The wave of Chinese steel exports hitting world markets is one of the most visible ways in which the country’s domestic slowdown is affecting the rest of us. All too visible, as it is leading to the shutdown of steel plants across Europe and prompting many countries to push for anti-dumping tariffs on Chinese steel.

How should we understand this phenomenon? The usual tendency, among both Chinese and foreign observers, is to attribute Chinese problems to distinctively Chinese causes. China is always different, it stands alone culturally, politically, economically. So the tendency is to take China’s excess capacity in steel as a sign of something peculiar to its system.

This may not always be the right way to look at the question. Indeed there is a more parsimonious explanation for the excess capacity that gets less discussion. What if the main reason that the world cannot digest China’s steel exports is not that its steel industry is peculiarly distorted, but that China is peculiarly large? I have previously suggested that the effects of China’s enormous size are not well understood, and I think this may be one area where size is indeed a very important factor (I am not denying that the excesses of state-led investment are part of the story; my point is that it’s not all of the story).

A comparison with Japan I think makes this easier to see. The primary use of steel, as discussed previously, is as a construction material, so rapid increases in steel use are usually a result of urbanization. Japan’s domestic steel output and steel consumption surged throughout the 1960s, but its domestic steel consumption peaked in 1973 (it later hit a new high in the late 1990s, but let’s ignore that for now). Other indicators of construction activity also peaked around the same time, so that was apparently a turning point for Japan’s urbanization process. While domestic steel consumption continued at a decent level, it retreated from the peak and stopped growing. However the capacity that the steel industry had built up to serve domestic demand was still there. So Japan naturally started exporting more steel. In the early 1970s, Japan’s steel exports accounted for 20% or more of all global steel exports.

The trajectory of China’s steel exports is eerily similar. China’s domestic steel consumption appears to have peaked in 2013, and since then its steel exports have surged, hitting 112 million tons in 2015. China’s share of global steel exports also is now probably around 20%, matching Japan’s in the early 1970s. The chart below shows the parallel. Japan could not sustain a global steel export market share of over 20% for long, and given the political backlash that China is now experiencing, it will probably encounter a similar ceiling in market share.

In relative terms Japan and China do look quite similar. China’s peak level of true domestic steel use in per capita terms was close to, but below, Japan’s, meaning it is actually a somewhat more efficient user of steel–as one would expect given three more decades of technological improvement. In absolute terms of course they are quite different: Japan had about 100 million people in the 1970s and China has 1.4 billion now. Japan’s crude steel production in the late 1970s was just over 100 million tons a year, but China’s is now over 800 million tons a year. China’s steel exports last year are larger than Japan’s annual steel output in the early 1970s.

That size is now a problem for China, because a 20% global market share in steel exports is, well, just not enough in domestic terms. China is now exporting close to 15% of its domestic steel output, the most it ever has. But in the early 1970s, Japan was exporting close to 30% of its domestic steel output. And once you factor in indirect steel exports–the steel contained in products like cars and ships–Japan was actually exporting 40-50% of its domestic steel output.

Japan built up a steel industry to serve domestic urbanization, but then was able to successfully transition the industry to exports. China cannot plausibly transition its steel industry to exports. Why? Because China is too big (or, depending on your point of view, the world is not growing fast enough; if India’s steel demand was now beginning a Chinese-style urbanization boom, this whole discussion could be moot). If China was a small Communist country, it could just export enough steel to keep its domestic industry afloat, and no one would complain that much. Because it is a large Communist country, it can’t export enough steel to keep its domestic industry afloat. And therefore there is a lot of excess capacity. But most people tend to focus on the fact that it is a Communist country, not on the fact that it is a large country.

What’s the implication of all this? Well, as the Chinese industry official I quoted recently said, China probably cannot avoid reducing its steel output in coming years–unless it rather quickly becomes a much, much bigger exporter of cars and other steel-using goods.

Note on sources. Thanks to Wing Thye Woo of UC Davis for asking the question that prompted this little investigation. The historical data are from the yearbooks of the World Steel Association, a wonderful resource. Since the older historical data is somewhat patchy, I had to convert between different concepts (steel production and apparent steel use) and statistical bases (crude steel equivalent and finished steel equivalent) to get these longer time series, so the figures in the charts should be taken as approximations rather than precise records. Also though I had data for China’s steel exports for 2015, I did not have the world total, so the figure in the chart is a guesstimate.