Following several months of research and analysis, in the middle of 2007 the China Iron & Steel Association (CISA) submitted a list of existing domestic steel industry problems along with possible solutions to the relevant government departments. The CISA's intention is that the state should take these issues into account and issue appropriate official measures and regulations to resolve them.
According to the latest indications from China's Ministry of Commerce and from Chinese customs, the government has taken serious note of some of the problems mentioned by the CISA. The issues in question are:
1. Thorough investigations into the illegal new steel projects permitted by all levels of local government. 2. The creation of high standards for the regulation and limitation of the number of local steel exporters. 3. The setting up of new cooperation and coordinating mechanisms for local steelmakers and traders with a view to the annual international iron ore price negotiations. 4. The updating of China's steel product codes in line with the catalogue of HS (Harmonized System) codes used in international trade. 5. The reduction and strict control of steel imports which are not currently subject to import tariffs and value-added tax and which are re-exported after being processed or transformed into other commodities.
Since the complex issues in the CISA report are wide-ranging and not easy to resolve in an overall manner anytime soon, the National Development and Reform Commission (NDRC) has indicated that the related departments should look carefully into the issues mentioned, selecting some of the important ones for urgent study and resolution. If necessary and if possible, according to the NDRC recommendations, detailed measures regarding one or two issues in the reports should be implemented within the current year.
Among the major issues in the report, Issue 1, which is on illegal investments, has been put into practice starting from 2006. However, the result has not been as good as expected although it was highly praised in local newspapers. Issue 2, regulation of exports, is something of a headache for the government. This is a strong direct method of controlling steel exports and the potential effect is serious. It is almost impossible for the state to work out detailed measures on the issue right now because the results of the current export policy are being gauged. Issue 3, cooperation for iron ore talks, is not urgent. The new round of international iron ore price negotiations will soon start again. The core thought of the CISA suggestions on this issue is to urge all parties towards firm unity and to negotiate with the overseas ore suppliers with a single voice. However, the achievement of wide and frank discussion and coordination of interests among steelmakers and traders remains a hard task, whether for the state or the CISA.
Issue 4 on steel product codes is comparatively the easiest one for the state. China's current HS code system was based on the 1960s edition and is somewhat dated. The CISA hopes that high-end and low-end steel products will be clearly divided into different catalogues rather than mixed together according to the names of the different specifications. As regards Issue 5, exports for re-processing, the state will perhaps spend more time on studying it. CISA's key aim in making this suggestion to the state is to achieve a reduction in the quantities of imported steel and increases in the exports of steel goods made in China. This conflicts with the state's current promotion of certain steel imports.
In any event, the CISA report is likely to result in some changes in China's steel industry policy. The future developments are awaited with interest.