CHINA, THE WORLD'S largest steel importer, is furious about the threat to its minuscule exports to the United States. Behind the outrage lies the far greater problems created by the mismanagement of what is at once the biggest and most unprofitable steel industry in the world. After a decade of stewardship under Premier Zhu Rongji, the steel sector has grown into a behemoth that eats up vast amounts of public subsidies.
The fantastic growth rate of the Chinese steel industry, which overtook the United States in 1996 as the world's largest producer, threatens to dominate the global industry and impel a new round of global consolidation.
'By 2010, China will become a formidable competitor,' predicted Father William Hogan, a Jesuit priest and worldwide authority on the steel industry who died in January, in his book The Steel Industry of China: Its Present and Future Potential.
The extensive upgrading of China's plant technology meant that it would be able to make the flat-rolled products it now imports, wrote Father Hogan, who was director of the Industrial Economics Research Institute at Fordham, New York's Jesuit university.
China is now the world's largest producer of crude steel but it will soon become the largest producer of quality steel, which will be equal to any made by competitors. Father Hogan predicted that China soon would have capacity to produce 100 million tonnes of quality steel a year. Public-works spending, accounting for 40 per cent of demand, helped push up domestic demand by 10 per cent a year during the 1990s but profits have kept falling.
The steel industry, one of the commanding heights of the planned economy, has seen phenomenal growth. In 1980 China made 27 million tonnes, by 1996 it had become the world's No 1 producer. Yet the more steel China has made, the more inadequate the Government's management of the industry has been.