The Worse Demand Gets, the Higher the Compliance Price, and Capacity Utilization Falls into a Death Spiral! Advanced Production Lines Are Forbidden to Sell Cheap, Downstream Profits Drop 10% Over Three Years, SMEs Die First, Inventory Is Not Written Down and Bad Debts Are Hidden in Small and Medium Banks, the Same Policy Prolonged the U.S. Great Depression by 60%! Not One Cent of the Loss Is Avoided — It Will Only Explode in a More Concentrated Way

The National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) of the Chinese Communist Party (CCP) issued Document No. 1303, using administrative means to determine the floor prices and costs of industrial products, banning low-price disorderly competition in an attempt to address overcapacity. Through practical data analysis from industries such as polysilicon, cement, and steel, the host points out that this set of policies not only fails to eliminate overcapacity, but instead causes operating rates to plunge into a death spiral, strips downstream profits, and prevents advanced production lines from clearing out through low prices. At the same time, the failure to devalue inventory and the practice of rolling over loans quietly transfers bad debts to local small and medium-sized banks, ultimately concentrating and triggering all economic losses on small and medium-sized enterprises and financial institutions with the weakest bargaining power.

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Look at the whole picture to avoid fragmented understanding. Previously, I saw many discussions online about how the CCP has revived deregistered enterprises to tax them. However, compared to what we are going to talk about today, that is merely child's play. In mid-September, the NDRC and the SAMR issued a document numbered Fa Gai Jia Ge [2026] No. 1303, with a title long enough to circle the Earth: "Notice on Relevant Matters Concerning Cost Accounting for Low-Price Disorderly Competition in Important Industrial Products." Translated into plain human language, it means one thing: important industrial products are no longer allowed to be sold at low prices. The CCP's justification is that this is to clean up involution-style competition. Where is the truly malicious part of this document? It doesn't lie in the words "no selling at a loss" or "no low prices," but in the word "cost," because this determines who calculates the cost and how it is calculated. Let's first talk about how this cost is calculated. This document has a total of six articles, and the core meaning is as follows.

First, calculate costs based on the enterprise's own accounting. Well, if the CCP's tax department is not satisfied with your books, they will use the industry average level as the bottom line. The implication is that you are in charge of your books, but the Imperial Army will be in charge of you. Well, that is a famous quote from Brother Sanren. There is one clause that is extremely high-handed, roughly meaning that your accounting must be recorded reasonably. As for what is considered reasonable and what is unreasonable, not a single article in this regulation explains it. In other words, this part relies entirely on the discretionary power of CCP officials. Well, if your accounting is deemed unreasonable, failing to meet the aesthetic desired by the CCP—for example, if your operating rate is much lower than the industry average—you must appropriately consider the impact of the operating rate. This so-called industry average cost is then calculated by industry associations under the guidance of the NDRC and the SAMR. What kind of things are the CCP's industry associations anyway? Everyone has a clear idea in their hearts. In China, as long as something is called an association, the guiding department...

It is definitely the government of the Chinese Communist Party (CCP), and generally, it is the civil affairs department of the CCP that manages this kind of thing. As for the association presidents, most of them have a lot of government intervention factors involved. Anyway, you figure it out: who exactly gets to decide what this so-called "unreasonable" means? Right? And what is the "reasonable" method? Well, this document doesn't write a single word about it; it is entirely a blank check left for the executors—meaning these officials can fill it in however they want. To put it bluntly, what exactly does the cost include? This is not covered in Document No. 1303. In fact, more than twenty years ago, nearly thirty years ago, back in 1999, the CCP's National Development and Reform Commission (NDRC) was still called the State Planning Commission. At that time, the Planning Commission issued a document called "Provisions on Prohibiting Low-Price Dumping." The description of cost in that document was crystal clear: production cost equals manufacturing cost plus management expenses, financial expenses, and sales expenses. In plain terms, you have to include the depreciation part, and you also have to include the bank interest part.

Include it; this is called full cost. Now, the interesting part comes. Let's do the math for a factory. For example, suppose there is a ton of goods that can be sold on the market for 40 yuan—just a hypothetical figure. Then, the raw materials plus electricity costs for each additional ton produced would be, say, 28 yuan. Added to that are the workers' base salaries, maintenance costs, and bank interest. What are these? These are fixed costs. What does fixed cost mean? It means you have to pay this money regardless of whether you are operating or not. So, when spread over each ton of goods, suppose this portion of fixed cost expenditure is 6 yuan, and equipment depreciation spread over each ton is 9 yuan. So, you sell a ton, first you get back 40, subtract 28, and you have 12 left. Out of these 12 yuan, 6 yuan is used to pay wages and interest, and at this point, you still have 6 yuan in cash left in your hand. The cash flow seems positive, right? At this time, interest can still be paid, supplier payments can still be made, and bank loans can still be repaid—meaning you can still continue to renew loans. But what is the situation on the books? It is 28 plus 6 plus 9, the full cost is 43 yuan, and you sold it for 40 yuan. On the books, there is a loss of 3 yuan per ton. This is the year of relative overcapacity. The price the enterprise relies on to survive can only be maintained above the cash cost, but it is below the full cost. The manifestation is that the cash flow is still positive, but the total account is in the red. Now, let's step away from this case and look at how this game works in reality. In China today, such cases are everywhere; electric vehicles, polysilicon, they all follow this path. We have talked enough about electric vehicles; today let's talk about the polysilicon industry. It has already gone through the whole process completely, and every step has a timestamp. Everyone, look at this process. Polysilicon is the silicon material at the very upstream of making photovoltaic panels. On December 9 last year, Tongwei, GCL, and other leaders in silicon materials pooled 3 billion yuan. What was this money for? To establish a storage and purchasing platform, intending to buy up the excess capacity and then collectively shut it down. Why? Because the price was driven down too low, so they wanted to control the supply.

This way, don't let the price keep crashing. As a result, on January 6 this year, the State Administration for Market Regulation called the photovoltaic industry association and six leading companies in for a talk. The reason was that someone reported these companies for pushing up prices under the banner of industry self-discipline, demanding that they not agree on capacity and prices in the future, and not to communicate with each other about prices, costs, and production/sales volumes. Then, on January 8, polysilicon futures directly hit the limit down, and the self-discipline of limiting production and prices was completely suspended. That was in January. By July, the wind direction from the CCP side did a 180-degree turn. On July 27, the Photovoltaic Industry Association issued a group standard called "General Rules for Cost Accounting Models in the Photovoltaic Industry," and also provided a supporting self-inspection accounting form. On this accounting form, what is the full cost of silicon material? It is 43 yuan per kilogram. Immediately after, on July 31, the State Administration for Market Regulation went to Yancheng, Jiangsu, to give this group of photovoltaic industries some bullshit price compliance guidance. The words were also very clear; they had already been reminded and summoned, if you...

If they don't abide by this price and this cost principle, they will be severely dealt with according to the law. On the evening of August 6, eight polysilicon enterprises signed a joint initiative. These eight enterprises together account for more than ninety percent of the effective capacity of polysilicon in China. What did they promise? They promised that the selling price of all products would not be lower than the cost calculated according to that set of principles. Just savor this plot! What did the State Administration for Market Regulation say in January? They said you are not allowed to communicate costs with each other. By July, it was still the same few enterprises, and then closely followed in August, the same batch of enterprises personally promised that no one's selling price would be allowed to be lower than the bottom line of the administrative cost set by the Chinese Communist Party (CCP). Similarly, when peers prop up prices together, if the enterprises set it themselves, it is a violation, but if the CCP sets it for the enterprises, it becomes compliant. What was the result? The Silicon Industry Branch of the China Nonferrous Metals Industry Association, which specializes in tracking the polysilicon market, said on August 5 that the price was already lower than the industry cost, and all enterprises also suspended their quotes. Following closely on August 12, what did this Silicon Industry Branch say?

It said that the market had no transactions for two consecutive weeks. Then on September 16, it said that actual signed orders were not on a scale, and direct spot transactions were very few. And the small amount of transactions mainly relied on roundabout methods such as OEM (original equipment manufacturing) and dual distribution. The spot price was indeed raised, but the futures price did not move at all and continued to go down. The spot quotation rose from about 32.5 RMB per kilogram on August 3 to 40 to 43 RMB in mid-September. But what was the futures price of actual transactions? On September 10, the November contract for polysilicon closed at 36.7 RMB per kilogram, which was 5 to 6 RMB lower than the spot quotation. What does this indicate? It indicates that the spot quotation is no longer a price; it is just a quotation. The price given by the market for actual transactions is much lower than the quotation, with a difference of fifteen to twenty percent. This is also fucking out of touch with reality.

The overall price has been pushed up, and goods cannot be sold. So what will happen next? This brings us to the operating rate mentioned in the document. Well, let's break it down step by step. If enterprises quote according to the bottom line set by the CCP, what will happen? Customers will definitely find it too expensive, and customers who find it expensive will turn to other companies. So what will happen to the sales volume of this enterprise? It will decrease. With decreased sales volume, the operating rate will also follow and drop. Although the operating rate has dropped, only the elastic part of the production cost has decreased, while the fixed expense part—such as depreciation, interest, and labor wages—remains the same. This leads to an increase in the fixed cost allocated to each ton, meaning the total cost per ton becomes higher. In this way, the baseline cost set by the CCP will also increase accordingly. Once the baseline rises, even more customers will leave, and the operating rate will drop further. What does whether this cycle can sustain itself depend on? It depends on how sensitive customers are to prices, and it also depends on how large a proportion fixed costs account for in total costs. I have made a formula card for everyone, take a look.

Let's take a look. The formula is as follows: the critical operating rate equals the demand elasticity minus one, multiplied by fixed costs divided by variable costs. What does this mean? It means that for every one percent drop in the operating rate, the total cost and the baseline cost prescribed by the CCP will rise accordingly. What is the magnitude of this increase? It is the proportion that fixed expenses account for in the total cost. Well, once the baseline rises, customers run away, and the increase of the baseline multiplied by this elasticity is what? It is the magnitude by which sales are dropping, which will cause sales to drop by even more than the one percent drop in the operating rate. This will cause one round to drop more than the previous one because it is a cycle. Well, now let's calculate in our heads. Within that 43 RMB administrative cost baseline set by the CCP, the money that must be spent even without operating—such as depreciation and interest—is allocated at a bit over fifty percent operating rate, which is about 15 RMB per kilogram. The remaining 28 RMB is the raw material and electricity costs that must be spent for every additional kilogram produced, which is the elastic cost part of the money. If operating at full capacity, the output will almost double.

times, then what about the fixed cost allocated per kilogram? It's about eight yuan. Eight divided by twenty-eight is approximately 0.29. This 0.29 is the fixed cost divided by variable cost term in the formula. What does this mean? It means that when operating at full capacity, the fixed expenses allocated per kilogram account for about 30% of the variable cost. The higher this number, the more it indicates what? The more asset-heavy it is. And what happens when it's asset-heavy? Once the operating rate drops, costs will rise even more sharply. Silicon material is a standardized product, which means what? It means it is very easy for customers to switch suppliers. We take the average elasticity as three, which is also a historical elasticity, meaning that for every 1% increase in price, customers will leave by 3%. When this fixed expense cost accounts for one-third of the total cost, for every 1% drop in the operating rate, the bottom-line cost set by the CCP will rise by 0.3 percentage points, and then customers will happen to leave by 1%. This is a critical point, and this critical point is where the fixed expenses allocated per kilogram account for about one-third of the total cost, which is.

It can be said that the fixed expenses are exactly half of the variable costs. So, what is half of twenty-eight yuan? Fourteen yuan. Then, to allocate eight yuan into fourteen yuan, how much must the operating rate drop? Eight divided by fourteen, which is 57%. Hey, this is the same as what the formula calculates. So, what was the operating rate of the top seven state-owned enterprises in August? It was 52.7%, which is 4.3 percentage points lower than the line we calculated. And the operating rate of medium-sized enterprises was only 25.1%, all below this line. Even if we calculate the error in this operating rate using a rough method, it won't be much different. Hey, 57% minus 52.7% equals an error of 4.3%. The direction given by this set of data is already very clear: the easier it is for customers to run away, the heavier the fixed costs will be allocated, and this line will become higher. The first ones to be dragged into this are the small and medium-sized enterprises whose customers can run away at any time. Article 4 of the CCP's Document No. 1303, that operating rate clause, is aimed at this. The original text only says what? Hey, it is called.

Appropriate consideration. Whenever the CCP mentions "appropriate consideration," these bastards are definitely not considering you, but their own pockets. If we calculate based on the industry average operating rate of 53%, no matter how low an enterprise's own operating rate is, due to the CCP's cost restrictions, this leads to the fact that no matter how little capacity an enterprise has, the depreciation and interest allocated per kilogram will not change. Then its cost bottom line will not rise because of its own low operating rate, right? Because your costs are subject to the CCP's right of interpretation. Hey, the problem then shifts back to the CCP's administrative cost bottom line. The industry-wide operating rate has dropped from 75% three years ago to 53%. If we follow the same set of parameters, the bottom line for all enterprises will rise by 11.5% together. What does this mean? It means the worse the demand, the higher the CCP's compliance price, because your bottom-line cost can only be allocated through what? Through production volume. Because now the market doesn't have that much demand, your production volume can't go up, but

the cost of fixed expenses is firmly pressed there by the CCP. So everyone might have a question in their hearts: who is actually making money in this set of rules, and who is losing money? Hey, let's look at the data. From January to July this year, among industrial enterprises above designated size, the profits of coal mining increased by 50.4%, non-ferrous metal smelting increased by 90.8%, chemical fuels and chemical products increased by 56%, and chemical fibers increased by 107.7%. And what is on the other end? Steel profits fell by 51.2%, and non-metallic mineral products, including things like cement, fell by 48.2%, automobiles fell by 20.4%, and moving further down, what is it? It's that profits in agricultural and sideline food processing fell by 58.2%, wood processing fell by 36.9%, and textiles and apparel fell by 17.2%. The performance in prices is also consistent. In August, the ex-factory prices of the mining industry rose by 17.8% year-on-year. The mining industry is what? It's various ores, while the ex-factory prices of consumer manufacturing

still fell by 0.5% year-on-year. So, what is the difference between these two ends? A full 18.3 percentage points.

Why are they compiling this set of data? The fucking Chinese Communist Party is obviously trying to figure something out, right? What are they trying to figure out? How to squeeze some more money out of loss-making enterprises to spend, of course. My Steel website tracked two hundred forty-seven steel mills, and in mid-September, only seven point seven nine percent were making a profit. In the cement industry, the proportion of loss-making operations in the first half of the year was around sixty percent, meaning out of one hundred cement enterprises, sixty were losing money. Why mention these things? Because steel and cement happen to be the main battleground for the next round of cost bottom lines. In early September, industry associations in the three northeastern provinces were already following the solar power template to establish a provincial-level cement cost accounting standard, and shortly after, the Shandong Cement Association also issued an initiative against production cuts. The substance of this anti-cut stance is that the Chinese Communist Party now wants to use administrative verification of enterprise costs to take away your right to interpret whether you made money or not. Did you get that? Resuscitating a few zombie enterprises and then taxing them is really a lot of fucking trouble. So what does document number 303 mean for downstream businesses?

Profits downstream are still falling, mainly because goods aren't selling and revenue isn't growing, yet costs cannot be amortized. So, what is No. 1303 trying to take away? It is the primary buffer for the downstream sector during the next round of the downturn. What kind of buffer? In a normal market economy, as soon as the economy heads downward, the prices of upstream goods fall the hardest; this is the famous economic law known as the long-side effect. Does Hong Kong guide economic laws? If this long-side effect were to take hold under normal economic conditions, when the economy performs poorly, the prices of raw materials for downstream sectors would become cheaper, and the money saved could offset the losses in sales volume. With this cost floor, upstream prices would automatically stop falling once they hit a certain level. But if upstream operating rates drop like this, industry costs rise, and downstream raw materials actually become more expensive during a downturn. Let's perform a deduction based on the actual profits of downstream consumer goods manufacturing: in a mild downward cycle, the floor over two years would transfer more than a year's worth of downstream profits to the upstream. If you also happen to encounter an increase in the industry's average costs, that's two years' worth of profits. Downstream net profit is only about 3%. If raw material prices rise under these economic conditions, the downstream sector cannot pass on the costs. This means that over three years, net profit would have to be at least around 10%. So, price elasticity is gone; where did the elasticity go? It can only go toward production volume. Let's compare the capacity utilization rate in the second quarter with the ex-factory prices in August: among eleven major industries, six have operating rates that are still falling year-on-year, yet prices are rising year-on-year. There isn't a single industry where prices are falling while operating rates are rising. In other words, not one of the eleven industries is selling more goods by lowering prices. But is this fucking normal in this kind of economic environment? Let's look at other sectors: the operating rate of coking coal enterprises dropped from about 72% in early August to around 67% in mid-September, and coal prices saw five consecutive rounds of price hikes in the same period. The operating rate of PTA dropped to 49.3% in August, the lowest point since 2014. Cement is even worse; the operating rate of cement clinker at the end of August was only 39%. After looking at this data, a more fatal question arises: in this model of production suspension and clearing, who can actually survive? If we follow market rules, it would be clearing based on price order, meaning whoever has the highest costs dies first, right? At this point, all losses are queued according to cost. If we follow production suspension and clearing, everyone's prices are the same, so who gets the orders? It depends on connections, local protectionism, and whether you are a state-owned or central enterprise, because this is equivalent to everyone bearing the losses together. In this situation, small and medium-sized enterprises will definitely die first, because they lack economies of scale and their fixed costs per unit will be amortized more heavily. You see, the CCP eliminates enterprises by class. There is another layer that is the most fucking insidious: legal full costs include depreciation and interest. Depreciation and interest have nothing to do with how efficient you are; they have to do with when you built the factory and how much money you borrowed. For example, take an old factory built in 2015; its depreciation has long been fully amortized, and the variable cost per ton is only about 32 yuan. Including fixed expenses, the full cost is only about 34 yuan because it has no depreciation. But if it's a new production line built with borrowed money this year, the technology is very advanced, and the variable cost per ton might only be 26 yuan, but it has to amortize 7 yuan in depreciation and 4 yuan in interest. At this point, its full cost will reach 39 yuan. In a normal market, the new production line could push prices down to between 26 and 32 yuan, squeezing out the old production line. But if the CCP uses this full cost to set a price floor, the old production line can still legally sell at 34 yuan, but the new production line is not allowed to go below 39 yuan. The logic behind the CCP guiding economic laws is that advanced production capacity is actually forbidden from selling cheaply. Furthermore, if anyone's cost is 30% lower than the industry average, they are doomed; the CCP will definitely determine that the data is unreasonable, and they will be adjusted and investigated. And they will be audited for taxes too.

Well, now that we have covered prices and production, let's look at the ledger and the banks. Under accounting standards, how are inventories recorded? They are recorded at the lower of cost and net realizable value. Put simply, net realizable value is the estimated selling price. However, after the introduction of No. 1303, what serves as the most authoritative basis for the estimated selling price? It is the compliant price restriction. And what is the lowest compliant price? It is the cost itself. In other words, the net realizable value will not fall below this cost. What happens at this point? The inventory does not need to be written down by even a single penny, as long as your enterprise refuses to admit that these goods cannot be sold. Well, of course, admitting it does no good either; um, the Chinese Communist Party (CCP) simply refuses to acknowledge it. At this point, the enterprise's ledger will never show a loss, and the book profit will never decrease. Um, the CCP can also collect more taxes. At the end of July, the finished goods inventory of industrial enterprises above designated size reached 7.27 trillion, a year-on-year increase of 10.8 percent, but operating revenue only grew by 0.5 percent. In other words, production is piling up much faster than it is being sold. Meanwhile, the accounts receivable of enterprises above designated size have already reached 28.88 trillion, and the average collection period has reached a terrifying 71.9 days, which is 0.9 days longer than the same period last year. From the end of February to the end of September this year, for eight consecutive periods, it has slowed down year-on-year. We all know a basic principle: if goods cannot be sold, the money cannot flow back, right? And this gap will travel down along commercial bills and bank loans, correct? And what is used the most in business operations? It is commercial bills. At this point, this will cause the six-month commercial acceptance bills issued by enterprises to their suppliers to become unpayable upon maturity. If the bills cannot be honored, the suppliers will not get their money. If the suppliers have already taken these bills to commercial banks for discounting, the banks will in turn have to chase the suppliers for payment, and the default will spread to smaller suppliers. This will further lead to the enterprises being unable to repay their own working capital loans upon maturity. And that is where things get interesting. At this point, the banks have two choices: either recognize the non-performing loans, or renew the loans. To renew the loans, they must use the inventory as collateral, and the inventory is recorded at cost. In other words, the value of the collateral is thus severely overestimated. When will the true price emerge? They have to wait; either the enterprise goes bankrupt, um, and this true price blows up and comes to light; or they have to wait until the bank disposes of the collateral, at which point the true market transaction price will finally appear. However, when the market price appears, the loss will hit the ledger all at once. Whose ledger will it hit? The ledgers of city commercial banks and rural commercial banks in production regions such as polysilicon, cement, and steel. Now you know how the malnutrition of Chinese banks actually came about, right? Oh, right, there is another thing that is also quite interesting. A friend of mine who deals with commercial acceptance bills told me what? The overdue list of acceptors at the Shanghai Commercial Paper Exchange will no longer be published separately in February 2026. Because I don't follow that market, I didn't pay attention to that data. However, my friend told me that, damn it, from now on we have lost our compass and can only guess blindly. Everyone can verify this news now. And what is the real-time news? It is that the National Bureau of Statistics of China, which releases monthly profit data for enterprises above designated size, has stopped publishing the loss data for loss-making enterprises. The two most direct early warning indicators for supply chain credit are no longer included in the public data. And what are private business owners doing? The data is also very clear: from January to August, private investment dropped by 10.1 percent year-on-year, and even manufacturing investment fell by 2.3 percent year-on-year, continuing a downward trajectory since the beginning of this year. The logic is not complicated either. Why would you build new production capacity? Isn't it to improve efficiency and then compete with lower prices? But hasn't this path been hijacked by the CCP's economic regulations? You can adopt new technologies, sure, but the CCP's statutory baseline will just be set even higher. How much you can sell in the future depends on a string of undefined administrative judgments. For this kind of uncertainty, any investor will demand a risk premium. Let's do a simple discounting model, um, let's calculate based on a project requiring an 8 percent return and 2 percent growth; for every percentage point increase in the discount rate, the value of the project drops by 14 percent. This is the standard algorithm of the discount model, and actually, this playbook was already tried by the United States long ago, and the answer is that it does not work. When was it played? From 1933 to 1935, when Roosevelt enacted the National Industrial Recovery Act, and under this act, more than 500 industry codes were created, among which over 400 prohibited sales below cost, and the cost was also determined by the trade associations of each industry. Economists Cole and Ohanian later calculated that this cartel policy—ah, yes, a cartel is when peers fix prices and production limits together—well, this whole gimmick accounts for about 60 percent of why the U.S. economy was so slow to return to its trend.

In other words, this whole thing not only failed to help the economy recover, but what did it actually do? It hindered the economy's self-recovery. This law hadn't even been in effect for two years when, in 1935, the U.S. Supreme Court ruled unanimously that it was unconstitutional. In the opinion written by Justice Cardozo, there was a phrase that went something like this: he called it an unbridled delegation of power. A counter-example is Nixon's price controls in 1971, where prices were only allowed to rise in accordance with cost increases; in other words, what was Nixon doing? He was setting a price ceiling. He used costs to set this upper limit. As a result, in 1973, feed prices rose, but poultry prices were not allowed to rise, so farmers began destroying chicks in large numbers. By 1974, once the controls were lifted, the U.S. CPI rose by 10.1% for the year. When there is a ceiling, you get shortages; when there is a floor, you get surpluses and idle resources. But the principle is the same: it is using administrative fantasy to replace prices.

So for ordinary people, especially private business owners who supply to or purchase from these industries, the payment period should be as short as possible. Think twice before accepting commercial acceptance drafts issued by downstream companies. To see the true price of an industry, do not look at the quoted price; you must look at the actual transactions, how much difference there is between futures and spot prices, and whether there is actually any trading volume. What on earth is this thing called 1303? Is it clear to everyone now? This set of rules simply shifts the losses of overcapacity to another place. In other words, it first transforms price losses into production reduction losses, which are then borne by the suspended factories and workers. The Chinese Communist Party can even use the invalidity of inventory depreciation as an excuse to re-evaluate your losses as profits, and then you still have to pay taxes. From the perspective of the industrial chain, this means moving the losses from the upstream to the downstream, to be borne by private manufacturing. Finally, through non-impaired inventory and extended loans, the losses are thus shifted onto the books of small and medium-sized banks. Rest assured, this consequence will inevitably show up on the banks' balance sheets. Once these three steps are completed, not a single penny of the loss has been reduced; it has simply been shifted to whoever has the weakest bargaining power and the least transparent information. In a word, 1303 did not eliminate overcapacity; it only eliminated the price signals of overcapacity. Although the price signals are gone, the overcapacity remains, only transformed into a way that is harder to see, later to be confirmed, and at the same time more centralized in its outbreak.