From the report of the third plenum of 18th CPC Congress of China， the Chinese government has made up its mind to shrink the governmental authority and make the market play a more important role. However， only the call of being “market-oriented” cannot promote the reform. This could be seen from the steel industry which has been haunted by the excess production capacity.
　　The previous industrial integrations were led and oriented by the government. But from now on， the profitability and the complementariness will be given more attention – He Wenbao， General Manager of Baosteel Group expressed this idea in October.
　　He was speaking of the Guideline Opinions about Resolving the Contradiction of Excess Production Capacity， which required the industries of steel， cement， electrolytic aluminum， panel glass and ship to solve the problem of excess production capacity.
　　The Guideline follows one principle： the combination of the market force and the governmental adjustment with the market force taking the leading position. That means the restructuring of these industries should be “market-oriented”.
　　The excess production capacity can cause the waste of resources and stop the industrial upgrade. The government has a strong sense of crisis about this， and， as He Wenbo said， it has been trying to solve problem with the governmental force taking the lead.
　　In the steel industry， in the mid-2000s， the government-oriented integrations were started one by one. In 2008， Tangshan Steel Group and Handan Steel Group were merged together to form Hebei Steel Group. And then this company absorbed the entities of many private steel companies， becoming a giant larger than Baosteel Group. In 2012， its output of raw steel amounted to 42 million tons， the largest in China and third largest in the world.
　　However， the goal of improving the operating efficiency was not realized in spite of the huge size. Experts point out that the integration just “placed the steel companies in Hebei together”. “The difference of operation of these companies made the elimination of behindhand production capacity fail to see the progress”.
　　In order to improve the GDP， which is an important indicator to review local government’s political performance， the steel industry， which could greatly boost the industrial output value， is considered to be a “money tree”. Eliminating the behindhand production capacity will cause great influence over the tax income and employment. Therefore， local governments are quite reluctant to give up the steel companies in their places. 　　The Chinese leaders might have seen the situation and put forward the idea of “letting the market be the force”. Their ideas are to promote the mergers and acquisitions （M&A） of enterprises to solve the excess production and to realize the industrial elimination and restructuring.
　　However， the “market force” the leaders refer to is different from the reality. The M&A is related the enterprise strategies and must have the factors such as the profit margin put into consideration. This is not a simple game of “big fish eating small fish”. Take the steel industry for example： the low profit margin of the entire industry made the industrial integration， which definitely costs a lot， unable to advance simply led by the enterprises.
　　Oppositely， most practitioners in the steel industry want to improve their production capacity because they believe that the demand for steel will increase in the future as long as the 7% GDP growth rate can be realized.
　　Therefore， it is not reasonable enough for the government to throw the burden of reducing the production capacity to enterprises while ignoring their own problems. The new measures， if not implemented properly and supplemented with more support， will just slow down the aggravation of the problem.