The elevated prices of high-demand steel products have dropped
for six consecutive weeks since March.
Although the prices are still 30 percent higher than a year ago,
the reduction is seen by the government as a major achievement
following its desperate efforts during the past year to cool the
country's overheated economy.
The?State Development and Reform Commission said Tuesday
that the price of steel products dropped about 17 percent, or
roughly 750 yuan (US$91), to around 3,440 yuan (US$419) per ton
during the past six weeks. The findings are the result of a close
watch on steel prices at 22 major markets nationwide.
"The drop mainly came from the government's effort to cool
overheating trends in some sectors," said a commission official who
asked not to be named.? The official also indicated that the
price would continue to fall in the short term owing to increased
macro-economic regulations, tightened money supply and
administrative intervention.
A stronger US dollar and price declines in raw materials for
steel products on domestic and overseas markets are also partly
responsible for the decrease, the official said.
According to the information gathered from major steel markets
in 22 cities, prices rose at least 1,000 yuan (US$121) per ton in
the 12 months leading up to March.
Domestic demand for steel products began to fall in the first
quarter but output increased by 29.5 percent, leading to growth in
inventories.
Climbing prices spurred investment in steel plants and led to
escalating prices for raw materials and energy during January and
February. Overall investment in the steel sector stood at 16.9
billion yuan (US$2.0 billion) in those two months, up 202 percent
year-on-year, according to figures released by the commission.
By early March, the price of steel products for construction had
risen at least 50 percent. Prices for iron ore, steel scrap and
coke had jumped by about 200 percent, 50 percent and 40 percent
year-on-year, respectively.
However, some economists say that the recent price decline in
steel has not changed the economy's overheating trend.
Money is still being injected into already overheated sectors
like iron and steel, aluminum, cement, real estate and
automobiles.
China's economy grew 9.7 percent in the first quarter of the
year, well above the official target of 7.0 percent for 2004.
To curb the trend, the State Council has said that it is
determined to punish officials contributing to overheating in
problem sectors. Recently, it sent a special team to investigate
the construction of a major iron-smelting project in Jiangsu
Province.
The investigation to date indicates that the project illegally
occupied 436 hectares of land and began construction without
approval from the local environmental protection department.
Wang Jiang, vice president of the China Institute of
Macroeconomic Research, said the government can play an important
role in macroeconomic management.
"But I don't mean that the government should tighten up the
economy all around," said Wang. "We need relatively rapid
development to create jobs, which many, many Chinese are
seeking."
(China Daily May 12, 2004)