Although China's market reforms have transformed its major steel makers into modern, international corporations, the government still plays a key role in regulating the strategically important industry.

"The government's role is necessary for big deals; foreign parties are monopolies while Chinese parties are diversified and do not have significant bargaining power," the state newspaper China Daily on Friday quoted Mei Xinyu, a Commerce Ministry researcher, as saying.

Ma said that this year the Chinese government plans to shut down the smallest and least technologically advanced steel furnaces in order to reduce the industry's heavy use of energy and water, as well as to reduce a supply glut for some products.

"In 2006, the strategy for iron and steel production in China is to control the size of this sector and reform its structure," he said.

Ma also affirmed government plans to emphasize environmental protection following two decades of rapid growth that have badly polluted China's air and water.

He said the government's latest five-year economic plan, unveiled at the country's annual meeting of parliament last week, does away with specific economic growth targets and instead imposes mandatory environmental quality goals.

"We are aware we cannot develop our economy at the expense of tomorrow," he said. "We will stick to a path of sustainable development."