BEIJING: Excess Chinese steel production is “damaging and distorting” global markets, US Treasury Secretary Jacob Lew said on Monday, joining a chorus of criticism that blames Beijing for plant closures and job losses in the industry worldwide.
China is the world’s number one steelmaker, producing more than half of global output, but stands accused of flooding the market with steel at below cost prices—dumping—in violation of global trade rules.
The practice has had a “distorting and damaging effect on global markets,” Lew said at a key annual meeting between the world’s top two military and economic powers in Beijing.
He said reducing output was “critical to the function and stability of international markets.”
Lew’s comments echo those of other senior officials around the world who have blamed the Chinese supply glut for turmoil in Europe and elsewhere.
Among those hit has been Indian-owned Tata Steel, which said in March it was selling its struggling British assets—putting 15,000 jobs at risk—partly because of a global oversupply of steel and cheap imports.
At Group of Seven summit talks in Japan this month world leaders said the global steel oversupply must be “urgently addressed,” indirectly targeting China by criticizing governments that contribute to excess capacity.
The US has punished China with harsh tariffs, most recently in March, when it slapped a 300-percent rate on the cold rolled steel used to make auto parts.
The EU, the second-biggest steel producer, has launched a dumping probe into Chinese steel but angry manufacturers have urged it to mirror the US’s tough tariffs.
The 28-nation bloc said this month that granting market economy status for China at the World Trade Organization was “untenable” because it would cost jobs in Europe in industries such as steel.
The designation would make it much harder for major economies to fight Beijing over alleged unfair trading practices.
Chinese leaders have repeatedly pledged to address the issue of excess capacity, admitting it is a drag on their own economy.
Demand for steel has fallen as the rate of economic growth has slowed, leaving producers making hundreds of millions of tons more each year than they need domestically.
Beijing has vowed to eliminate 100 million to 150 million tons of capacity—out of a total of 1.2 billion tons—by 2020, saying the reforms would cost 500,000 jobs.
But local governments have been reluctant to act, fearing the social instability that mass layoffs could cause.
Monday’s US-China Strategic and Economic Dialogue in Beijing is a key annual meeting between the world’s two military and economic powers.
The US delegation also called on China to liberalize its investment rules to create a “level playing field” for American investment and trade.
Concerns about the business climate in China are rising, Lew said in remarks later in the day: “Candidly, foreign businesses wonder if they are welcome, and find China’s regulatory environment harder and harder to navigate.”