Steel ran in Zhang Cheng's family for three generations. His grandfather mined iron ore. His father got a job in the big state-owned steel mill just outside Jinan, capital of Shandong Province. His mother worked in the on-site hospital. And Zhang went to the mill-run school, graduating to a job in its foundry, where, in the heat of the blast furnace, he rolled metal into thin bars for construction.
But after nearly two decades in Jinan Steel, he worked his last day there this summer. In the name of "capacity reduction" — a government policy to rein in excess production of steel — the plant stopped operating in July, and Zhang went on the dole.
Since they worked for a state-owned company, the local government has helped him and the 20,000 others who lost jobs find new ones. But it has been a struggle for Zhang, a soft-spoken man. Openings in Jinan are mainly in the service industry and he worries that he does not have what it takes. "I've spent my life interacting with machines, not with people," he said.
That China has persisted in cutting capacity in heavy industry, even at the cost of pushing people out of their jobs, has been one of the biggest but also more controversial trends in the global economy over the past year.
It is big because of China's sheer heft: It produces nearly as much coal and steel as the rest of the world combined, and even more aluminum and cement. U.S. and European companies have in the past accused China of swamping their markets with cheap metals. But more recently they have benefited as China's efforts to curb production have fueled a run-up in prices.
And yet there are doubts about whether the capacity cuts are all they are cracked up to be. The cuts are ambitious. By 2020 the government aims to reduce the country's annual capacity for coal production by 800 million tons, or roughly 25 percent of what it made last year; its steel capacity by 100 million to 150 million tons, nearly 20 percent of its output in 2016; and its aluminum capacity by 30 percent in big production centers.
But for years the government has promised capacity cuts that never materialized.
Nearly 18 months into the latest bout of capacity cuts, China has made believers of many investors and analysts. Coal and steel prices have more than doubled since the start of 2016. Producers of both, in the red for much of the past half-decade, have seen their profits surge.
This, however, does not entirely settle the debate. As in any market, commodity prices are determined by supply and demand. At the same time as China has closed steel mills and halted work at coal mines, demand for their products has strengthened, thanks to a property-market rally and the government's sustained splurge on infrastructure.
This suggests that the price rises reflect not just the elimination of unused capacity but also greater use of what had been deemed excessive.
In China, this has ignited a heated debate about whether the economy is on the cusp of a new growth cycle. Proponents argue that the rebound in industrial profits has allowed companies to repair damaged balance-sheets. Others counter that a slowdown in the property market will spell an end to the recovery in demand.
There is a chilling subtext for global competitors. Putting a lid on capacity ought also to put a lid on China's exports. But another aspect of China's campaign is to replace outdated plants with more modern ones. In the steel sector, China has already amassed some of the world's most technologically advanced facilities. It is likely to emerge from this round of capacity cuts with even better steel mills, giving it a bigger share of the high-end market.
The closure of Jinan Steel, where Zhang worked, has been touted in the state press as an example of China's seriousness in cutting capacity. It may in fact be a better example of industrial upgrading.