There is a crisis in the Chinese steel manufacturing sector. Even though the government understands the need to transition workers to profitable industries, it is proving difficult. Closing down unnecessary factories is crucial to helping improve the Chinese economy, but it has proven difficult to accomplish. This is especially difficult because local government officials and business leaders keep the unneeded steel mills and other factories open in order to stave off unemployment and potential civil unrest.
The price of steel is steadily declining, as the production simply exceeds demand. The Chinese government hopes to close down unneeded steel factories, putting about 500,000 steel workers out of work. The hope is that workers will be able to transition to more stable industries such as services. Even so, Chinese factory workers have been unable to find employment in other industries, leaving many unemployed and some even staging protests.
This employment problem is a huge issue for the Chinese government. In an effort to maintain jobs to keep workers placated, many steel mills that should be closed have reopened, providing an artificial boost to the Chinese economy and factory workers.
The current instability of the Chinese economy has a negative impact on the global economy as well. As the Chinese government tries to avoid more protests, the close down of failing factories has slowed. This has led the U.S. to combat the influx of cheap Chinese steel imports by implementing stiff tariffs on Chinese steel.
Taking all of this into account, the importance of stability in supply and pricing becomes a crucial consideration. During this current election, some presidential candidates speak to the importance of free trade. Others talk about finding ways to keep the American manufacturing industry thriving and heavily taxing imports. Product based businesses must consistently meet consumer demand. At Sharn, we use materials sourced in the U.S.A. We believe that we can provide value and a better product that way. We are a reliable source because of the uncertainty of the current state of foreign production. This is beneficial because it keeps money in the local economy as well as aiding in relieving unemployment in the United States. That helps you, the customer, as we are able to provide you with quality products at great prices, all made in America.
(Credit: Michael Schulman- A Steel Mill Lives Again, in a Setback for China via The New York Times)
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