Economic vulnerability and resilience analyses for China's iron and steel industry: Insights from COVID-19

Abstract

China's iron and steel (IS) industry plays an indispensable role in both the Chinese and global economy. Economic vulnerability and resilience are key factors for the sustainable and stable development of China's IS industry. However, COVID-19 has negatively impacted the economic vulnerability and resilience of the IS industry. This paper introduces an open-economy dynamic stochastic general equilibrium (DSGE) model that encompasses the production chain of the IS industry. From the perspective of the production chain, combined with the inoperability input-output model (IIM) and scenario analysis methods, the paper analyzes the economic vulnerability and resilience of China's IS industry under COVID-19's impact. The research findings indicate that the direct economic vulnerability of the iron smelting sector within the IS industry was the highest under the influence of COVID-19, with the most substantial decline in production ranging from 7.7% at a 0.71% incidence rate to 13.04% at a 7% incidence rate. The indirect economic vulnerability of the steel processing sector was most pronounced under the COVID-19's impact, and the decrease in the production of this sector had the most negative impact on total output, ranging from 0.6% at a 0.71% incidence rate to 1.1% at a 7% incidence rate. The steel processing sector exhibits the highest economic resilience within the IS industry. This sector may exhibit a minimum growth rate of 17.9% under a 4% GDP growth rate and the pre-COVID-19 capacity reduction trend. This paper identifies the sectors with the highest economic vulnerability and resilience within China's IS production chain and proposes corresponding policy recommendations, providing a basis for the government and enterprises to formulate development policies for the IS industry.