China has been coming across issues with overproduction and deciding on how to increase the size of their industries. In order to address the issues they believe that creating mergers, setting up reorganizations with the firms/companies that are having the same issues of overproducing and competitive pricing could be a solution in their case.
The amount of surplus that the Chinese industries and companies are left with are astonishing. China was left with over 160 million tons of surplus and more than 300 million tons of excess cement. According to recent reports, China might experience an increase of about 12 percent in their production growth. China has great expectations for their future, they predict that their "top 10 makers"will be responsible for about 60 percent of output by 2015. The article mentions how China is pushing to create these mergers so that larger firms can form across a wider variety of industries. They are hoping that this can lead to a beneficial progression to the economics of scales and reduce the excess surplus. Although this may seem like a good idea, it still has its own side effects. China's private sector my end up suffering greatly from this and there will likely a decrease in competition if the firms/companies are merging. At the moment there is still no guarantee that this will end up happening, it just all depends on what their government decides and what direction the Chinese economy is headed towards
This is an issue that China has been facing for the last 10 years. The government has been supporting and sponsoring these giant companies so that China can compete on the international markets. However, government support of the giant companies has caused the private market to suffer. It appears that this is what they are trying to do with the Steel and Cement industry. This was also done in the mobile service industry with China mobile and China Unicom receiving state support.
ReplyDeleteThe interesting question is how much more growth can the markets in china can have with the limited amount of space that is usuable in the large nation. Will the lack of space dictate the amount the economy can grow? or can they work around that?
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