Issue link: http://read.dmtmag.com/i/703077
I DA U N I V E R S A L J u l y -Au g u s t 2 0 1 6 47 Continued on page 45 According to a Wall Street Journal investigation, in the fi rst three months of this year, the American government has already launched seven inves- tigations into Chinese steel dumping and unfair govern- ment subsidies for national steelmakers. ese fi nancial advantages led to Pittsburgh- based U.S. Steel Corp. losing a reported $1.5 billion last year and $340 million in the fi rst quarter of 2016. According to the Alliance for American Manufacturing, an estimated 12,000 steel- workers lost their jobs nation- ally. "I think complaints from the international community on China's steel overcapacity have a point. We can't deny that China's steel capacity is huge at over 60 percent of global steel capacity," says Xiang, who notes that China could very nearly meet world demand for steel on its own. "I think China should face this issue ... [but] there are a lot of mechanisms between China and the U.S. to negotiate and I think the best way to solve this problem is through dialogue." At an annual press confer- ence in Salt Lake City earlier this year, American Iron & Steel Institute Chairman John Ferriola argued that global overcapacity for steel was an industry problem rooted in declining global demand from countries like China, but exacerbated by Chinese subsi- dies of its own companies. "China has subsidized the growth of its steel industry through grants, low-interest loans, free land, low-priced energy and other raw material inputs," Ferriola said. "Simply stated, the Chinese govern- ment is a company disguised as a country, and they are waging economic war on the United States." Steel is not the only industr y where this complaint has been lodged against Chinese subsidies. In numerous sectors where demand has sof tened, like a luminum, coa l, shipbuilding and solar panel manufacturing, Chinese governmenta l support, as laid out by Ferriola, provides a lifeline to compa- nies that other wise would be forced to signif icant ly cut production or even shutdown a ltogether. is has given rise to what critics have dubbed "zombie companies," or fi rms that are only able to continue opera- tion through bailouts. "Most 'zombie companies' in China are from traditional indus- tries," says Wang Ying, senior director of Fitch Ratings in Shanghai. "It's because China's economic structure relies on continuous invest- ment, and these industries are capital intensive." Reports in foreign and Chinese media have cited numerous examples of these types of fi rms in recent months that have suddenly restarted production or been spared closure, thanks in large part to injections of government credit. e South China Morning Post reported recently that economic data from the fi rst quarter of 2016 showed a record 4.6 trillion yuan ($708 million) worth of bank credit was loaned out by Chinese state banks – more than the four trillion yuan that was released into the economy during the 2008 fi nancial crisis. e combination of cheap credit and a need to keep millions of Chinese employed in a slowing economy has consequently fostered an environment where government support for exces- sive and unneeded industrial capacity is providing tempo- rary stability within China.