Abstract The recent economic reform of China's iron and steel industry has resulted in its rapid expansion to become the largest in the world. However, the resultant increase in the use of energy and other resources has resulted in severe environmental degradation. To further increase output while reducing emissions and waste will require increased productivity. In this paper the technical efficiency and Malmquist productivity indexes of a sample of 88 enterprises producing 72 percent of the industry's output were determined for the period 1989–1997, with the aim of gaining some insights into the policy options likely to achieve this.