A source with Shagang said big problems remain in the Chinese steel market such as vastly excess capacity, shortages of high-end steel at home, and large proportion of low-value added steel China produces and exports. The fundamental problem is how to improve quality and diversify its products range. While China has been introducing a great number of advanced facilities in recent years, the lack of talent people masterful at research and development is becoming a hurdle to its future development.

Relocating production sites to coastal areas can help reduce transportation fees and unnecessary bureaucracy, but precautionary measures should be made to prevent the new round of overcapacity along the coastal regions. The best way to do so is carrying out merger and acquisition activities.

He added there is no point of choosing a leader in a merger case merely by the standards of the size and ownership of each participant involved. It is the comprehensive competitiveness that should matter. Local authorities should learn to accept anybody regardless of their ownership, state-owned, private or pluralistic.