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Response of the Spokesperson of the Mission of China to the EU on Steel Trade and Market Economy Status
2015/12/22

Q: At the Extraordinary Competitiveness Council meeting last month, some member states reportedly urged the Commission to adopt trade remedy measures to protect the European steel industry that has been suffering from global excess capacity. Recently, some European and American iron and steel associations voiced their opposition to the EU automatically granting China MES in 2016, claiming that the Chinese steel industry is the predominated global contributor to the problem. What is your comment on this?

A: At present, the global steel industry in general is facing overcapacity problems. The root causes lie in the weak recovery of the global economy and a lack of effective demand of steel. These are the main contributors to the sharp fall of global steel prices. The EU, the US, Latin America and ASEAN all face this problem. China is no exception.

To effectively deal with this issue, the Chinese government has made unremitting efforts in recent years in accelerating economic restructuring. In October 2013, China's State Council issued guidance "on resolving the conflict of serious excess capacity", clearly prioritizing three specific tasks, namely: strict control of new capacity, complete elimination of outmoded capacity, and reduction of 80 million tons of steel production capacity by the end of 2017. Government work report both in 2014 and 2015 focused on resolving overcapacity as an integral part of structural adjustment.

Through relentless efforts, China has reached success in controlling steel overcapacity. During the "Twelfth Five-year Plan", China's steel industry cut capacity by 77.8 million tons; this year, investment in iron and steel fixed assets fell by 12.4%. On the other hand, fierce market competition and pressure on the environment also prompted the automatic exit of a large number of steel production capacity, including both the private sector and state-owned enterprises. Overall, the growth of Chinese steel production has basically come to a halt. However, China will continue to take measures to address overcapacity.

Steel trade problems would be better resolved through dialogue, communication and cooperation between industries. China is willing to work together with other countries to actively improve the international trade environment and to encourage industries to collaborate in order to achieve shared and win-win growth. Steel trade issues should not be linked to the MES issue and should not be used as an excuse to continue discriminatory and unfair practices.

Furthermore, MES and the anti-dumping "surrogate country" approach are two separate issues. Whether or not China's market economy status is recognized, all WTO members, including the EU, must fulfill their international treaty obligations, in accordance with article 15 of China's WTO accession Protocol, and terminate on time the anti-dumping "surrogate country" approach.

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