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Economy

On Global steel overcapacity, is blaming China really fair?

1
2016-04-21 08:47Xinhua Editor: Gu Liping

Before high-level government officials from nearly 30 countries and international associations of the steel industry gathered in Brussels for a three-day meeting on Monday, China was set to be blamed for the sector's grave ills.

Last week saw tens of thousands of German steel workers go on strike over steel products from China, and Indian giant Tata's closing of mills in Britain also drew a media flurry against so-called dumping from China.

Analysts said it's convenient for the West to point the finger at China and indulge in domestic populism for its own good. But such a poorly thought out strategy won't help lift the world out of its steel woes and serve instead to strengthen the protectionist bent of some developed economies.

CHINA: CULPRIT OR SCAPEGOAT?

The fact that China is the world's largest steel producer and consumer has made it vulnerable to Western critics. But Zhang Ji, assistant minister of China's Ministry of Commerce (MOC), blamed "the slow recovery of the world economy" and "sluggish demand" for the current steel glut.

"In recent years, 85-95 percent of steel produced by China has been for domestic consumption. China's annual steel consumption accounts for 45 percent of the global in total," he said Monday in an interview with Xinhua.

In order to rein in production, China has stopped issuing new licenses for steel projects and begun shutting down outdated facilities.

China also announced earlier this year that it will continue to reduce crude steel capacity by 100 million to 150 million tons in the next five years. Doing so would cost China 100 billion RMB in re-employing over 500,000 laid-off steel workers.

"None of the money will subsidize steel exports," said Zhang. "China has no subsidy policies to stimulate steel exports; instead, it has leveraged export tariffs on some steel products ... The export tariff for billet is 20 percent and for hot-rolled wire rod 15 percent."

In this context, China's crude steel production in 2015 has decreased 1.92 percent year on year, the first annual decline since 1981, with the capacity utilization rate souring to 71.2 percent, higher than the global average of 69.7 percent.

  

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