Excess Capacity far from being Checked

China's overall steel capacity is proliferating through means of merger and project expansion by investors in the name of rooting out outmoded steel facilities that has been frequently reiterated by the government since as early as 2006.

The country's steel capacity rose from 720 million tons in 2009 to 770 million tons in 2010, and is projected to exceed 790 million tons this year when its real steel demand would be just 470 million tons.

Some steelmakers have been desperate to ramp up output or refashion their facilities by taking advantage of the fast advance of urbanization drives all over the country that usually means huge demand for steel products particular construction steel. Moreover, many mills in poverty-stricken regions have covertly been encouraged to grow bigger by local officials who deem the sector as a chief contributor to GDP and their tax revenues. The steel industry in Wuan City, Hebei now contributes up to 70 percent of the city's GDP and employs approximately 10 percent of local residents. The inner opposition of some local governments seems to have had much to do with the central leadership's repeated failure to truly hold down the overall production scale.