What a 'steel-free' town in China really looks like

  • China has come under criticism — including by the Trump administration — for flooding global markets with cheap steel, pressuring steelmakers in other countries.
  • Chinese Premier Li Keqiang, at the opening of the National People's Congress, said China was reducing steel capacity and pledged to do more.
  • Baoding, about a three hour drive from Beijing, was recently declared "steel-free."

Chinese Premier Li Keqiang, at the opening of the country's National People's Congress this week, said China is reducing steel capacity and pledged to cut it further. CNBC looked at one newly "steel-free" town to get a look from the ground level.

China has come under criticism — including from the administration of President Donald Trump — for flooding global markets with cheap steel, pressuring steelmakers in other countries such as the United States.

CNBC visited the town of Baoding, in the heart of China's steelmaking industry about a three hour drive from Beijing, was declared "steel-free" in November.

China is shutting down steel mills

In its heyday, Baoding had eight steel mills, all contributing to China's status as the world's biggest producer. However, as part of the government's efforts to clean up the environment around Beijing and reduce steel capacity, Baoding's mills were shut down.

In November, the city declared that it was completely free of steel production after authorities inspected the last remaining mill and determined that it had been officially closed.

Hebei province, where Baoding is situated, aims to continue to cut iron and steelmaking capacity by 20 million metric tons in 2018.

Capacity is still a problem

Despite Beijing shutting down mills in Baoding, the steel company that owned the last remaining one in the town, Ao Yu Steel, had organized a deal to transfer capacity to a firm in Fujian province in southern China.

That sort of practice is one of the reasons so many of China's trading partners including the United States are frustrated with the Chinese and argue that Beijing should do more.

Social concerns determine the pace of steel cuts

The last operating mill had employed 2,000 workers, many of whom still live in the town. Most we met are jobless.

As in many of China's steel towns, the workers were older and lacked skills to compete for other jobs. And with little social safety net, they felt the company's severance — at $800 for every year employed — was insufficient.

One worker said he and several others blocked the road to the mill when they first learned of the amount of compensation. He was detained for 10 days and eventually agreed to the deal, he said.

He is still angry though — highlighting the serious social challenge China's leaders face when they close factories.

China remains touchy

Baoding boasts about its steel-free status, but that doesn't mean the officials there want the international community to see it. After a few hours in the town, the police stopped a group from CNBC and escorted it to the station to verify press credentials.

The officers acknowledged that as accredited journalists, the CNBC crew had the right to do reporting there. The police offered the team an escort out of town regardless.