Chinese oversupply of steel is "damaging and distorting" global markets, US Treasury Secretary Jacob Lew said Monday, joining a chorus of criticism that blames Beijing for plant closures and job losses in the industry worldwide.
China is the world's number one steelmaker, producing more than half of global output, but stands accused of flooding the market with steel at below cost prices -- dumping -- in violation of international trade rules.
"Excess capacity has a distorting and damaging effect on global markets," Lew said at the US-China Strategic and Economic Dialogue in Beijing, a key annual meeting between the world's two top economic powers.
"Implementing policies to substantially reduce production in a range of sectors suffering from overcapacity, including steel and aluminium, is critical to the function and stability of international markets."
Lew's comments echo those of other senior officials around the world who have blamed the Chinese supply glut for industry turmoil in Europe and elsewhere.
Among those hit has been Indian-owned Tata Steel, which said in March it was selling its struggling British assets -- putting 15,000 jobs at risk.
At Group of Seven summit talks in Japan last month world leaders said the global steel oversupply must be "urgently addressed", in what was seen as a barely disguised jab at China.
The US has punished Beijing with harsh tariffs, most recently in March, when it slapped a 300 percent rate on the cold rolled steel used to make auto parts.
The EU, the second-biggest steel producer, has launched a dumping probe into Chinese steel but angry manufacturers have urged it to mirror the US's tough tariffs.
The 28-nation bloc said this month that granting market economy status for China at the World Trade Organization was "untenable" because it would cost jobs in Europe in industries such as steel.
The designation would make it much harder for major economies to fight Beijing over alleged unfair trading practices.
But Beijing hit back Monday, with Finance Minister Lou Jiwei defending overcapacity as a hangover of China's rapid economic growth.
“Now the world is pointing a finger at China saying its overcapacity is a drag on the world, but they didn't say so at the time China contributed to world growth."
He added that half of Chinese steelmaking firms are privately owned, and "they are not going to accept any instructions from us".
- Social instability -
China's steel industry is huge, with national production growing sevenfold from 2000 to 2014 on the back of massive infrastructure investment in cities and as the government ploughed billions of dollars into heavy industry to counter the impact of the 2008 financial crisis.
But demand for steel has fallen as the rate of economic growth has slowed, leaving producers making hundreds of millions of tonnes more than they can sell domestically each year.
Chinese leaders have repeatedly pledged to address the issue of excess capacity, admitting it is a drag on their own economy.
The country's largest steel firms are state run, and the government wields significant control over the industry as a whole.
Beijing has vowed to eliminate 100 million to 150 million tonnes of capacity -- out of a total of 1.2 billion tonnes -- by 2020, saying the reforms would cost 500,000 jobs.
But local governments with ownership stakes in steel firms have resisted reforms, fearing the social instability that mass layoffs could cause.
Ratings agency Fitch has said that the plan to cut capacity "faces immense social and financial challenges", while laid-off steelworkers have already begun to protest at losing their jobs.
Ahead of the Beijing meeting, Lew said he didn't think policies to deal with excess capacity had been implemented.
"They made the policy commitment to make these changes, they now have to implement and execute, not just at the national level but at the provincial level as well," he said according to Bloomberg.