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U.S. Steelmakers Seek to Block Chinese Investments

Oct. 14 (Bloomberg) -- U.S. steelmakers, working to block Chinese investments such as a planned venture by Anshan Iron & Steel Group in Mississippi, produced a report saying companies in China get illegal government subsidies.

Groups representing Nucor Corp. and U.S. Steel Corp. listed government loans, tax breaks and payments they said their counterparts in China receive. Much of the aid violates World Trade Organization rules and may give Chinese companies an unfair advantage if they invest in the U.S., according to the report released today.

“By making its steel industry artificially competitive in world markets, the Chinese government has disadvantaged market-oriented producers around the globe,” the American Iron & Steel Institute and the Steel Manufacturers Association said in the report. “Deploying its steel-producing, state-owned enterprises overseas to compete in private markets will only further distort global steel markets.”

With Chinese foreign investment poised to expand, the complaints from steelmakers indicate the fight over Anshan may set the terms for future disputes between U.S. producers and Chinese companies. While steelmakers complain that government-supported Chinese firms can undercut them in the American market, many U.S. communities are seeking overseas investment to rebuild factories and boost employment.

Cheap credit and benefits from ties to the Chinese government has meant that all of the expansion in global steel production in the past decade has come from China, said Alan Price, a lawyer at Wiley Rein LLP in Washington who wrote the report.

‘Government Intervention’

“That does not happen without major government intervention,” Price said in an interview. “The report starts to lay out the broader ground for action on WTO violations.”

Anshan announced May 18 that it was forming a venture with Amory, Mississippi-based Steel Development Co. on a $200 million factory that will produce 300,000 tons of reinforcing bar a year. Additional plants may follow, it said at the time.

Anshan’s planned “small” investment in the U.S. shouldn’t be politicized by U.S. lawmakers, Yao Jian, a spokesman at China’s Ministry of Commerce, said in July.

Even that investment is part of the Chinese government’s “Going Abroad” strategy, and is not based solely on commercial terms, Price said.

“The whole ‘Going Abroad’ strategy is government supported and directed,” he said. “We’re at a crossroads.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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