China to boost imports of steel materials and primary steel products in 2007

SteelOrbis Shanghai According to the latest indications from the relevant Chinese government departments, China is planning to issue some new measures and make adjustments to existing policies with a view to giving a major boost to import quantities and import value in international trade, and likewise in order to increase outward direct investment. As regards the steel industry in particular, the relevant state policies will aim at achieving a significant increase in imports of steel materials and primary steel products. Currently, the Chinese state is hurrying up the preparatory process for the upcoming series of policy adjustments. The concerned government departments have been required to put forward detailed schemes in connection with the imminent changes. As the principal interested department, China's Ministry of Commerce is responsible for organizing and coordinating the work and will be putting forward the greatest number of suggestions and plans. The core content of the work in question is to change the present situation of China's international balance of payments and to reduce the country's trade surplus. Due to China's rapid economic development, China's export trade has increased at a remarkably high speed. As a result, the favorable trade surplus has given rise to significant foreign exchange reserve accumulation. Up to October 2006, the national foreign exchange reserve exceeded USD 1 trillion, while for the whole year the trade balance increased USD 16 million in China's favor. Indeed, China has surpassed Japan to become the country in the world with the greatest foreign exchange reserves. The Chinese state has serious concerns relating to the inflation potential deriving from its huge accumulated trade surplus under the present national foreign exchange management system. In addition, in the absence of a better investment option to the purchase of US bonds, the large quantities of foreign currency in China's banks has been a heavy burden on China. The coming series of policy adjustments will mainly focus on increasing imports of materials, energy products, advanced machine equipment, primary products in most industries and various everyday consumption products. Meanwhile, outward direct investment is to receive greater encouragement. Local corporations are to benefit from state support in many areas in order to boost overseas business. The state's ultimate aim is to assist these companies to attain to the status of genuine multinational corporations in the near future. In order to achieve the above goals, more preferential import tariff rates are expected to be implemented this year. The many import quotas and restrictive regulations in effect heretofore will be cancelled soon. Already, China has allowed increases in the quantities of RMB being converted to foreign currencies. Furthermore, the total amount of foreign currency reserved in the accounts of Chinese companies will soon be subject to lesser number of restrictions . Regarding the steel industry, the state is to exert further controls on steel exports and will focus on increasing the value of imports. The imports in question will in the main be steel-related materials, including iron ore, coal, primary steel products and rare metals. Besides the above factors relating to the balance of payments, another reason for this new policy trend is that China is now urgently seeking to reduce the negative environmental effects of the mining industry and the steelmaking process. Therefore, the import tariff rate of the above mentioned steel-related products is expected to drop further in the near future. In line with these measures, China's mining corporations and outdated steel mills will face increasingly restrictive state policies.