How China Built a Steel Behemoth and Convulsed World Trade

By Chuin-Wei Yap | December 24, 2018 | *Originally published in the The Wall Street Journal 

China was leaving behind decades of deep poverty when Vice Premier Deng Xiaoping flew to Japan in 1978 to seal a historic peace treaty between the two nations. Mr. Deng’s trip featured a lower-key, but equally important visit—to a state-of-the-art plant owned by Nippon Steel Corp

The Japanese steel mill was seen as the model for a manufacturing beachhead China wanted to build in Shanghai, called Baosteel. It was the linchpin of plans to transform China’s agrarian economy into an industrial powerhouse.

Baosteel’s initial price tag was steep, $6 billion, equal to 36 times China’s foreign-exchange reserves at the time. Mr. Deng’s response became national lore: “If we want to do this, let’s do it big.”

Mr. Deng, who died in 1997, never got to see how big. At the time of his visit to Japan, China produced 4% of the world’s steel. This year, China is on track to produce more than half, a record 923 million metric tons, according to government estimates. It overtook the U.S. in steel production in 1993, sped past Japan in 1996 and last year produced three times as much steel as the U.S., Russia and Japan combined. Steel made its shipbuilding and auto-making industries into the world’s largest.

In the U.S., China’s steel is used for everything from bridges and oil pipes to home appliances and cutlery.

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