According to Jiang Yuan, an official from the State Economic and Trade Commission, the US steel import restrictions will spark a "very negative chain reaction" on the home steel market.

Steel makers from the other entities affected by the US restrictions -- such as the European Union (EU), Japan and South Korea -- are now likely to more strongly target China, one of the world's biggest steel markets, Jiang said.

"This will put more pressure on China's struggling steel firms," she said.

China imported 17.2 million tons of steel last year, up from 16 million tons in 2000.

Under obligations of the World Trade Organization (WTO), China has slashed its tariffs on steel imports by an average 2.5 per cent this year.

Chinese firms have suffered from an overall glut on the domestic steel market for years.

"China's exports to the EU and Southeast Asia will be squeezed amid increasing competition in these markets as a result of the US restrictions," Jiang said.

The nations affected by the US restrictions will protect their own markets, hurting China's steel exporters, she said.

The EU has said it will take "whatever measures are necessary" to prevent a jump in steel imports into its own market.

China exported 4.7 million tons of steel last year, down from 6.2 million tons in 2000, she said. Steel exports to the US amounted to 740,000 tons last year.

China's steel industry has been speeding up restructuring to improve its competitiveness in the period following its entry to the WTO.

The commission said China will continue to close small steel plants this year to cut overall production. Over the past three years, 85 small plants were closed.

It said China would control steel output to 125 million tons this year. The output last year amounted to 157.5 million tons, compared with 131.5 million tons in 2000.

The commission calls for domestic steel makers to accelerate technical innovation to develop more high-end products to offset imports.

Domestic firms are also encouraged to expand exports.

The Shanghai-based Baosteel plans to export 3 million tons a year by 2005 and the other three aim to export 1.5 million tons annually.

(China Daily March 22, 2002)