Recently, U.S. President Donald Trump said the United States was set to impose 25 percent of tariff on steel imports products and 10 percent on aluminum. These incidents have made the steel industry the main battlefield of trade frictions between China and the United States. Will Sino-US trade frictions have a negative impact on China’s steel industry? What opportunities and challenges will China's steel industry face in the future?
On April 8, Mr. Li Xinchuang, Director of the Institute of Metallurgical Industry Planning and Research and an MBA alumnus of Class 1998 at National School of Development, was invited by the Institute of South-South Development and Cooperation（ISSCAD）to deliver a speech entitled “Challenges and Opportunities for Iron and Steel Produce in China and Beyond”, under Peking University Public Policy Forum International.
Mr. Li shared his insights on the experiences of China’s iron and steel industry development and had a lively discussion with students of ISSCAD on exploring cooperative opportunities between China and other developing countries in the current global trade situation. Prof. Fu Jun, Academic Dean of ISSCAD introduced that: “China has undergone a remarkable process of industrialization and modernization, and to support all of that, the steel industry is very important.” He hoped that students from ISSCAD would have an in-depth understanding of what has transpired in China’s iron and steel industry from the discussions at this forum.
In 2017, China's steel consumption accounted for about 50% of the global steel consumption, and China’s steel industry has the world's largest domestic demand market. Why is China's steel market so competitive? What is the future development of China’s steel industry? How should other developing countries develop their own industry? Mr. Li Xinchuang addressed on these issues extensively on the Forum.
Competitiveness of China’s steel industry
Mr. Li Xinchuang mentioned that China’s steel industry is one of the most globally competitive industries in the manufacturing sector and has achieved “5G”: Good Product, Good Price, Good Scale, Good Service, and Good Brand. The complete industrial system and the abundant talent resources have made the industry the flagship of the aircraft carrier. For other developing countries willing to learn from China’s development experience, they need to firstly guarantee a large market, advanced technology and equipment, excellent human resources, and a stable economic environment.
Mr. Li also pointed out three major trends in the development of the global steel industry at the new phase: the advancement of new low-carbon technology research and development in the context of global low-carbon development, the industrial transformation and upgrading under the background of excess global steel capacity and increasing trade friction, and the international industrial cooperation represented by the “Belt and Road Initiative”.
New opportunities for China's steel industry
“China should take the advantage of the global trend and seize new opportunities for industry development.” As Mr. Li pointed out that the iron and steel industry will play a greater role in improving product quality, innovating enterprises, and improving environmental protection levels. Meanwhile, China will further stimulate the vitality of state-owned steel enterprises by developing a mixed-ownership system. Furthermore, China will utilize the historic opportunity brought by the “One Belt One Road Initiative” to seek new ideas for global cooperation.
Future of China’s steel industry
Mr. Li Xinchuang concluded that China will highlight the high-quality development and the new normal and supply-side structural reform in the future. He said that the supply-side structural reform clarifies thatChina will enter the era of “cutting off production capacity”, and it could effectively solve the “low-quality steel” problem that has plagued the steel industry for many years. In addition, the supply-side structural reform could also promote the innovation of companies to drive effective supply, solving the global iron and steel overcapacity issue with China’s wisdom.
Students from ISSCAD showed great enthusiasm seeking for cooperation opportunities in the steel industry between their countries and China. Mr. LiXinchuang responded: “When China selects its partner, the main considerations are the country’ market, supply, and infrastructure”. He also said that Africa has great opportunities to cooperate with China in the future.
Talking about the trade friction between China and the U.S, Mr. Li responded that the total exports of steel from China to the U.S are very small, so China’s steel industry will be little affected. Prof. Fu Jun said: “America used to see China as a ‘competitor’, but now sees China as a ‘rival’. The difference between the two terms is that rivals compete without rules. Opening the global market could benefit the world, but now America has lost its patience.”