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China's exports of steel and aluminium nearly doubled in the first half of this year even while the central government mounted a nationwide campaign to cut sales overseas of such energy-intensive products.
The continued strength of the two industries in the face of measures designed to cut their export growth underlines the challenges of the government in resetting the direction of the economy.
Aluminium, steel and cement have been targeted because of the high use of energy in their production, and in the case of smaller and older mills and smelters, high levels of pollution.
Besides the potential for trade friction from rising steel exports in particular, the government is under pressure to increase energy efficiency and reduce greenhouse gas emissions.
China is expected to surpass the US this year as the largest emitter of greenhouse gases even though its economy is about one-fifth its size, mainly because of a surge of investment in energy-intensive industries since 2000.
Chinese officials on Thursday defended the impact of measures introduced this year to bring the steel and aluminium sectors under control, consisting mainly of taxing such exports at the customs gate.
“Without these measures, exports of these two products would have gone even higher,” said Wang Shouwen of the commerce ministry’s foreign trade department.
In the seven months to July, China exported 45m tonnes of steel, up from 25m over the same period last year. Aluminium product exports rose by 88 per cent to 1.18m tonnes in the first half of 2007, according to Macquarie Research.
Local industry executives say they expect the surge in exports to be temporary, because of the long-term resource constraints in China.
“For China as a whole to turn from a net exporter of aluminium to a net importer is entirely possible. It’s only a matter of time,” Xiao Yaqing, chairman of the Aluminum Corp of China, the country’s largest producer, told Bloomberg on Thursday.
But despite Mr Xiao’s pessimism and Beijing’s own policy goals, the low capital costs and in some cases subsided power tariffs that underpin the industries’ growth remain largely in place.
Thanks to effective subsidies from local authorities, most aluminium smelters pay Rmb300-400 ($39.50-$53.60, ?29.20-?38.90, £19.80-£26.40) a megawatt hour for power, about half of the amount the government says they should pay.
Power accounts for about two-thirds of the cost of making aluminium.
China can also build new smelters for about half of the cost of foreign competitors, because of cheap land and labour, much of it made available by local governments chasing investment.
Environmental assessments of the kind that can hold up projects for years in the west are also comparatively weak. back to the News |
