The following chart shows China’s annual cement production compared with the rest of the world. You can see that China is producing TWICE what the rest of the world produces. The thing is cement is a heavy and low value commodity. As such, it is not economical to export cement from one country to another. Common sense would tell anyone that China doesn’t need that much cement.

You can see from the chart that China’s cement production went berserk after the 2009 stimulus. In the 5 years after 2008, China’s production increase was equal to the increase over 16 years prior to 2008.

Thailand and China have roughly the same GDP per capita. Thailand has about 40 million tonnes of capacity in a country of 67 million people whereas China with 1,351 million people has 3 billion tonnes of capacity. If it were behaving like Thailand, it would only need 800 million tonnes!

A similar situation exists for steel.

The chart on the next page shows China’s steel production compared with the rest of the world. China produces nearly as much steel as the rest of the world put together. Post 2008, monthly production has increased by 20 million tonnes, a 50% increase over 2008 levels.

David Fuller's view

Here is Bernard Tan's Letter.

These are additional examples of how China’s regional governments have been out of control.  The excess production does not appear to be linked to any economic logic other than perhaps to make money quickly and get out before the bubble bursts.  China’s central government is trying to rein in the worst excesses without creating a slump but this is not easy, not least as there are so many vested interests in powerful positions.