Important English Vocabulary from “The Economist”-(Day-26):
Dear Readers, to score good marks in English Section first and for most thing is you need to develop your reading skills, while reading a passage you need to highlight the tough words in it and you should know the correct meaning for those words. This will help you understand the passage clearly and also you can learn more new words, it means also you can develop your vocabulary. To help you in this part we have provided a passage along with meaning, synonyms and usages of hard words in the passage, make use of it. We also providing Important Vocabulary Quiz based on “THE ECONOMIST”.
Capacity cuts in China fuel a commodity rally and a debate
One of the biggest, and more controversial trends, in the global economy
STEEL ran in Zhang Cheng’s family for three generations. His grandfather mined iron ore. His father got a job in the big state-owned steel mill just outside Jinan, capital of Shandong province. His mother worked in the on-site hospital. And Mr Zhang went to the mill-run school, graduating to a job in its foundry, where, in the heat of the blast furnace, he rolled metal into thin bars for construction. But after nearly two decades in Jinan Steel, he worked his last day there this summer. In the name of “capacity reduction”—a government policy to rein in excess production of steel—the plant stopped operating in July, and Mr Zhang went on the dole.
Since they worked for a state-owned company, the local government has helped him and the 20,000 others who lost jobs find new ones. But it has been a struggle for Mr Zhang, a soft-spoken man. Openings in Jinan are mainly in the service industry—as a waiter in restaurants or an attendant at a station on the new underground. He worries that he does not have what it takes. “I’ve spent my life interacting with machines, not with people,” he says.
That China has persisted in cutting capacity in heavy industry, even at the cost of pushing people out of their jobs, has been one of the biggest but also more controversial trends in the global economy over the past year. It is big because of China’s sheer heft: the country produces nearly as much coal and steel as the rest of the world combined, and even more aluminium and cement. American and European companies have in the past accused China of swamping their markets with cheap metals. But more recently they have benefited as China’s efforts to curb production have fuelled a run-up in prices. But then there is the controversy: doubts about whether the capacity cuts are all they are cracked up to be.
The cuts are certainly ambitious. By 2020 the government aims to reduce the country’s annual capacity for coal production by 800m tonnes, or roughly 25% of what it made last year; its steel capacity by 100m-150m tonnes, nearly 20% of its output in 2016; and its aluminium capacity by 30% in big production centres. When Mao Zedong launched his catastrophic “Great Leap Forward” in 1958, he insisted that within 15 years China would produce more steel than Britain. China’s new campaign amounts to a Great Leap Backward: it wants to eliminate steel capacity equal to 15 times that of Britain.
When the government unveiled its plans last year, the natural response was scepticism. Yes, authorities had taken to talking tough: Li Keqiang, the premier, said that economic reforms would be “like taking a knife to one’s flesh”. But for years they had promised capacity cuts that never materialised. With local officials judged to a large extent on their area’s GDP growth, they had every incentive to pay lip-service to reducing capacity, while quietly allowing new investment. By the World Steel Association’s count, almost half of the steel policies announced by China from 1990 to 2016 were focused on limiting capacity. Yet China’s steel mills mushroomed and their capacity-utilisation rate fell from nearly 90% in 2006 to less than 70% a decade later.
Nearly 18 months into the latest bout of capacity cuts, China has made believers of many investors and analysts. The official numbers show it to be well ahead of schedule. And for those who doubt those data, two other indicators—price and profit—show that Chinese heavy industry is much healthier than just a short while ago. Coal and steel prices have more than doubled since the start of 2016. Producers of both, in the red for much of the past half-decade, have seen their fortunes improve markedly. Their profits have surged.
This, however, does not entirely settle the controversy. As in any market, commodity prices are determined by supply and demand. At the same time as China has closed steel mills and halted work at coal mines, demand for their products has strengthened, thanks to a property-market rally and the government’s sustained splurge on infrastructure. This suggests that the price rises reflect not just the elimination of unused capacity but also greater use of what had been deemed excessive. The coal industry is the best example. Last year the government ordered mines to cap their production at 276 days, trying to put a lid on supply; this year, it let them increase that to 330 days.
In China this has ignited a heated debate about whether the economy is on the cusp of a new growth cycle. Proponents argue that the rebound in industrial profits has allowed companies to repair damaged balance-sheets, and that the cuts in capacity are laying the groundwork for an eventual recovery in investment in production facilities. Others counter that a slowdown in the property market, visible in recent weeks, will spell an end to the recovery in demand, and reveal that current industrial capacity remains more than sufficient. At least some of the run-up in metal prices does appear to be excessive. At a meeting in August, the China Iron and Steel Association, an industry body, accused speculators of trying to exploit uncertainty about capacity cuts.
This points to a separate concern about the nature of China’s capacity cuts: low prices ought to have signalled to companies that it was time to curtail production, but it took top-down orders from the government to get them to act. Wang Tao of UBS, a bank, describes the successes to date as a testament to policy implementation: “It is difficult to say that market behaviour has really changed.” In the coal industry, officials are struggling to find the right balance, aiming to restrain prices after their initial efforts drove them up. “It’s like a car fishtailing,” says Laban Yu of Jefferies, an investment bank. After skidding a bit, a driver with some luck and skill can get his vehicle straight again.
Clownish as that might sound, there is a chilling subtext for global competitors. Putting a lid on capacity ought also to put a lid on China’s exports. But another aspect of China’s campaign is to replace outdated plants with more modern ones. In the steel sector, China has already amassed some of the world’s most technologically advanced facilities. It is likely to emerge from this round of capacity cuts with even better steel mills, giving it a bigger share of the high-end market.
The closure of Jinan Steel, where Mr Zhang worked, has been touted in the state press as an example of China’s seriousness in cutting capacity. It may in fact be a better example of industrial upgrading. One option the company has given laid-off workers is to move 300km (186 miles) to the east, to the city of Rizhao, where its parent group, Shandong Steel, just opened a state-of-the-art plant. The expected output of the Rizhao mill is a touch higher than the Jinan mill. Shandong Steel, in other words, appears to be replacing capacity, not cutting it. But that is cold comfort for Mr Zhang: for its new production lines, the company wants younger workers, especially those with university degrees.
Source: “THE ECONOMIST”
1). Dole (noun)
Definition: benefit paid by the state to the unemployed.
Synonyms: unemployment benefit, state benefit, government benefit
Usage: I was on the dole for three years.
2). Persist (Verb) past tense: persisted; past participle: persisted
Definition: continue in an opinion or course of action in spite of difficulty or opposition.
Synonyms: persevere, continue, carry on, go on
Usage: The minority of drivers who persist in drinking.
3). Heft (Verb)
Definition: Lift or carry (something heavy).
Synonyms: lift, lift up, raise, raise up
Usage: He lifted crates and hefted boxes.
4). Swamp (Verb) gerund or present participle: swamping
Definition: overwhelm with an excessive amount of something; inundate.
Synonyms: overwhelm, inundate, flood, deluge, engulf
Usage: The country was swamped with goods from abroad.
Definition: restrain or keep in check.
Synonyms: restrain, hold back, keep back, hold in, repress
Usage: She promised she would curb her temper.
6). Catastrophic (Adj)
Definition: extremely unfortunate or unsuccessful.
Synonyms: disastrous, calamitous, cataclysmic, ruinous
Usage: The catastrophic consequences of a major oil spill.
7). Scepticism (Noun)
Definition: a sceptical attitude; doubt as to the truth of something.
Synonyms: doubt, doubtfulness, dubiousness, a pinch of salt
Usage: Members of the organization greeted his ideas with scepticism.
8). Mushroom (Verb) past tense: mushroomed; past participle: mushroomed
Definition: increase, spread, or develop rapidly.
Synonyms: proliferate, grow/develop rapidly, burgeon
Usage: The ecotourism industry mushroomed in the 1980s.
9). Bout (Noun)
Definition: a short period of intense activity of a specified kind.
Synonyms: spell, period, time, stretch
Usage: Occasional bouts of strenuous exercise.
10). Splurge (Noun)
Definition: an act of spending money freely or extravagantly.
Usage: The annual pre-Christmas splurge.
11). Exploit (Verb)
Definition: make full use of and derive benefit from (a resource).
Synonyms: utilize, make use of, put to use, use, use to good advantage
Usage: Platinum was originally exploited by the Indians of Colombia and Ecuador.
12). Curtail (Verb)
Definition: reduce in extent or quantity; impose a restriction on.
Synonyms: reduce, cut, cut down, cut back, decrease
Usage: Economic policies designed to curtail spending.
13). Testament (Noun)
Definition: something that serves as a sign or evidence of a specified fact, event, or quality.
Synonyms: testimony, witness, evidence, proof
Usage: Growing attendance figures are a testament to the event’s popularity.
14). Touted (Verb)
Definition: attempt to sell (something), typically by a direct or persistent approach.
Usage: Sanjay was touting his wares.