Smog-choked province in China’s steel heartland to push for even higher growth

PUBLISHED : Wednesday, 11 January, 2017, 7:03am
UPDATED : Wednesday, 11 January, 2017, 7:02am

Plans to chase even higher economic growth in China’s steel-making heartland this year have fuelled market fears of continued air pollution and an official push for expansion at all costs.

Hebei province, which surrounds Beijing and produces more than one-tenth of the world’s steel, is aiming for 7 per cent growth in gross domestic product this year, up from 6.8 per cent realised growth in 2016, ­according to a government report released on the weekend during the provincial people’s congress.

Hebei’s target is higher than the 6.7 per cent growth that ­National Development and ­Reform Commission chairman Xu Shaoshi on Monday said the country’s whole economy “probably” expanded by last year.

While President Xi Jinping has repeatedly said the country will put as much value on the environment as economic prosperity, the world’s second-biggest economy is still run by an institutionalised system geared towards economic expansion.

What goes into our lungs when we breathe in China’s severe smog?

Hebei, which adjoins Beijing and Tianjin, relies heavily on the steel and coal sectors and is home to seven of the 10 most polluted cities in the country.

That pollution is in large part due to the massive scale of production and poor enforcement of environmental standards.

The pollution worsened as the province’s growth rose in the ­second half of last year amid a ­rebound in commodity prices.

Hebei’s output of crude steel rose 2.4 per cent to 178 million tonnes in the first 11 months of last year, according to the ­National Bureau of Statistics. Both its capacity utilisation ratio and production growth were higher than the national average.

And despite Hebei saying it cut 16 million tonnes of steel capacity last year, the heavy smog spread to blanket the two neighbouring municipalities.

Beijing raised its first red alert for air pollution in mid-December, and had an orange alert in place for the first week of the year. Red is the highest alert in the four-tier system, followed by orange, yellow and blue.

Wei Yingsong, an analyst with Shanghai-based industry consultancy Mysteel, said capacity cuts did not necessarily mean a fall in actual output.

“Lots of capacity that has been removed had been idle for quite a long time,” Wei said.

Wei said small and mid-sized plants had big increases in output after steel prices rebounded last year and could continue to do so again on expectations of higher prices in 2017.

Xu Fengxian, from the Chinese Academy of Social Sciences’ economic research institute, said ­Hebei’s 7 per cent growth target “can certainly be achieved under the existing growth model”. “But Hebei needs to upgrade its steel industry to reduce pollution and introduce hi-tech industries to optimise its economic structure.”

Is China’s bid to slash the size of its polluting steel and coal industries working?

The province has vowed to ­develop seven newly emerging ­industries, including cloud ­computing , health sciences and ­robotics, according to the government report.

Under the Beijing-Tianjin­Hebei economic integration plan, some general manufacturing businesses are set to relocate to the province, but its prospects for developing high-value-added ­industries seems limited.

The transfer of some industries, such as car manufacturing from Beijing, could help cut its reliance on the steel industry. That would increase the added value of the equipment manufacturing sector, which is already on a par with that of steel.

But Xu said the structural adjustment would take a fairly long time.