A Study On Government Subsidy Policy Of Iron And Steel Enterprises In China

Iron and steel industry plays a decisive role in China’s economic development, and has an important impact for the realization China’s industrialization and modernization. In recent years, China’s steel industry has made significant progress, but there still exists some problems.On the one hand, because of local governments provide capacity subsides to enterprises, enterprises develop production plans according to the profit maximization principle. And the less cost of subsidies governments provide, the easier overcapacity arises. On the other hand, because of low level of technology and excess capacity of steel caused the price of steel products fell, many steel enterprises are facing financial loss. Therefore,as a kind of means for the steel industry, the specific role of government subsidies is worth studying.Firstly, this article starts from the review of theories of government subsidies, domestic and foreign government subsidies as well as empirical research studies on the steel industry, and then discusses the evolution of Chinese steel industry subsidies, the subsidies structure, subsidies scale as well as subsidies level. In empirical research on government subsidies, most of the research focuses on the motive of government subsidies, nearly no empirical study on steel subsidies. Studies on steel industry mostly about national industrial policy on steel enterprises. In this paper, the empirical research on iron and steel industry subsidies used the listed steel company--Benxi Iron & Steel Group as a case studied. All the research data from the recently Benxi Iron & Steel Group annual reports and annual financial statements. The empirical results show that: government subsidies on the company’s profitability has some impact,but the impact on eliminating backward production capacities is not significant. And the study of subsidies efficiency on production found that some of the steel companies have lower technological progress level,which reduce the efficiency of government subsidies.Finally, the article analyses the empirical conclusions, and puts forward some relevant recommendations on the development of steel industry.