On July 31, the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC) issued a report called "Concerns Regarding the Chinese Steel Industry and Trade" in response to a US industry report charging that huge governmental subsidies had unfairly boosted China's steel production.

 

The CCCMC is an organization representing the general interests of Chinese steel makers. Their report covers the development of Chinese steel industry, Sino-US steel trade, governmental subsidies, governmental intervention, macroeconomic control over steel industry and Sino-US steel dialogue. The statement charged that the US has not acted objectively by accusing the Chinese government of intervention in its steel sector. The report concluded that the US has presented insubstantial evidence, thus invalidating the charge of China as a threat to the global steel market.

 

The US believes that in the last decade the Chinese government has given more than US$52 billion in subsidies to its steel industry to advance steel production and exports. These subsidies were mostly given to the country's top 20 steel makers who produce 91 percent of China's total steel outputs. Consequently, they charge that Chinese domestic steel companies have gained an unfair competitive edge over their foreign counterparts.

 

The CCCMC retorts that currently China has about 1,000 steel companies. Privately-owned companies are as a major force and produce 35 to 40 percent of China's total steel outputs. Due to the rapid growth of steel outputs in recent years and exports the government has adopted a series of preventative measures to balance China's fast growing steel outputs from becoming a threat to global markets. The report contends that no third party country's steel products are forced into US markets due to China's increased steel outputs. Moreover, China's decreased steel imports do not force any third party country's steel products out of Chinese markets and into US markets. On the contrary, China's increased steel exports are simply meeting the growing global demands. Export growth is not caused by overproduction, but from an increasing global demand, according to the report.

 

"The US steel industry enjoys strong prices in both domestic and global markets and maintains a record of high profits. Under such circumstances, it is totally groundless for the US government to view the Chinese steel industry as a potential threat. Nor should they urge congress and/or any other administrative departments to take punitive actions against China. The Chinese steel industry is focused on meeting domestic demands. It poses no threat to the global marketplace as it develops. In fact, four times this year the Chinese government has revised its policies in order to curb steel product exports," the report bluntly points out.

 

Since 2006 the US has issued two reports stating that the Chinese steel industry has been significantly boosted by governmental subsidies. The CCCMC report categorically denies this while pointing out that it is the US government's long-term and comprehensive subsidies that have kept the US steel industry competitive for the last three or four decades. Currently the US government uses subsidies and other measures, some of which violate WTO rules, to protect its own steel sector. But these combined measures have in effect caused the US steel industry to lose momentum and its competitive edge. The report charges that governmental subsidies for the Chinese steel industry are a strategic invention of the US government.

 

The CCCMC's report emphasized that the Chinese government primarily utilizes economic rules and measures, such as taxes, as leverage in lieu of dominating an individual enterprise in order to adjust the market. It also refuted the US's accusation of intervention. The report noted a contradiction in the US allegation: accusing China of intervention concerning the steel industry, and simultaneously demanding that China adopt governmental policies, such as licensing steel exports.

 

According to reports, the US has taken anti-dumping and anti-subsidy actions against three major steel products imported from China during recent months. In response the CCCMC has suggested that any steel trade conflicts should be solved via bilateral talks rather than enacting retaliatory commercial measures. 

 

(China.org.cn by Pang Li August 1, 2007)