| The iron and steel industry has made significant achievements since People's Republic of China was established through nearly 60 years of its construction and development. Since it broke through 100 million in 1996, the output of steel has been ranking first in the world. China has become the world's largest steel producer, consumer as well as the largest steel importing and exporting country. However, with the rapid development of the domestic steel industry and economy globalization, the conflict arising from lack of coordination among industrial chains with the steal as its core, such as lack of the control power for upper-chain industry products pricing, irrational industrial structure, and low industry centralization, is increasingly apparent. This thesis, with dynamic CGE as its approach, aims to provide a quantitative study for the problems occurred in development and optimization of iron and steel industry after a detailed analysis of output and demand of this industry.On the basis of MCHUGE, this Chinese dynamic CGE model jointly developed by Economics and Trade College, Hunan University and CoPS, Monash University, this thesis expands its model structure and application field and builds an expanded MCHUGE model, with Chinese iron and steel industry as its main study issue. The expending work in this thesis are as follows:①Refine the original iron and steel industry and divide it and the its product into more specific pieces so that the assumption one industry has one typical product in the original model has changed. The input-output matrix of this expanded industry and product is built on the 1997 and 2002 Input-Output Table and other relevant data.②take the lead in adopting the imperfect competition and scale of economy assumptions instead of perfect competition and constant returns to scale.③With a view to reflecting the effect of mergers and acquisitions of steel industry, the model derive a link between the share weighted price-cost mark-up (i.e. Lerner index) across all firms in steel industry and the absolute concentration degree CRn index and introduces this index in CGE model for the first time. All of the features above make this MCHUGE model distinctive from the existing Chinese CGE model.With the framework of this model, the bottleneck constraints of iron ore, the tax reform of iron and steel as well as the effect of its mergers and acquisitions are analyzed on a quantitive basis, revolving around the issue—development and optimization of Chinese steel industry. The first analysis is the effect of international iron ore price shock. It is found, in this simulation that the substantial rise of international price of iron ore cuts down the employment in the short run, decreases the capital stock in the long run and ultimately hinders Chinese economic development. As the consequence of iron ore price rise, the cost of Chinese steel industry increases considerably just when the profit passes on the international suppliers of iron ore. In addition, the original cost advantage of our country is weakened and the international competitiveness of exporting sector is undermined because our country is poor in passing the pressure of price rise on the buyers. Besides, the rise of iron ore price pushes partial rise of the downstream products, which causes a certain amount of cost pressure on the steel intensive industries such as machinery and equipment, automobiles as well as construction industries and hence increasing greater risk in the iron ore mining as well as the overall economy. In the long run, the output of labor-intensive industry such as wearing apparel, leather industry has a relative obvious increase and the development of wearing apparel industry stimulates the demand for wool, particularly importing wool, with greater rise than domestic wool. As far as the steel tax reform is concerned, the export tax rebate rate is positive related to the increasing speed of steel products export, which implies the export rebate policy can stimulate the export of steel products. Besides, the effect on high-tech products, mechanic and electronic products, energy and raw materials varies a lot. From elimination of the export tax rebate to imposition of tariff, the government spending and deficit go down, but the total tax revenue has no sign of rise. In addition, it is concluded that the effect after the primary products are levied tax is larger than the finished steel products are levied tax, which indicates enterprises are faced with the extremely high cost in terms of steel-making and iron-making. The overall study shows that the short-run effect of tax policy to balance the trade surplus of steel seems to be not so apparent but the cumulative effect of this policy should not be overlooked. When it comes to the economic effect of the mergers and acquisitions of steel industry, it is found that whether the effect of rise in concentration on the economic growth is positive or negative depends. The results of different industries at the different stages may vary. Without considering other economic impact, only the rise of concentration in iron and steel industry is separately considered, the concentration is negative related to economic growth in the absence of the administrative objective of steel industry. When the administrative objective is considered, the effect of concentration in steel industry on the economic growth has bearing with the initial concentration. In particular, in consideration of special situation of China, the effect of concentration on economic growth can be divided into two stages. At the first stage, with the low level of industrial concentration, the economic growth rate goes down with the rise of concentration. At the second stage, the industrial concentration itself is relatively high at this time and the merge of domestic enterprises and multi-national enterprises will inevitably improve the technology, the above both effects will make the positive relations between steel industry concentration and economic growth rate. However, this thesis only analyzed the situation of concentration above 70%, and from the changing tend of analog result becoming smaller, if integration will keep growing, effects of scale economy will not have its obvious advantages as before.Finally, some suggestion about the policy on iron and steel industrial development and optimization are put forward.
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