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If you want to understand China, understand this industry

An employee works at a steel factory in Dalian, China.
China Daily | Reuters

A lot of major investors want clues on China's economic "transition," and many analysts say the country's steel sector is the one to watch.

Steel is seen as emblematic of the worst of China's economy: A heavily state-supported manufacturing industry that is deep in debt, influenced by Beijing, and which dumps its excess production onto other countries' markets, distorting prices around the world and crushing non-Chinese competitors.

"Steel is still useful because it's essentially a reform indicator," said Brian Jackson, senior economist at IHS Markit in Beijing.

This week, the G20 meeting ended in Hangzhou, China, with the multinational organization calling for cuts in global steel capacity. The G20 did not specifically name China, but the country accounts for about half the world's steel production — up from roughly a third in 2008.