China Understands Steel. Our Activists Do Not.
by Cynthia Omerza Stene
In 1958, Mao Zedong toured China and announced the Great Leap Forward, a five-year plan in which the country would focus on agriculture and industry. Mao determined industry needed agriculture and agriculture needed industry. Indeed, agriculture kept industry fed; and industry fueled agriculture with technological advancement. The plan began so successfully that the government greedily and impatiently set unrealistic goals, and impossible expectations ultimately led to failure by the end of 1961.
The Chinese government seized private farms and citizens worked on behalf of the government, practicing close farming with nonsensical expectations of high yield. Citizens created backyard furnaces, melting their pots, pans, and other household items to produce steel. Citizens couldn’t keep up: farming was neglected while stoking the furnaces and vice versa. Fields failed, causing a widespread famine; but Mao demanded the Chinese people keep working. Brutal and torturous punishments were imposed upon people who didn’t work hard enough or who managed to pilfer a handful of food. The sick were intentionally starved to hasten their deaths. The famine ultimately led to government-imposed cannibalism. At least 45 million deaths can be attributed to Mao’s campaign.
However, China grasped one critical concept from the failed venture: Steel. Steel production could propel them to become a solid economic force. Steel drove China to its spot as the second largest economy in the world, currently a mere $6 trillion behind the United States.
China now supplies more than half the world’s steel. In the past five years, China extracted 5,733 million metric tons of raw iron ore from the earth and produced 52 percent of the world’s steel. In contrast, the United States extracted 311 million metric tons of iron ore and produced five percent of the world’s steel. But here’s the rub: most of China’s steel industry is government-owned. Communist China controls more than half of the world’s steel production.
Steel supply is slightly ahead of demand this year. Due to its massive production efforts, China has an overabundance of steel; so the government has turned its focus to consumption rather than production. Thus, with demand down, steel prices are at a ten-year low. The stagnant prices may be blamed in part on the fact that, in 2015, China realized that they needed to look to other countries to buy their excess steel. Their exports dramatically increased by 25 percent. The amount China exported exceeded the total production from other countries with the exception of Japan. The Chinese government not only controls its own steel production, it also financially subsidizes the industry so there is essentially no possible financial loss. As a result, China has been saturating the global market with cheap steel – both in price and quality (Pham).
The Chinese steel glut has and continues to force steel mills out of business around the world because the Chinese are “dumping” their steel. Dumping means they are selling exports below market costs or selling below home market sale prices. So while the Chinese government funds steel mill operating losses and purposefully dumps the steel to keep their people employed, it severely damages our global economy. The more money a government filters into the economy, the less value that money has. Devaluation of currency causes prices to go up, and inflation follows. Inflation is nondiscretionary: It hurts all classes, rich, poor, and in between. Artificial manipulation of currency endangers the sustainability of free market enterprises and the affected industries.
The consequences of Chinese control are dangerous both economically and politically. Steel dumping has closed myriad mines and steel mills around the world, causing unemployment rates in those sectors to skyrocket. Chinese control of their currency can change the U.S. economy overnight because the Chinese are a significant trading partner. China’s control of the world steel market wields the power to cripple the world’s steel mills.
The world needs steel: cars, aircraft, ships, railroads, bridges, roads, buildings, houses, and appliances. Steel is everywhere, but China is slowly paralyzing our iron ore and steel industries. Americans need to ask and answer these questions: In the event of a national crisis, could the U. S. be as prepared as we were in World War II? With diminished iron ore and steel production of our own, are we prepared to stabilize our nation? Are we advancing our iron ore and steel technology along with the rest of the world to insure our own defense? Might China have an ulterior motive in purposefully damaging the economies of other countries by monopolizing the steel industry? Should the U. S. government consider China’s motivations and actions a national security threat? Why is the U. S. government taking such parochial care of its own industries?
This past spring, the U.S. imposed tariffs of up to 522 percent on Chinese steel imports into the United States. The imposed tariffs are born largely out of frustration with China’s crushing of the competitive edge in the global steel market. The Chinese government expressed surprise by the size of the tariff and forecasts retaliation and strained relations within the global community. China could supply the entire world with steel, but should the global community be at China’s mercy for steel? John Ferriola, Chairman of the American Iron and Steel Institute, evaluates, “China has subsidized the growth of its steel industry through grants, low-interest loans, free land, low-priced energy and other raw material inputs. Simply stated, the Chinese government is a company disguised as a country; and they are waging economic war on the United States (Flanagan).
Works Cited
Flanagan, Ed. “China’s ‘Zombie’ Steelmakers Hit With Huge U.S. Tariffs.” NBC News. 18 May 2016. Web. 23 Jun 2016.
Pham, Peter. “China’s Steel Industry is Dominating the Global Market – But Will it Last?” Forbes. 27 Apr 2016. Web. 21 Jun 2016.
by Cynthia Omerza Stene
In 1958, Mao Zedong toured China and announced the Great Leap Forward, a five-year plan in which the country would focus on agriculture and industry. Mao determined industry needed agriculture and agriculture needed industry. Indeed, agriculture kept industry fed; and industry fueled agriculture with technological advancement. The plan began so successfully that the government greedily and impatiently set unrealistic goals, and impossible expectations ultimately led to failure by the end of 1961.
The Chinese government seized private farms and citizens worked on behalf of the government, practicing close farming with nonsensical expectations of high yield. Citizens created backyard furnaces, melting their pots, pans, and other household items to produce steel. Citizens couldn’t keep up: farming was neglected while stoking the furnaces and vice versa. Fields failed, causing a widespread famine; but Mao demanded the Chinese people keep working. Brutal and torturous punishments were imposed upon people who didn’t work hard enough or who managed to pilfer a handful of food. The sick were intentionally starved to hasten their deaths. The famine ultimately led to government-imposed cannibalism. At least 45 million deaths can be attributed to Mao’s campaign.
However, China grasped one critical concept from the failed venture: Steel. Steel production could propel them to become a solid economic force. Steel drove China to its spot as the second largest economy in the world, currently a mere $6 trillion behind the United States.
China now supplies more than half the world’s steel. In the past five years, China extracted 5,733 million metric tons of raw iron ore from the earth and produced 52 percent of the world’s steel. In contrast, the United States extracted 311 million metric tons of iron ore and produced five percent of the world’s steel. But here’s the rub: most of China’s steel industry is government-owned. Communist China controls more than half of the world’s steel production.
Steel supply is slightly ahead of demand this year. Due to its massive production efforts, China has an overabundance of steel; so the government has turned its focus to consumption rather than production. Thus, with demand down, steel prices are at a ten-year low. The stagnant prices may be blamed in part on the fact that, in 2015, China realized that they needed to look to other countries to buy their excess steel. Their exports dramatically increased by 25 percent. The amount China exported exceeded the total production from other countries with the exception of Japan. The Chinese government not only controls its own steel production, it also financially subsidizes the industry so there is essentially no possible financial loss. As a result, China has been saturating the global market with cheap steel – both in price and quality (Pham).
The Chinese steel glut has and continues to force steel mills out of business around the world because the Chinese are “dumping” their steel. Dumping means they are selling exports below market costs or selling below home market sale prices. So while the Chinese government funds steel mill operating losses and purposefully dumps the steel to keep their people employed, it severely damages our global economy. The more money a government filters into the economy, the less value that money has. Devaluation of currency causes prices to go up, and inflation follows. Inflation is nondiscretionary: It hurts all classes, rich, poor, and in between. Artificial manipulation of currency endangers the sustainability of free market enterprises and the affected industries.
The consequences of Chinese control are dangerous both economically and politically. Steel dumping has closed myriad mines and steel mills around the world, causing unemployment rates in those sectors to skyrocket. Chinese control of their currency can change the U.S. economy overnight because the Chinese are a significant trading partner. China’s control of the world steel market wields the power to cripple the world’s steel mills.
The world needs steel: cars, aircraft, ships, railroads, bridges, roads, buildings, houses, and appliances. Steel is everywhere, but China is slowly paralyzing our iron ore and steel industries. Americans need to ask and answer these questions: In the event of a national crisis, could the U. S. be as prepared as we were in World War II? With diminished iron ore and steel production of our own, are we prepared to stabilize our nation? Are we advancing our iron ore and steel technology along with the rest of the world to insure our own defense? Might China have an ulterior motive in purposefully damaging the economies of other countries by monopolizing the steel industry? Should the U. S. government consider China’s motivations and actions a national security threat? Why is the U. S. government taking such parochial care of its own industries?
This past spring, the U.S. imposed tariffs of up to 522 percent on Chinese steel imports into the United States. The imposed tariffs are born largely out of frustration with China’s crushing of the competitive edge in the global steel market. The Chinese government expressed surprise by the size of the tariff and forecasts retaliation and strained relations within the global community. China could supply the entire world with steel, but should the global community be at China’s mercy for steel? John Ferriola, Chairman of the American Iron and Steel Institute, evaluates, “China has subsidized the growth of its steel industry through grants, low-interest loans, free land, low-priced energy and other raw material inputs. Simply stated, the Chinese government is a company disguised as a country; and they are waging economic war on the United States (Flanagan).
Works Cited
Flanagan, Ed. “China’s ‘Zombie’ Steelmakers Hit With Huge U.S. Tariffs.” NBC News. 18 May 2016. Web. 23 Jun 2016.
Pham, Peter. “China’s Steel Industry is Dominating the Global Market – But Will it Last?” Forbes. 27 Apr 2016. Web. 21 Jun 2016.
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