WASHINGTON Jan 8 Massive government energy
subsidies have fueled China's transformation into the world's
largest producer and exporter of steel, according to a new
study released on Tuesday.
"In 2007, energy subsidies to Chinese steel are estimated
at approximately $15.7 billion, showing a 3,800 percent
increase since 2000," the study prepared for Alliance for
American Manufacturing, a U.S. industry group, said.
The report provides new ammunition for U.S. steel companies
that complain Chinese government subsidies are responsible for
a surge in steel imports from that country. Imports totaled
5.35 million tons in 2006, more than double the 2005 level.
It also could lay the groundwork for a possible case
against China at the World Trade Organization for violating
world trade rules on subsidies.
"The China steel industry in its current form is the
creation of the Chinese government. It has benefited from
massive direct and indirect subsidies, many of which violate
the WTO's subsidies agreement, China's obligations under its
WTO accession agreement, or both," the study said.
The report's author, Usha Haley, a professor of
international business at the University of New Haven in
Connecticut, said she collected data from Chinese and U.S.
government agencies, the International Energy Agency,
international investment houses, U.S. industry groups and some
individual Chinese companies.
By comparing Chinese and world prices for thermal coal,
coking coal, natural gas and electricity, Haley calculated the
Chinese steel sector received $27.11 billion in energy
subsidies from 2000 through the middle of 2007.
Chinese provincial and local governments are responsible
for the bulk of the subsidies because steel mills provide both
employment and tax revenues, Haley said.
"Every province wants its own steel mill," she said.
As a result, the Chinese steel industry became increasingly
fragmented during a period when the steel sector in other
countries was consolidating, Haley said.
As recently as 2003, China imported 43.2 million tons of
semi-finished and finished steel products, or about 13 percent
of the global steel trade, the report said.
Despite central government plans to curb growth, Chinese
steel production has risen rapidly and accounted for around
one-third of world output in 2006, the report said.
"Under true market conditions, China would undoubtedly have
had a large and diverse steel industry, but not one that has
grown to a staggering 34 percent of total world steel
production in three years," the report said.
Last week, the U.S. Commerce Department slapped
anti-dumping duties on imports of steel pipes used in plumbing
and heating systems that have risen rapidly from China in
U.S. steel companies are pressing for legislation that
would make it easier to win import relief against China.
(Editing by Eric Beech)