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Is Steel Capacity Excessive?

  • Dianqing Xu
  • Ying Liu
Chapter

Abstract

  • Before steel output per capita reaches the peak of inverted U curve, even if steel overcapacity occurs, it is probably a short-term phenomenon; only when the inflection point is crossed will real overcapacity appear.

  • China’s steel consumption per capita has not reached the inflection point judging from the growth rates of steel output per capita and total steel output, the speed of urbanization, GDP per capita, growth rate of fixed-asset investment, and the volume of new housing.

  • In China, living space per capita is far from reaching the peak. In the next two decades, both living space per capita and the total space will see substantial growth so that people’s demand is satisfied. As long as the government encourages the building of low-rent housing, steel industry will not suffer overcapacity.

  • If the weighted average of industrial production and construction industry growth rates exceeds or approaches the growth rate of steel output, then there is no reason to conclude steel construction will embrace its inflection point.

  • Higher than the average of Asian and non-OECD countries, the capacity utilization rate of Chinese steel industry is basically within normal ranges.

  • There is no necessary correlation between overcapacity and the profit margin of steel producers.

  • In 2012, Chinese government introduced the strictest ever housing price control policies, which is an important reason behind the plight of steel industry. On the surface it seems to be the fault of overcapacity, but the root cause is macroeconomic disequilibrium triggered by the shrinking of construction industry. To solve the problem of overcapacity, should the government cut steel production capacity, or correct the policy mistakes that have disrupted the balanced development of national economy? There is a clear distinction between these two answers.

Copyright information

© Peking University Press and Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  • Dianqing Xu
    • 1
  • Ying Liu
    • 2
  1. 1.Huron University CollegeUniversity of Western OntarioTorontoCanada
  2. 2.School of StatisticsDongbei University of Finance and EconomicsDalianChina

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