Before 1949 the iron and steel industry was small and dispersed the Japanese had built the only modern steel facility just after World War I at Anshan, Liaoning Province. Although Japan eventually built nine blast furnaces in Anshan, total steel output by all plants never exceeded one million tons annually. Much of the Japanese equipment was either damaged in the civil war or removed by the Soviets at the end of World War II.

Since the establishment of the People's Republic, considerable investment has gone consistently to expand steel output. However, steel production has been very sensitive to changes in economic policies and political climate (see fig. 9, Steel Production and Capacity, 1949-85). Steel output rose steadily in the 1950s when Soviet advisers helped establish the basis of the iron and steel industry, installing numerous Soviet-designed blast and open-hearth furnaces. The Great Leap Forward saw great growth of primitive backyard furnaces producing poor-quality pig iron, numerous new, small, modern plants, overuse of large plants, and exaggerated production reports. In 1961 the industry broke down nearly all small plants were closed, and output fell to less than half the amount reported for 1960. From 1960 to 1965, output gradually recovered with equipment repair and the purchase of basic oxygen furnaces from Austria and electric furnaces from Japan. Production fell in 1967 and 1968 during the Cultural Revolution, but it grew rapidly in the relative political stability from 1969 through the early 1970s. In the mid-1970s political upheaval retarded output, as did the catastrophic Tangshan earthquake of 1976. That event severely damaged the Tangshan steel plant and the Kailuan coal mines. The latter are aอออออออ major source of coking coal. After 1976 output climbed steadily, reaching 34.5 million tons in 1979. Steel production for 1986 was fifty million tons.

Steel was viewed as the cornerstone or "key link" of both the Great Leap Forward and the Four Modernizations programs (see _______________, ch. 5). But the post-Mao leadership was determined not to repeat the economically disastrous Great Leap policies: in 1979 it called for a period of readjustment and a cutback in steel investment. However, it had set a goal of producing 80 million tons of steel by 2000. Production targets were to be met by renovating and improving existing facilities, rather than building new ones. Improvements in existing plants reduced steel-industry energy consumption from 73.8 million tons of coal in 1978 to 69.1 million tons in 1983, and production increased by 26 percent. However, the Chinese realized they would need outside assistance to fully modernize their steel industry. They sought hardware, technology transfer, and managerial and planning assistance.

In 1987 China was the world's fifth-largest producer of iron and steel, but lagged far behind developed countries in production methods and quality. Most steel capacity was in open-earth furnaces with basic oxygen furnaces, electric furnaces, and side-blown converters. Much of the iron and coking coal used in making steel was of low low quality. Approximately 25 percent of the country's coal went for steel production in 1985. In 1985 capital construction, considered excessive by the Chinese, exacerbated existing shortages of rolled steel, and imports filled 25 percent of domestic demand.

The Ministry of Metallurgical Industry reported in 1985 that China had 13 plants capable of producing at least 1 million tons per year. Accounting for approximately 65 percent of total production, these mills were built mostly during the 1950s. The Anshan plant was the oldest and most productive of all, producing 7 million tons per year. The next largest was in Wuhan. It was constructed in the 1950s with Soviet aid. China began construction in 1978 on its first integrated steel complex, the Baoshan Iron and Steel Works in Shanghai, but the completion date moved from 1982 to 1985, and finally to 1988.

Besides the larger plants, about 800 smaller mills were dispersed throughout the country in 1985. They ranged from specialty mills producing 500,000 tons per year to very small operations under local jurisdiction or other ministries. Many of the smaller mills were legacies of the Great Leap Forward, when local authorities had hurriedly established their own steel-making facilities. In the mid-1980s the government hoped to phase out these inefficient plants in favor of larger, more productive plants.

In the late 1980s, it was apparent that steel output would remain insufficient to meet the needs of the Four Modernizations. During the period covered by the Seventh Five-Year Plan, imports were expected to average 41 percent of domestic output. Thin rolled sheets, used to make such items as vehicles, washing machines, and refrigerators, were in extremely short supply. In 1984 China had to import about half its steel sheet and about 80 percent of its steel plate. Production of tubes and pipes also was inadequate, and approximately 50 percent of all tubes had to be imported. The country was most proficient in the production of steel bars, but it still had to import an estimated 1.8 million tons of rods and bars in 1984. In 1985 China imported a record 15 million tons of steel, more than two-thirds of it from Japan.

Data as of July 1987