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Wendy Wu

Zhuang Pinghui

China hit back on Monday at US criticism over its excessive steel capacity, saying it was serious about the issue but could not simply order cuts in an industry in which private companies held a big stake.
During the China-US Strategic and Economic Dialogue in Beijing, US Treasury Secretary Jack Lew called on China to cut overcapacity, which was “damaging and distorting” global markets.
Finance Minister Lou Jiwei said his US peers had been expected to raise the issue, and attributed the issue to “domestic political and employment ­pressure”.
He also signalled a reversal in attitude in the West towards China.
“China contributed over half of the global economic growth between 2009 and 2011 via infrastructure investment, which brought the accumulation of excessive capacity such as in coal and steel,” Lou said.
“At the time the world was applauding China [for its contribution],” Lou said, adding that Time magazine selected Chinese migrant workers as its “Person of the Year” in 2009.
“Now [the West is] blaming us for overcapacity.”
Lou said the Chinese government was “serious” about addressing overcapacity.
The zombies return: why are steel firms in China coming back from the dead?
China has been accused of dumping subsidised steel products in overseas markets, putting jobs there at risk.
The United States and the European Union have responded by slapping high tariffs on Chinese steel products.
According to an estimate by consulting firm APCO Worldwide, China’s annual excess steel capacity is enough to build 6,500 aircraft carriers or 2,157 San Francisco Bay bridges.
China has retired 90 million tonnes in the past five years and aims to increase the amount to up to 150 million tonnes by 2020.
China is not a planned economy any more, so we cannot directly issue orders to cut overcapacity
Lou Jiwei
In February, Minister of Human Resources and Social Security Yin Weimin forecast that 1.8 million steel and coal jobs would be lost as part of economic reforms, without giving a time frame.
But Lou said it was difficult to predict in detail how many jobs would go.
“China is not a planned economy any more, so we cannot directly issue orders to cut overcapacity,” he said.
“Private steel companies ­account for over half of the steel sector, how can we expect they would accept such an order?”
Beijing was approaching the challenge by tightening standards on environmental impact, safety and quality to help companies address the issue, and it would also rely on the market as well as fiscal policies to bring about the necessary changes, he said.
Your quick guide to the US-China Strategic and Economic Dialogue
Also complicating the immediate outlook for the global market is the upcoming referendum in Britain on whether it should exit the European Union.
Another concern dominating the talks is the possible interest rate rise by the US Federal Reserve either this month or the next.
US non-farm employment data for May, which surprised the market on the downside, has added uncertainty over what the Fed will do.
“We discussed the May non-farm data this morning. We felt puzzled, and no one can see whether the Fed should raise the interest rate,” Lou said.
“The US rate rise is the Sword of Damocles, but the market has priced in [an increase] and there is no need to overly worry about that such a rate rise would have a great impact on the market.”
But Lou cautioned that the economic recovery in the US was fragile and its government should pay close attention to the impact of American monetary policy on global financial markets, especially emerging ones.


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Commodities

Blame game: China hits back at US jabs over excess steel production

Finance Minister Lou Jiwei tells US officials that China took overcapacity seriously but it couldn’t simply order private companies to make the cuts. Photo: EPA

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China is being criticised for the result of an investment spree that it was praised for just a few years ago, Finance Minister Lou Jiwei says


Update | Blame game: China hits back at US jabs over excess steel production

China is being criticised for the result of an investment spree that it was praised for just a few years ago, Finance Minister Lou Jiwei says