China Market Watch: Consolidation of Cement Firms and Plans to Lower Logistics Costs

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China-market-watch

China’s cement firms to consolidate by over 50 percent by 2020

60 percent of China’s cement capacity is to be consolidated into 10 of the country’s top production companies by 2020. There are around 3500 cement producers in China, and the country’s Cement Association has petitioned to speed up the consolidation process, which will involve numerous closures of cement plants and mergers. This will require existing cement producers to jointly pool RMB 20 billion into a restructuring fund, with many commentators suggesting that the top production companies should contribute the most. China accounts for around 60 percent of global cement production, and is one of the industries suffering from serious overcapacity along with the steel and coal industries. The industry is required to cut 390 million tons of capacity, and 130,000 jobs over the next five years in order to reach a balance between supply and demand.

China to invest US$450 billion towards modernizing agriculture by 2020

The Agricultural Development Bank of China has recently agreed to loan around RMB 3 trillion by 2020 to aid the modernization of China’s agriculture industry. The Ministry of Agriculture signed an agreement with the bank to protect national food security, support the sector’s business overseas and to develop China’s seed industry. It also aims to increase efficiency and encourage income growth in rural areas. It is not clear if this deal is separate from the bank’s announcement made in May of this year to lend RMB 3 trillion to reduce poverty via means of agricultural investment. The bank will be responsible for managing financial services regarding the deal.

Professional Service_CB icons_2015RELATED: Pre-Investment and Entry Strategy Advisory from Dezan Shira & Associates
China rail freight grows for first time in 32 months

In August, China’s rail cargo volume showed signs of growth for the first time in 32 months. The National Bureau of Statistics figure grew by 1 percent year-on-year to 279 million tons. The worst year-on-year performance was recorded in October 2015, when rail freight volume dropped by 16.3 percent. However, August’s positive figures are not enough to reverse the decline of the first eight months of this year. The Bureau reported 2.1 billion tons of goods transported by China Railway Corp. (CRC), a 6.2 percent decrease from last year. CRC is now planning to invest in 6,600 container flatcars and 9,000 double decker flatcars to boost capacity, despite the company having lost RMB 7.3 billion in the first half of this year, bringing its debt total up to RMB 4.2 trillion.

China issues plan to lower logistics costs

The State Council issued a plan to lower logistical costs, detailing its aims to reduce ratio of costs to 8.5 percent for manufacturers and 7.3 to 7.7 percent for wholesale and retail sellers by 2018. The government plans to do this by cutting taxes and fees, and also streamlining reviews and approvals for logistics companies, with additional requirements for improved network efficiency and better connectivity between motorways, railways, waterways and air routes. Customs clearance will be sped up and delivery services will be extended further into rural areas, with financial support and adequate land supply designated for logistics purposes.


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