FOX BUSINESS

New rules aimed at making China's sprawling steel sector greener will do little to tackle rampant overcapacity or help Beijing protect its big State-owned mills from smaller, nimbler rivals.

China has said it will impose "special emissions restrictions" from next month on major industries from steel and petrochemicals to cement, non-ferrous metals and coal-fired power. Environmental inspections have already started in big steel producing regions.

But when it comes to steel, it's more than just pollution.

Many in the industry hope the curbs will help tackle overproduction, slash the number of privately owned mills and boost the market share of State-owned giants.
"If we are to solve the emissions problem more effectively, reducing capacity is a part of it," said He Wenbo, Baosteel's chairman. "We approve of any effort to strengthen the laws, and no enterprise that has reached a certain standard will oppose it."

MARKET WATCH

On Friday, China's Minister of Commerce Chen Deming was the latest to raise concerns about competitive currency depreciation and the effects of excessive money-printing by central banks.

There were some clues, however, as to what lies behind the amplified currency war rhetoric .

While China's exports impressed, its economy is showing some disturbing trends, suggesting that the country's recent economic recovery is far from assured. The massive lending figures seen at the beginning of the year appear to be generating more inflation than growth. To concerns about property bubbles, some might add looming stagflation.

Clearly the last thing China needs just now is a surge in hot-money flows through quantitative easing.