Groundbreaking Research Confirms Massive Chinese Energy Subsidies to Steel Industry

New report uncovers unprecedented subsidies affecting global steel


Jan 08, 2008, 00:00 ET from Alliance for American Manufacturing

    WASHINGTON, Jan. 8 /PRNewswire-USNewswire/ -- According to a new report
 commissioned by the Alliance for American Manufacturing (AAM), the Chinese
 government has exponentially boosted its steel output over the last three
 years through massive, trade-distorting energy subsidies. Total energy
 subsidies to Chinese steel from 2000 to mid-year 2007 reached $27.11
 billion. Despite China's entry to the World Trade Organization (WTO) in
 2002, energy subsidies grew, totaling $25.07 billion through mid-year 2007.
 These energy subsidies include supports for thermal and coking coal,
 electricity, and natural gas.
     "Chinese subsidies exist, they are enormous and they are shaping the
 global steel market," said the report's author, Usha C. V. Haley, Ph.D.
 "China has identified steel as a strategic industry, and both the central
 and provincial governments have decided to ramp up steel production with
 massive subsidies that have now been confirmed."
     China is the largest producer and consumer of steel in the world,
 accounting for 40 percent of the global market. Much has changed for
 China's steel industry in the last 5 years. In 2005, China went from a net
 steel importer to a steel exporter. In 2006, China became the largest steel
 exporter in the world by volume, up from fifth largest in 2005. This
 enormous increase in production has come at a cost for U.S. manufacturing;
 more than 1.8 million U.S. jobs have been displaced since China joined the
 WTO, according to the Economic Policy Institute.
     "This shift from a net importer to the largest exporter in a span of
 only two or three years is staggering," said Dr. Haley. "Our analysis shows
 that energy subsidies have a very strong correlation with Chinese steel
 exports. In fact, the connection is so clear that, essentially, it's
 possible to almost perfectly predict China's steel exports from its energy
     Conducting an extensive market-based study was a difficult and daunting
 task. "There is an absolute lack of transparency and people were afraid to
 talk to us. The amount of the subsidies is enormous and they are
 conservatively estimated in this report," said Haley.
     In her report, Dr. Haley notes that Chinese energy subsidies fell in
 2002 and 2003, after China joined the WTO. However, the subsidies surged in
 2004 and have continued to grow exponentially. From 2000 to 2006, China's
 total energy subsidies to steel grew by 1365 percent. In 2007, energy
 subsidies to Chinese steel are estimated at approximately $15.7 billion,
 showing a 3800 percent increase since 2000.
     "These subsidies need to be urgently addressed and remedied by Congress
 and the Administration," said Scott Paul, AAM's executive director.
 "They're typical of China's brazen subsidization as well as illegal
 practices like currency manipulation. China shipped 5.4 million tons of
 steel to the U.S. in 2006 -- more than double the amount in 2005.
 Washington needs to take strong action to correct this one-sided approach
 to trade which has given Beijing an unfair competitive advantage while
 harming American businesses and workers."
     A copy of Dr. Haley's report is available at, or by contacting AAM's Steven Capozzola at

SOURCE Alliance for American Manufacturing