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China Trade Fight
China Cuts Steel Production

Home to more steel production than anywhere else in China, the city of Tangshan has told manufacturers to take a two-week hiatus. Reuters reports:

The environmental crackdown will affect steel mills, power plants, coking producers and cement producers that have failed to meet standards.

The city in the northern province of Hebei, which accounts for more than a fifth of China’s steel output, enforced similar cuts in July and August, and will strengthen inspections of emissions.

The authorities are framing the shut-down in environmentalist terms, saying it’s all about climate change and pollution. Maybe so, but it’s at the very least a rather convenient opportunity to placate China’s steel industry competitors from New Zealand to Germany to the United States, all of whom accuse the Middle Kingdom of flooding the market and engaging in anti-competitive practices.

Steel production was a big focus at the G20 summit earlier this week, and participants released a joint statement saying they would work together to bring global supply in line with demand. But the statement left out any specific restrictions or expectations, essentially letting China off the hook.

The import figures for August showed that iron ore (an ingredient in steel) imports fell, but China’s steel plants nevertheless expect to see record exports in the coming months.

As in the South China Sea, whether China plays by the rules is the big story here. But it’s important to understand that Beijing doesn’t have any good choices. Appeasing international partners means firing hundreds of thousands if not millions of Chinese steelworkers; appeasing those steelworkers means angering international partners. If Beijing can slow production under the banner of environmental stewardship, it’s likely to upset fewer of its own citizens than if it does so under pressure from global interests. Nevertheless, it’s a delicate balance and it’s not clear that the occasional two-week pause will be enough to reduce overcapacity problems.

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