By Zhu Junbi

The 2010 No.1 Document of central government calls grasping the current opportunity of rapidly increased house construction and ample supply of building materials in rural area, considering the support to peasants' house construction as an important measure for expanding domestic demand, adopting effective measures to boost "building materials going to the countryside" and encouraging peasants to build self-occupied houses according to laws and regulations.

Related experts estimated that Chinese rural residents spend nearly RMB500 billion yuan on house construction and maintenance each year. Through such policies as financing allowance, if peasants' house construction can be mobilized and driven to be increased by from 10 percent to 15 percent on the original basis, the annual domestic consumption amount will increase by RMB50 billion yuan to RMB60 billion yuan at least, which will drive the rural cement sales volume to be increased by around 30 million tons. Therefore, the allowance for "building materials going to the countryside" can narrow even reverse the price gap between the new dry process cement and the cement with laggard capacity, help encouraging rural areas to use more new dry process cement and accelerate the withdrawal of the cement with laggard capacity from the market.

In this respect, China Cement Association has held Symposium on Asking Opinions for Several Problems in Implementing "building materials going to the countryside" for Cement Products recently, where Kong Xiangzhong, Secretary General of China Cement Association, expressed that "building materials going to the countryside" can drive rural market's demand on cement.

Statistics shows that in 2009, the number of the newly-established production lines for new dry process cement across China is 176, and the annual newly-added capacity of cement clinker is 195 million tons. And the number of the production lines with the daily output of more than 5,000 tons is 69, taking up 56.47 percent of the total newly-added output.

The Suggestions on Expanding and Implementing the Policy of Building Materials Going to the Countryside recently delivered by China Building Materials Federation towards Ministry of Industry and Information Technology (MIIT) mentioned that what shall be done is to make peasants from totaling 15 million to 20 million families benefit from house construction, and all houses cannot be constructed without cement. Therefore, such a new increment plus the drive of the RMB4 trillion yuan-valued investment plan can basically consume about one third newly-added output in 2009; if including the original market demand, the capacity of the 176 production lines for new dry process cement newly added in 2009 can be digested effectively.

Relevant experts in cement industry rendered that to eliminate laggard capacity, the market shall also be paid attention to. Such laggard capacity of vertical kilns has been taking up a large proportion in Chinese production manners for cement in the past few years due to such reasons as small investment, short cycle and simple technics. Nowadays, as the strong demand brought by the rapid growth of the fixed assets in cement industry and the urgent demand of energy conservation and emission reduction, those small and dispersed vertical kilns have gradually lost the soil for survival, and the discriminatory electricity prices and the cancellation of preferential policies even make them lost competitive strength further.

As introduced by Liu Zuoyi, President of www.dcement.com, since the issuance of Several opinions on restricting capacity overplus and redundant construction in part industries and guiding industrial healthy development, the expansion of newly-added capacity of cement has been restricted effectively; the elimination force to laggard capacity has been boosted; the acquisition and integration of the industry has been encouraged by policies; and the centralization degree of the industry will be further improved.

Experts believe that with the improvement of the centralization degree of cement production, the elimination of laggard capacity will also be realized naturally. With the issuance of Several opinions on restricting capacity overplus and redundant construction in part industries and guiding industrial healthy development, the approach for big enterprises to further increase production lines has been decreased, the merge and reorganization between enterprises and regional combination will become the mainstream, and large enterprises will realize the control on regional cement markets through coalition, so as to eliminate regional laggard and small capacity. Therefore, the surplus laggard capacity across the country will be eliminated naturally depending on market methods.