China’s industrial overcapacity damaging global economy

Beijing, February 22

China’s overcapacity in heavy industries is wreaking ‘far-reaching’ damage on the global economy, with steel production ‘completely untethered’ from market demand, the EU Chamber of Commerce in China said today.

The Asian giant’s steel industry manufactures more than the next four largest producers combined — Japan, India, the US, and Russia — the chamber said in a report, warning that more than 60 per cent of China’s aluminium industry has negative cash flow.

And in just two years, its cement production equalled the amount produced in the US during the entire 20th Century.

“China has not followed through on attempts it has made over last decade to address overcapacity,” Joerg Wuttke, chamber president, said in a statement.

Brussels has launched new anti-dumping probes into Chinese steel imports, as producers in both Europe and Asia struggle with global prices that have plummeted in the face of oversupply.

“Overcapacity has been a blight on China’s industrial landscape for many years now, affecting dozens of industries and wreaking damage on global economy in general, and China’s economic growth in particular,” chamber’s report said.

The issue has led to trade tensions between the world’s second-largest economy and developed countries that accuse it of dumping in their markets.

China accounts for half of global steel production but internal demand has slowed sharply along with economic growth, forcing it to look overseas. Its steel exports soared 20 per cent in 2015, according to Chinese Customs data.

The EU launched probes this month into imports of Chinese steel, with Trade Commissioner Cecilia Malmstroem warning: “We cannot allow unfair competition from artificially cheap imports to threaten our industry.”

This month, Luxembourg-based world leader in steel-making ArcelorMittal blamed China for a colossal $8 billion loss in 2015, at a time when thousands of jobs are being cut across the industry.