JCEFTS
1,1
62
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 1 No. 1, 2008
pp. 62-74
# Emerald Group Publishing Limited
1754-4408
DOI 10.1108/17544400810854504
Globalisation and China’s iron
and steel industry
Modelling China’s demand for steel importation
Xiaoling Hu
University of Gloucestershire, Cheltenham, UK
Hua Ping
Centre d’Etudes et de Recherches sur le De
´
velopement International,
Universite
´
d’Auvergne, Clermont-Ferrand, France
Charlene Xie
Shenzhen Graduate School, Harbin Institute of Technology, Shenzhen,
People’s Republic of China, and
Xiaoju Hu
Jili University, Beijing, People’s Republic of China
Abstract
Purpose – The purpose of this paper is to estimate China’s import-demand function for steel
products within the context of globalisation.
Design/methodology/approach – The research used the monthly data for the period 1996-2004
and a cointegration procedure is applied in the estimation.
Findings – The results show that the price and income elasticities of China’s import demand for
steel are no different from those of other countries investigated by other researches. Specifically, the
results of this study are consistent with the hypothesis that China’s import of steel products is
strongly correlated with its economic activities and the fluctuation of its real exchange rate.
Practical implications – The empirical results obtained are important both for government policy
and for employment. On the one hand, the magnitude of imports may adversely affect employment in
China’s steel industry. On the other hand, any changes in China’s domestic macroeconomic activity
and its exchange rate will generate great uncertainty in the world steel market.
Originality/value – This paper may be the first of its kind to apply the cointegration technique in
estimating China’s import-demand function for steel products. It is important, given China’s dominant
position as both the biggest producer and the biggest consumer of steel products.
Keywords Steel, Imports, China, Globalization
Paper type Research paper
1. Introduction
China is now the world’s biggest steel producer with an annual steel output exceeding
100 million tons, a position held since 1996. In 2003 China’s crude steel production was
219.3 million tons. This was increased to 272.8 million tons in 2004 (International Iron
and Steel Institute (IISI), 2004). However, over the past ten years, the growth of steel
demand in China has been averaging 10 per cent annually on a compound basis,
roughly in line with the expansion of the economy. Within a very short period, China
has become the largest steel consumer in the world. In 2003, China’s annual steel
consumption reached 215 million tons (International Iron and Steel Institute (IISI),
2003). As a large proportion of this consumption consists of high-quality steel and the
domestic producers have great difficulty in meeting the requirement, the shortfall has
had to be met from imports. While China has significantly reduced its steel imports
since the 1990s, its size in world markets still makes it of key importance. Therefore,
the determination of the demand, price and substitution elasticises in the Chinese
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