The Impact of Imports, Technological Progress and Domestic Demand on the Growth of and Structural Changes in China’s Steel Industry

In this chapter, we first construct a comparative statics model and theoretically discuss how raw material supply and price volatility, intercountry trade relations, technological progress and demand for final goods impact the production and trade of intermediate goods and production of final goods through the perspective of the vertical division of labor. Based on a theoretical analysis, we focused on the Chinese steel industry and collated panel data on steel products to demonstrate how various factors (price of iron ore, domestic demand for final goods, technological progress in the steel industry, accession to the WTO and triggering of anti-dumping measures) affect imports from Japan and the ROK and domestic steel product production. We further estimated how these factors impact the production of final goods closely related to steel products in China. First, although the Chinese steel industry’s rapid growth is due to improved steel production technology and the effects of iron ore prices and imports from Japan and the ROK, domestic demand for final goods has the greatest impact. In addition, these factors affect the production of different steel-related final goods differently. From this point of view, China’s steel industry has not only expanded in scale but also undergone significant structural changes.