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China

China's incoming president slams turbine manufacturers

CHINA: Xi Jinping, general secretary of China's ruling Chinese Communist Party, has lashed out at the country's wind turbine manufacturers for excess production capacity.

Xi Jinping is the general secretary of Chinese Communist Party
Xi Jinping is the general secretary of Chinese Communist Party

Xi criticised the wind turbine manufacturing sector by naming it along with polycrystalline silicon, electrolytic aluminum and silicon steel sectors, among others, for their high levels of redundancy in production capacity, at a conference in December, it has been revealed.

Xi is to replace Hu Jintao as chinese presidentat the National People's Congress in March.

The incoming president said China's industrial sectors with excess capacity have seriously affected efficiency and investment. He warned that they will harm social stability if they go unchecked.

As a result, he added, China must give priority to "neutralising" the excess production capacity.

Industry officials estimate that around half of the Chinese wind turbine manufacturing sector's 30-35GW annual production capacity is currently lying idle. To solve the problem, China needs to merge and close some plants, which may result in rising unemployment and greater pressure on national economic growth.

Turbine manufacturing was first identified as one of nine sectors with excess capacity back in 2009, and the situation has worsened since then.

According to analysts at China International Capital Corporation, China's largest turbine manufacturer Goldwind has expanded annual production capacity to over 6GW, but delivered only 3.1GW wind turbines in 2011 and 2.7GW in 2012.

This is largely due to the fact that the rate at which China is installing new turbines has slowed significantly over the past couple of years.

In 2011, China had 17.63GW new installations, down 6.9% from the previous year. In 2012, China had about 14GW new installations, down 20%.

Excess production capacity combined with tumbling installation rates has seen turbine prices plummet in China. In four years, turbine prices have fallen from about CNY 7,000/kw ($1,125/kw) to just over CNY 3,000/kw ($482/kw).

This cost-cutting has eaten away at profit margins and, as a result, the majority of Chinese turbine manufacturers are expected to reveal substantial losses when they announce their financial results for 2012.

Xi was speaking at the Central Economic Working Conference on 15 December in Beijing.

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