Evidence of the problems with China’s economy exist across different industries. This is especially true of the housing, rail, and steel industries. As housing prices decrease, so does demand for construction inputs such as steel, which decreases the price. To keep factories running, producers are turning to foreign markets to sell their steel. As a result, China’s steel exports have reached record highs at 100 million metric tons in the last 12 months. In response industrial production is starting to slow, which puts downward pressure on upstream mines and quarries that produce necessary raw materials.
To counter this, the Chinese government has been investing in infrastructure such as rail lines. Though they spent $130 billion on rail infrastructure last year, the amount of rail freight fell 11% in December and 9% in January relative to the previous year. This is largely due to decreased transportation of coal, a necessary input to steel production. In addition, continuing fiscal reforms are making it more difficult for local governments to fund this activity. Therefore, severe decreases in the price of steel are causing a ripple effect throughout the economy.