Overcapacity is a global challenge that requires cooperation and coordination rather than finger pointing, a senior Chinese official said on Friday.
Widespread excess production capacities stems from the sluggish global economic recovery, weak global demand and ever-worsening global economic structural problems, Zhu Guangyao, vice-minister of finance, said at a news briefing ahead of the G20 Summit in Hangzhou.
The international community should "work hand in hand to cope with and eliminate overcapacity", Zhu said, "because it is crucial to global economic recovery and economic growth."
He said China is the first country among major global economies to have taken action to cut overcapacity, which is also a key part of the country's supply-side structural reform.
China has been cutting overcapacity since the end of last year, when it was decided that supply-side structural reform, including cutting overcapacity, should be carried out.
"We have clear policy objectives and specific policy support in terms of cutting overcapacity in the steel and coal industries, such as the establishment of a 100 billion yuan ($14.9 billion) structural adjustment fund to handle unemployment," he said.
Zhu also noted that China will adopt market-oriented and law-based approaches in the reduction of overcapacity, a process that mainly involves mergers and acquisitions as well as corporate restructuring based on market principles, he said.
According to Zhu, there are three major ways to cut overcapacity through bankruptcy: restructuring, conciliation and liquidation.
Zhu also mentioned that China is promoting the establishment of bankruptcy courts to help companies cut overcapacity.
"China will resolutely push ahead with overcapacity reduction with powerful policy measures," Zhu said.
"We expect to achieve a global policy consensus to contribute to the joint, sustainable and balanced growth of the global economy," Zhu added.
Zhang Yansheng, chief economist of the China Center for International Economic Exchange, agreed that overcapacity is a global problem faced not only by China but by many other countries, and cutting overcapacity is the appropriate choice.
"Facing a common issue, countries have only two choices: one is trade conflict that only leads to a more divided world, the other is cutting overcapacity."
Zhang said China's experience in cutting overcapacity will be conducive to the global community, and action to cope with overcapacity should be based on international cooperation.