A new study sponsored by four organizations representing steel producers documents the artificial advantages fueling the unprecedented 170% growth rate of the Chinese steel industry from 2000 to 2005. The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industry details the impact on the U.S. economy of subsidies in the form of tax refunds, cash grants, preferential loans, currency manipulation, discounted interest rates and other preferential Chinese policies on the competitiveness of the international steel market.

A new study sponsored by four organizations representing steel producers documents the artificial advantages fueling the unprecedented 170% growth rate of the Chinese steel industry from 2000 to 2005. The China Syndrome: How Subsidies and Government Intervention Created the World's Largest Steel Industrydetails the impact on the U.S. economy of subsidies in the form of tax refunds, cash grants, preferential loans, currency manipulation, discounted interest rates and other preferential Chinese policies on the competitiveness of the international steel market.

The study was prepared by Wiley Rein & Fielding LLP for The American Iron & Steel Institute, The Steel Manufacturers Association, The Committee on Pipe and Tube Imports and The Specialty Steel Industry of North America.

Perhaps in anticipation, shortly before this report was issued an influential Chinese business consultant urged his government to adjust its steel export rebate policy “as soon as possible” to cope with increasing export pressure.

TheChina People's Dailyreported these remarks from the chief inspector of LangeSteel Information Consultation Co. Ltd. Xu Xiangchun said that the policy is a necessary response to the anti-dumping charges imposed on China by other countries. It will also help strengthen the macro control policy on the sector and step up the restructuring of the industry, he noted.

It is believed the rate for steel export rebate might be cut from 11% to 8-9%. Industry insiders claim the slash of the export rebate by one or two percent would have little impact on steel producers' profit margins, but the symbolic meaning of the policy adjustment is greater than the actual effect.

China exported 12.67 million tons of steel in the first five months of this year, up 35.1% over last year. China's steel exports are facing increasing pressure as Australia and Indonesia have launched anti-dumping investigations against steel products from China.

China's steel prices have dropped sharply since late June as the market fears a stricter macro control policy in the latter half of the year.

Some industry insiders suspect that the central government may take more serious measures to curb excessive investment and slow down the country's overheated economic growth.