Beijing wants to turn Baosteel into one of the strongest steel conglomerates in the world, says Sun Jian of U.S. consulting firm A.T. Kearney. With the money, it will acquire and restructure more mills, as mandated by the State Council. Shanghai alone has more than a dozen steel plants on the verge of bankruptcy, including several under Shanghai Metallurgical Holdings. Ultimately, state-ordered mergers may drag competitive players like Baosteel down. Privately, Baosteel executives grumble about taking over badly run, poorly equipped plants.
Analysts doubt that they can raise that kind of money from the markets.
Even with state support, gearing up industries for global rivalry isn't easy. The steel sector faces a global glut, too. To address both the need for capital and the threat of competition, Baosteel is selling a stake to Korea's Posco, the world's largest steelmaker, and will be talking with Nippon Steel, the global No. 2, about a similar link when its chairman visits Japan next month. Going global, it seems, brings with it some world-sized ambitions. Jakarta, May 1998.