China decides to control overheating

China decides to control overheating

China's steel industry which supports the country's economy is indicating an upturn trend due to an increase in investments. Therefore, government is trying to control the investments in some sectors such as real estate, steel and cement, for fear of overheating. In 2003, capital investment in China's steel industry has reached Yuan 133.2 billion (approx. $16 billion) with a significant increase of 89.2% over the previous year. The overheating in the industry is attributed to the price decreases began in the first quarter of 2002 and an ensuing continuous price hikes. This situation has also detected a rising demand for iron ore, particularly from overseas countries. China caused iron ore shortage as the country's iron ore demand increased too much since 1996. China imported 150 million tons of iron ore last year. Furthermore, country's iron ore imports are expected to reach 200 million tons in 2004 and 342 million tons in 2005. China has decided to stop approving new construction projects of steel groups, steel and iron mills to slowdown its steel industry investments. In addition, government is collaborating with banking sector to tighten credit requirements for steel projects. It seems that China's steel industry will enter a new round of reorganization when the overheating slowdowns.