Wednesday, July 11, 2012

If Only We Were Like China...

...we could build steel mills we don't need in order to try to stimulate economic growth:

Among projects newly approved, the government has dusted off steel-industry investment plans that had languished. State-owned Baosteel Group Corp. has won the go-ahead to build an $11 billion plant it first broached more than 15 years ago.

The plant won a preliminary approval in 2008 that was later suspended out of concern it would deepen the steel glut. In late May, however, Mr. Wen spoke publicly of the importance of policies "to maintain stable and relatively fast growth."

The next day, Beijing approved 100 projects, according to Spanish bank BBVA.

A photo of the elated mayor of the city where the new steel plant will be built, Zhanjiang, kissing the approval letter circulated on the Internet.

It wasn't that concerns about steel oversupply had faded. China's large and midsize steel plants lost money overall in the first quarter, according to Citigroup Inc. But political imperatives shifted as the government searched for projects that could boost growth. "The market situation may be the same as before, but the political motives have changed," said Lin Jiang, a finance professor at Sun Yat-sen University in southern China.

Oh well, I guess we'll just have to settle for building trains that we don't need, another situation where the political motivations far outweigh those of the market.