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China's Hesteel sets up special fund to aid restructuring

[SHANGHAI] Hebei Iron and Steel Group (Hesteel), China's second biggest steelmaker, has set up a 10 billion yuan (S$2.01 billion) special fund with the Great Wall Asset Management Corp to help finance its restructuring efforts, the firm said on Monday.

Hesteel will contribute 51 per cent of the financing for the fund, according to a notice published on Monday by the Hebei provincial government, which owns the firm. The notice said the fund would be the first of its kind in China.

Great Wall, a state-owned asset management firm, will contribute the remainder of the financing, while the fund will aim to attract other sources of capital and planned projects with a total value of 30-50 billion yuan, the notice said.

China's biggest state-owned steelmakers are under pressure to rationalise operations and rise up the value chain as part of a state plan to revitalise a sector saddled with huge debts and a price-sapping capacity glut.

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Hesteel plans to invest in technological research and high-end steel production, including steel used in domestic appliances and automobiles, in a bid to boost profitability.

The fund will also participate in Hebei's overall state-owned enterprise reform plans, with the heavy industrial province aiming to upgrade polluting heavy industries like steel and invest in cleaner sources of growth.

Hesteel said earlier this month it also planned to take over more production capacity overseas following its 46 million euro (S$73.3 million) acquisition of the Zelezara Smederevo steel mill in Serbia last year.