdrawn according to law and regulations.

-- Environmental protection: Strictly enforce the environmental protection Law, and impose daily penalties on steel production capacity that fails to meet the requirements of the discharge Standards for water pollutants in the Iron and Steel Industry, the Discharge Standards for Air Pollutants in the Iron and Steel Sintering and pelletizing Industries, the Discharge Standards for Air pollutants in the Iron and Steel Industry, the discharge Standards for Air pollutants in the Steel making Industry, and the Discharge Standards for air pollutants in the Steel rolling Industry; If the circumstances are serious, it shall be reported to and approved by the people's government with the power of approval and ordered to suspend business or close down.

- Energy consumption: strictly implement the energy conservation law, steel production capacity that does not meet the mandatory standards such as the energy consumption limit of the unit product of the main process of crude steel production should be rectified within 6 months, and the extension of the rectification period can be submitted for no more than 3 months, and if the rectification period is not rectified or fails to meet the rectification requirements, it will be shut down and quit according to law.

- Quality: strictly implement the product quality law, the quality of steel products does not meet the mandatory standards, according to law and ordered to stop rectification, within 6 months does not rectify or does not meet the rectification requirements, shut down and exit according to law.

- Safety: strictly implement the safety production law, for the steel production capacity that does not meet the level 3 safety production standardization of enterprises, and the safety conditions that do not meet the requirements of the "iron-making safety Regulations", "Steelmaking safety regulations", "Industrial enterprise gas safety regulations" and other standards, it is necessary to immediately stop production for rectification, and those that do not rectify within 6 months or are still unqualified after rectification shall be shut down and quit according to law.

-- Technical aspects: In accordance with the relevant provisions of the Guidance Catalogue for Industrial Structure Adjustment (2011)(Amendment), immediately shut down and dismantle backward production equipment such as iron blast furnaces of 400 cubic meters or less, steel converter furnaces of 30 tons or less, and steel electric furnaces of 30 tons or less. Enterprises that produce strip steel shall immediately shut down, dismantle their equipment, and be punished according to law.

2. Initiate an active exit. We will improve incentive policies and encourage enterprises to withdraw some steel production capacity through proactive reduction, merger and reorganization, transformation and transformation, relocation and reconstruction, and international production capacity cooperation.

-- Enterprises took the initiative to reduce production capacity. We encourage qualified enterprises to adjust their development strategies in light of market conditions and their own development needs, and withdraw production capacity that has been stopped as soon as possible. Encourage key areas with large steel production capacity to support territorial enterprises to take the initiative to undertake more reduction tasks.

-- Reducing production capacity through mergers and reorganizations. Encourage qualified steel enterprises to implement cross-industry, cross-regional, cross-ownership reduction mergers and reorganizations, focus on promoting the implementation of mergers and reorganizations of enterprises in major steel-producing provinces, and exit some excess capacity.

-- Reducing production capacity through relocation. For urban steel mills that do not meet the development plan of the city where they are located and do not have the value and conditions for relocation, they shall be encouraged to carry out transformation and conversion; With the relocation value and conditions, support its implementation of reduction and environmental protection relocation.

-- International cooperation on production capacity transfer. We encourage qualified enterprises to transfer part of their production capacity through international production capacity cooperation in conjunction with the construction of the Belt and Road Initiative to achieve mutual benefit and win-win results.

3. Remove the device. The corresponding smelting equipment shall be dismantled when the steel production capacity is withdrawn. If the conditions for demolition are met, they shall be removed immediately; The equipment that does not have the conditions for demolition should be immediately cut off water and power, remove the power plant, seal up the smelting equipment, and the enterprise publicly promises to the society that it will not resume production, and at the same time publicize it on the website of the provincial people's government or the provincial competent department, accept social supervision, and dismantle it for a limited time.

6. Strict law enforcement and oversight. Strengthen the role of environmental law enforcement constraints, comprehensively investigate the environmental protection situation of the steel industry, strictly deal with iron and steel enterprises that fail to meet environmental protection standards in accordance with the law, and further improve the online monitoring system for major pollutants in the steel industry, covering all steel enterprises. Strengthen law enforcement inspections of energy consumption, comprehensively investigate energy consumption in the steel industry, and strictly deal with iron and steel enterprises whose energy consumption per unit product in the production process does not meet the standard. Strengthen law enforcement of product quality management, comprehensively investigate the production conditions and production conditions of steel production license enterprises, and severely crack down on illegal activities such as unlicensed production. For enterprises that are shut down according to law due to backward process equipment, environmental protection and energy consumption standards, the production license shall be cancelled; For the reorganization of "zombie enterprises" and the implementation of reduction and reorganization of enterprises to handle production licenses, optimize the procedure and simplify the handling. Strictly supervise and enforce the law on production safety, comprehensively investigate the situation of production safety in the steel industry, timely publish the "blacklist" information of poor production safety records of steel enterprises, and investigate and punish steel enterprises that do not meet the conditions for production safety according to law. We will strengthen information disclosure, disclose monitoring information in accordance with the law, and accept public supervision.

7. Promoting industrial upgrading.

1. Promote smart manufacturing. Guide the integrated development of steel manufacturing industry and "Internet +", closely integrate with mass entrepreneurship and innovation, implement intelligent manufacturing demonstration projects for steel enterprises, and formulate "two integration" solutions for the whole process of steel production. Improve the intelligent level of enterprise research and development, production and service, and build a number of intelligent manufacturing demonstration factories. Promote the new model of personalized and flexible product customization based on Internet orders to meet the needs of customers with many varieties and small batches.

2. Enhance the quality brand. Establish quality benchmarks, upgrade product standards, strengthen brand building, comprehensively improve the quality stability and performance consistency of major steel products, and form a number of corporate brands and product brands with greater international influence.

3. Develop high-end varieties. Strengthen the connection between the production and processing of the steel industry and the needs of the downstream steel industry, guide iron and steel enterprises to promote the research and development and promotion and application of high-end steel varieties required for major technical equipment in high-speed railways, nuclear power, automobiles, ships and Marine engineering in accordance with the mode of "initial research and development intervention, follow-up improvement".

4. Promoting green development. We will carry out energy conservation and environmental protection upgrading, carry out environmental protection and energy conservation benchmarking activities, and accelerate the construction of enterprise energy management information systems. All iron and steel enterprises have achieved stable environmental protection and energy conservation standards, and the total pollutant emissions of the whole industry have steadily decreased.

5. Expand market consumption. Promote the application of steel structure buildings, in conjunction with the renovation of run-down areas, the renovation of dilapidated houses and the implementation of earthquake-resistant housing projects, carry out pilot projects to promote the application of steel structure buildings, and significantly increase the proportion of steel structure applications. Stabilize the consumption of key steel industries, promote cooperation between steel enterprises and downstream users, and promote the expansion and upgrading of steel applications in automobiles, machinery and equipment, electric power, ships and other fields.

Third, policies and measures

8. Strengthening support for awards and subsidies. We will set up a special fund for awards and subsidies for restructuring industrial enterprises, and, in accordance with regulations, provide awards and subsidies to local governments for the relocation of personnel in the process of reducing excess production capacity. We will guide local governments to make comprehensive use of mergers and reorganizations, debt restructuring, and bankruptcy liquidation to speed up the disposal of "zombie enterprises" and achieve market clearance. The use of special award and subsidy funds should be combined with the progress of local tasks (mainly linked to the withdrawal of production capacity), the degree of difficulty, the placement of workers and other factors, the implementation of local awards and subsidies, by the local government to meet the requirements of the staff placement of enterprises. Specific measures shall be formulated separately by relevant departments.

9. Improving tax policies. We will accelerate the reform of the AD valorem resource tax on iron ore and expand the scope of VAT deduction. We will expand the scope of replacing business tax with VAT to include construction and other sectors. Iron and steel enterprises use residual pressure and heat to generate electricity, and enjoy preferential VAT policies for comprehensive utilization of resources according to regulations. The preferential policy of enterprise income tax for comprehensive utilization of resources applicable to power generation by steel enterprises using residual pressure and residual heat is studied comprehensively. We will implement the policy of fair taxation and cancel the policy of bonded steel imports under processing trade.

10. Increasing financial support.

1. Implement the financial policy of ownership and control, increase credit support for resolving excess capacity, implementing mergers and restructurings, and promising and profitable steel enterprises in accordance with the principles of controllable risks and sustainable business, and support all kinds of social capital to participate in the mergers and acquisitions of steel enterprises; Stop lending to enterprises that illegally add new steel capacity.

2. We will use market-based means to properly dispose of corporate debts and non-performing assets of banks, implement fiscal and tax policies for writing off bad debts of financial institutions, and improve fiscal and tax support policies for financial institutions to increase their efforts to dispose of debt-offset assets. We will study and improve policies for the bulk transfer of non-performing assets, support banks in speeding up the disposal of non-performing assets, and support banks in packaging and transferring non-performing assets to financial asset management companies to improve the efficiency of the disposal of non-performing assets.

3. We will support the participation of non-government capital in enterprise mergers, acquisitions and reorganizations. Encourage long-term funds such as insurance funds to innovate products and investment methods, participate in enterprise mergers and acquisitions and reorganization, and expand sources of merger and acquisition funds. We will improve the exit channels for M&A funds, accelerate the development of secondary trading markets for related property rights, and improve the efficiency of the use of funds.

4. We will severely crack down on the evasion and cancellation of bank debts by enterprises and protect the legitimate rights and interests of creditors in accordance with the law. Local governments have established a coordination mechanism for corporate financial debt restructuring and disposal of non-performing assets, and organized and coordinated relevant departments to support financial institutions in their work of corporate financial debt restructuring and disposal of non-performing assets.

11. Doing a good job in resettling workers. It is necessary to make the resettlement of workers the top priority in the work to reduce excess production capacity, and combine the role of enterprises as the main body with social security, and take multiple measures to ensure the resettlement of workers. The resettlement plan shall not be implemented if the resettlement plan is not perfect, the financial security is not in place, and the resettlement plan is not discussed and approved by the workers' congress or all the workers.

1. Tap the internal potential of the enterprise. Give full play to the main role of enterprises, adopt salary negotiation, flexible working hours, training and transfer methods to stabilize existing jobs and ease the pressure of employee diversion. Support the construction of entrepreneurship platforms and employees' self-employment, actively cultivate entrepreneurship and innovation carriers that adapt to the characteristics of workers in iron and steel enterprises, expand the scope of pilot projects for returning home to start businesses, improve the incubation capacity of entrepreneurial services, cultivate and continue industrial clusters, and guide employees to start businesses and employment in the local area.

2. Employees who meet the conditions shall be given internal retirement. For employees who are less than 5 years from the statutory retirement age, after voluntary selection, consent of the enterprise and signing an agreement, the labor contract shall be modified according to law, and the enterprise shall provide them with living expenses and pay basic pension insurance premium and basic medical insurance premium. An employee may not receive a basic pension before reaching the statutory retirement age.

3. Dissolve or terminate labor contracts according to law and regulations. If the enterprise really needs to terminate the labor relationship with the employee, it shall pay economic compensation according to law, repay the overdue wages of the employee during the period of employment and make up the social insurance fees, and complete the formalities for the transfer and continuation of the social insurance relationship. When the main body of the enterprise dies, it terminates the labor contract with the employee according to law. For the employee who is within 5 years of the statutory retirement age, the employee may voluntarily choose to receive economic compensation, or the social insurance premium and basic living expenses set aside by the unit for payment until the statutory retirement age. Institutions designated by the government shall pay the basic living expenses, basic old-age insurance premiums and basic medical insurance premiums on their behalf.

4. We will provide re-employment assistance. Through skills training, job introduction and other means to promote the unemployed re-employment or self-employment. For those who have difficulty finding employment, we should increase employment assistance and provide assistance through various means such as developing public welfare posts. Unemployment insurance benefits shall be paid to qualified unemployed persons in accordance with regulations, and those eligible for assistance shall be included in the scope of social assistance in a timely manner to ensure their basic livelihood.