The recent recovery in the steel market has caused the strange phenomenon where overcapacity is being cut while the production is being increased.

ANBOUND Consulting is of the view that cutting overcapacity while expanding production is clearly not the result wanted by the central government.

Our field research shows that some of the local governments are so concerned with the social risk and the financial impacts arising from the bankruptcy of the enterprises that despite their struggles, these local governments are keeping the unnecessary enterprises afloat at all costs. Some of the local governments are using unemployment and bank debts as bargaining chips to pressurize the government and the group of companies.

In order to really solve the conflicts, we should operate based on a market-oriented approach, for example, bankruptcy liquidation, sale of assets and reducing the business size.