Gee, speaking of steel and China and overcapacity-- from yesterday's Wall Street Journal:
China Takes a Hard Look at Its Steel Industry Beijing and Companies Move Toward Lowering Taxes to Promote Consolidation and Cut Capacity "Frustrated in previous attempts to consolidate its fragmented steel industry, Chinga is working on a new way to promote mergers and reduce capacity, possibly giving a boot to other global steel companies. China has hundreds of steel mills [around 800 actually-- my note] many of them small and inefficient. But the central government's desire to close small plants and consolidate the industry has been stymied at the regional level. Local government officials have resisted the potential loss of jobs and tax revenue. Steelmakers, meanwhile, have been kept in check by riots protesting planned plant closures. [Isn't it funny how that part of the equation never shows up in the homages sung to increased capacity by our developmentalists? And I get accused of 'defeatism'? Or perhaps the Chinese workers are being misled by their ultra-left leaders, leaders secretly allied with Western imperialism, to engage in direct action thereby undermining the fatherland? ] Under a plan being worked out, steelmakers' national tax bills would decline by year end, with some of that money instead going to regional taxes, according to people familiar with the matter. That would soften the blow of closed mills by giving regional governments additonal tax revenue to stimulate their economies and help find jobs for displaced steelworkers..... [sure, that worked so well for steelworkers in Pittsburgh, Pa. and Buffalo, NY. Allentown, Pa. during the Reagan era, didn't it?] Details on the tax plan are still being worked out by the Chinese Iron and Steel Association and China's central government in Beijing, said Wu Xichun, the association's honorary chairman. "The tax burden for Chinese steelmakers is too high," Mr Wu said [channeling the spirt of Milton Friedman]. About 17% of revenue for Chinese steel makers goes to pay taxes, about triple the rate for US steelmakers, he said.... [hmmm... how could that be-- first law of Laffler/Friedman Robotics 1.more tax, less growth; less tax, more growth. Here we have China's capacity growing despite a higher tax burden... Do you think maybe the real issue isn't taxes but profitability?] China has the capacity to produce at least 610 million metric tons fo steel a year-- about 100 million more tons than it currently needs. The central government has said excess capacity has been permanently shut down.... The association noted that China already has reduced its exports substantially to 4% of production through August from 12-13% last year... The [World Steel Association-- remember them, and the locomotive of China?] global trade group expects that growth in Chinese demand will slow to 5% next year, based on Chinese steel assoication forecasts, as support from stimulus measures wanes. Not so big a locomotive is it? Not quite the tractive effort you would expect from the next big thing in locomotives is it? Who's Friedmanizing now? ________________________________________________ YOU MUST clip all extraneous text when replying to a message. Send list submissions to: Marxism@lists.econ.utah.edu Set your options at: http://lists.econ.utah.edu/mailman/options/marxism/archive%40mail-archive.com
