China gives most important impulses according to IISI
Viewpoints from
China was the title of the panel discussion on the last day of IISI-38 in Istanbul. Prof. Li Shijun, the Deputy Secretary General of CISA (
China Iron & Steel Assoc.), Prof. Dr. Yin Wenquan, the Deputy Director of Institute of Economic System and Management in
China, Prof.Dr. Markus Taube Chair East Asian
Economics of Institute of Int'l and Regional Economic Relations in University of Duisburg-Essen, and Prof. Zhang Yensheng, the Director of Institute of Int'l Economic Research have made presentations in the Panel.
First of all, everybody agrees that the strong market demand is the driving force behind the rapid increase in steel output of
China. Good news is, the demand for steel is not projected to be limited to the short term, as the course of industrialization and urbanization in
China has not been completed, yet. Those two factors have been amongst the reasons driving demand for steel in
China, along with transferring of
manufacturing industry to
China and changing
consumption patterns.
Prof. Li underlined in his presentation that the growth of steel output in
China has actually been triggered by the reforms and commencement of open policies back in 1978. Obviously the strong market conditions had ignited a rapid expansion of the industry.
Having already surpassed 250 million tons of steel output,
China is still far from being in the same league with the industrialized countries.
China has just been entering the “Low Medium Income Level” from “Low Income Level” in the GDP per capita tables as Chinese GDP per capita has finally passed $1000 per year in 2003. They still have a long way to go in wealth accumulating and expected to enter “Upper Medium Income Level” not before 2020.
Urbanization is another critical issue in
China. The urbanization rate has been 1% on average in
China during the past 10 years. That means, around 13 million people is urbanized in
China as an inevitable way of economical development. At this point of time, around 39% of the country is urbanized and as the urbanization is going to continue it is expected to pull the steel demand.
Construction industry has been growing incredibly in
China. The steel
consumption in housing
construction reached almost 80 million tons in 2002. Automobile industry has also been showing significant growth.
There is still big room for development of the Chinese iron and steel industry according to Prof. Li, who believes that the regional imbalances in economic development must be taken into account when analyzing the steel market demand of
China. The Eastern part of
China has been leading the economical growth as well as steel
consumption of
China. Therefore, increasing developments in other regions may lead to cyclical increases in demand. Another important issue is that growth rate of
consumption of flat products has passed 30% in 2003 whereas of long products dropped to 20% in
China.
As mentioned above, there is still big room for development of Chinese steel industry. However it is underlined that the increase in
production will be a rational increase rather than extraordinary increases of the past couple of years. The domestic steel
consumption has reached 150 million tons during the first six months of 2004, and it is expected that the total output will reach almost 287 million tons by the end of the year. Of course, Chinese government's intervention and introduction of certain macro-economic regulation by early 2004 has had a very important impact on such change according to Prof.Li. Fixed asset
investments have fallen since then having its impact on steel demand too. Thus, increases in demand and
production are expected to be rational in the coming years.
Obviously, a significant dampening of investment into iron and steel industry has also been noted after the macro-economic adjustments of early 2004. Quarterly comparisons are already showing decrease in output growth rate, and product prices have been showing decreases in the market.
While the government is yet to finalize its policy for the iron and steel industry, there are also certain problems lying ahead. The main problems ahead of the Chinese iron and steel industry's development were listed as the limited sources of energy and water, as well as environmental issues.
Of course, the amazing growth of the Chinese economy is followed by the entire world. Prof. Zhang stated that, Chinese economy is the 7th largest economy in the world today, and at this growth rate it is expected to become third largest surpassing
Germany by 2015.
The foreign exchange reserves of
China have also been increasing significantly over the past ten years. It has been reported that the reserves surpassed $470 billion already. The savings figure in
China is close to $1.4 trillion. These figures show that
China is not actually in need of foreign direct
investments because there is shortage of money in the country. Prof.Zhang says,
China lacks the method of deploying money into management and banking systems efficiently.
China's incredible economic growth rate inevitably increased demand for energy and natural resources, having an inevitable and increasing impact on international markets. On the other hand, the
US and EU have become net importers of Chinese origin consumer products. As
China's role in global economy gets bigger,
China will certainly keep being the engine of economical growth.
Talking about raw materials, it needs to be mentioned that
China has imported about 150 million mts of
iron ore in 2003. Of course there are still big differences between Chinese steel
consumption per capita and that of leading industrialized countries like the USA and
Japan. In order to reach that level of steel
consumption per capita,
China would need approximately 1 billion tons of steel, which will be very difficult to produce with the resources of the whole world according to Prof.Zhang.