"We remain highly skeptical that there is any real underlying change to the way heavy industries are operating and believe that the margin recovery in steel, in particular, is largely due to better demand from stimulus, rather than supply-side reforms," investment bank Macquarie wrote in a note. The goal of the reform is to close down excess capacity in steel and coal, for example, and make Chinese producers more efficient.

... while a significant amount of capacity has been closed so far in 2016, it is far below target. According to the National Development and Reform Commission (NDRC), producers reached only 38 percent of their coal capacity and 47 percent of their steel capacity target cuts.

For example, Hebei Province was supposed to close down 18.4 million tons of steel-producing capacity in 2016. By the end of July, it had only closed down 1.9 million tons, according to Goldman Sachs.

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