China's Slow Rebalancing Fueling Protectionism

WSJ: China’s Steel Body Sees Red Over Tariff Measures To Stall Exports

But speaking to The Wall Street Journal on the sidelines of an industry conference here, Li Xinchuang, deputy secretary-general of the China Iron and Steel Association, said China alone wasn’t responsible for an excess of global steel supply, and that higher tariffs imposed on its exports were unfair.

“Overcapacity in the steel industry is global. It is not only a situation in China,” he said. “We have both good quality and price. It is not about price alone.”

“I don’t see why we can’t export when we can offer good quality to customers…We are against the anti-dumping action and we will take measures,” he said.

Two main factors are at play. One, China is by far the largest source of overcapacity. As is the case in the oil market, all the producers want to drive each other out of business. Local players do not want to shut production, such as the Tianjin government still offering subsidies to keep the Bohai Steel plants operating.

This is getting noticed. AFR: Awash with an oversupply of Chinese steel and no end in sight

The world is awash with cheap steel, blast furnaces are closing in Europe and Australia, and the industry in China is said to be entering a new "ice age".

Yet how does Baosteel of Shanghai respond?

China's biggest, listed steel maker has pledged to ramp up production this year and not by a small amount.

On March 31, the secretary of its board, Zhu Kebing, said the company's annual output would increase by 20 per cent to 27.1 million tonnes in 2016.

China could get away with this when it was a small economy, but now countries aren't interested in giving China any breaks. China created a massive oversupply of steel and it should bear the brunt of its mistakes.

This leads into the second factor, the change in sentiment surrounding free trade. Countries are reassessing the cost of trade, particularly with respect to industries such as steel, where one country's disastrous policies are causing losses all over the globe. China refuses to respond to market signals and shut steel mills that haven't paid their debts in 5 years, all the while increasing productive capacity. Meanwhile, appeals to global trade or the WTO won't do much when you are viewed as the offender and countries such as the U.S. on toying with the idea of scrapping the WTO.