As the second-largest economy in the world, the policies and plans that the China government announced at the Fourth Session of the 12th National People’s Congress perhaps provide some hints for the development trend of what is now the second-largest industrial gas market.
The GDP of China in 2015 is reported to be RMB 67.7 trillion, representing a year-on-year increase of 6.9%. Premier LI Keqiang stated in his Annual Report of the Work of the Government, delivered at the Congress, that this was not achieved without difficulties because the acceleration of the world economic growth was the slowest in the past six years – and the acceleration of world trade was even worse.
Regarding the issue of over-capacity, outdated production capacity of more than 90 million tonnes of iron and steel, 230 million tonnes of concrete, 76 million weight boxes of flat glass, and more than one million metric tons of electrolytic aluminium have been cut in the past three years alone.
Further cuts in the production capacity of iron and steel and other materials is expected. Until now, 150 iron and steel mills, state-owned or independent, large and small, have been reported to have shutdown. It is reported that in addition to the 90 million tonnes production capacity mentioned above, an additional 100 million to 150 million tonnes of steel production capacity will be cut in the coming years.
From a macro-economic perspective, Premier Li proposed that the economy grow at an average annual rate of 6.5% - 7% during this five-year period and by 2020, GDP will be double that of 2010. By then, China’s aggregate economic output should have exceeded 90 trillion yuan.
Following the ‘Internet+’ policy proposed last year, this year Premier LI stressed the plan to promote widespread applications of big data, cloud computation, and the Internet of things (IoT). Therefore, we would expect the gas industry to continue to develop such new applications to help optimise operations, improve their supply chain, and provide more value to customers.
Further positives can also be derived from the new Five-Year Plan report, with the statement that China will ‘significantly relax restrictions on entry into markets’ such as electricity, telecommunications, transport, petroleum, natural gas, and municipal public utilities. ‘Hidden barriers’ will be removed, and China will encourage private companies to increase investment in these areas and participate in reformation of State-owned enterprises (SOEs), it said.
In addition, the Five-year Plan will demand an investment of more than RMB 800bn in the railway system, RMB 1650bn in highways, EHV power transmission, oil and gas pipelines, and city metro systems. Such projects will both support the development of the gas industry when they are completed and require supplies from the end-user industries of industrial gases during the construction phase.
Environmental protection is another of the major topics to be covered, with a commitment to increasing natural gas supply, improving policy support for the development of wind, solar, and biomass energy, and increasing the proportion of clean energy in total energy consumption.