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China’s zeal for steel casts long shadows at home and abroad

Decades of overproduction were borne of hubris and an unchecked urge for self-sufficiency

Strong winds blew through central Beijing on Thursday afternoon, brushing away the smog which that morning had sent the city’s air quality index to around 170, signifying “moderately polluted”. As the sun shone it was a glorious, if brief, respite from the polluted atmosphere that China’s rampant industrial expansion has helped to create.

Until recently steel was a Chinese success story. Its steel industry kicked off in 1894 with a small victory against its historic rival, Japan, after the opening of the Hangyang Iron Works in Hubei province. Though it opened two years before Japan’s first steel plant, the factory was privatised in 1908 and was eventually bought by the Japanese.

The first world war stimulated demand, and after a postwar decline in production, further Chinese steel plants saw the industry take off. When Mao Zedong took power in 1949 and the People’s Republic of China was established, self-sufficiency rather than global industry domination was the driving force in a diplomatically isolated country.

Steel production expanded through the 1950s as Soviet-influenced heavy industrialisation kicked in. Annual output was 158,000 tonnes when Mao took over; by 1976, the year before his death and the final year of the decade-long Cultural Revolution, it was 20.5 million tonnes.

But in the 1980s, China imported more and more steel as it struggled to meet domestic demand. As the country’s economic clout grew, the government set a target of increasing crude steel production to 60 million tonnes by the end of 1990 and 80 million by 1995. Early signs of the recent, disastrous, overproduction were apparent as these targets were surpassed. In 1996, China overtook Japan to become the world’s biggest steel producer, churning out more than 101 million tonnes that year.

The 2008 global recession failed to put the brakes on. While much of the developed world was mired in crisis, China boasted a 9% GDP growth rate in 2009. Steel production was still rocketing, with output of 683 million tonnes in 2011.

After 2014, China’s economic growth slowed, and so did domestic demand. China responded by increasing steel exports, which led to accusations of dumping. In 2015 exports increased by 20% to 107 million tonnes. Prices were slashed as Chinese steel companies battled to survive.

The dumping cast a shadow over the UK steel industry, and has also meant shutdowns and layoffs at Chinese plants. Last month, before it became clear that 40,000 jobs were at risk in the UK, the Chinese government announced that 500,000 steel workers were to lose their jobs. All this is the result of China’s first annual steel industry contraction in a quarter of a century, announced last January. The government is aiming to cut steel production by 150 million tonnes by 2020.

China has risked raising tensions over its role in the UK steel crisis by imposing a 46% import duty on a type of hi-tech steel made in Wales. The Chinese government said it had slapped the tariff on “grain-oriented electrical steel” imported from the EU, South Korea and Japan because imports were causing “substantial damage” to its domestic steel industry.

The decision came as British politicians were accused of pandering to China by blocking new tariffs on Chinese imports to the EU, a measure designed to prop up the region’s own steel industry.

Source theguardian

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