China ordered sweeping limits on investment in cement, steelmaking, and other industries Wednesday, in an apparent effort to curb overexpansion and its snowball effect. (China’s hefty stimulus package, and a mandate that banks increase lending sharply in the first half of the year, spurred an investment boom that has analysts worried.) While preventing these issues is crucial, the investment limits could also decrease the country’s ability to create certain renewable energy technology. What impact will this development have on China’s expansion into sustainable industry?
According to an NPR report, the order bans new aluminum production for three years and requires that regulators use funds to create steel, cement, polysilicon, and glass (for use in wind and solar equipment), instead of using the funds to build factories. The steel, cement, polysilicon, and glass industries will also be held to higher energy efficiency, recycling, and other environmental standards. Steel mills must be approved by Beijing instead of local authorities, whom Beijing says failed to enforce environmental standards.
Beijing apparently made the order in an attempt to keep the country’s recovery moving – by ensuring an adequate supply of industrial goods while preventing overexpansion-related economic troubles. Analysts believe overinvestment could spur vicious market competition, which could threaten already weak businesses, job availability, and bank assets.
Meanwhile, China’s businesses and investors await the profit-related consequences of the order. Some analysts also wonder if China will be able to meet its renewable energy goals without the investment funds coming in.