Technological Diffusion in China's Iron and Steel Industry

Summary

Any serious attempt to address the global climate change problem must involve the diffusion of energy-efficient technologies into the industrial sector of countries critical to future global emissions.  China is expected to be the largest emitter of greenhouse gas emissions by early next century due to its high economic growth and reliance on coal.  Although the diffusion of energy-efficient technologies in China has increased since the start of market reforms in 1978, much improvement is still needed.

In an attempt to understand the impediments to technological diffusion in China, this paper explores the dominant factors influencing the diffusion rate of continuous casting technology --- an advanced technology that can achieve energy savins of ~10% per ton of crude steel produced -- among Chinese steel firms.  Informed by the literature on technological diffusion and interviews with individuals associated with the steel industry in China, this paper develops a theoretical model of the diffusion process and empirically tests potential factors affecting firm-level diffusion of continuous casting technology using panel data of 75 steel firms in China covering the period 1985-1995.  The empirical results suggest that although market forces are beginning to have an effect on the diffusion rate, institutional constraints continue to impede the process.

This research makes important contributions to the literature by providing not only one of the few econometric analyses of the determinants of technological diffusion in developing countries, but also one of the few analyses of a country critical to a climate change solution -- China.