How China rocked the global steel market

China left behind decades of deep poverty when Vice Premier Deng Xiaoping flew to Japan in 1978 to negotiate a historic peace treaty between the two countries. Then there was a more discreet, but no less important visit - to a modern plant owned by Nippon Steel Corp.

A Japanese steel mill was seen as a model for the manufacturing base that China wanted to build in Shanghai, called Baosteel. This was the basis for plans to turn China's agrarian economy into an industrial center.

The original cost of the Baosteel project was high, $ 6 billion, 36 times China's foreign exchange reserves at the time. Mr. Deng's response has become a nationwide motto: "If we want to do this, let's do it on a grand scale."

Mr. Deng, who died in 1997, has never seen how great China's metallurgists are. During his visit to Japan, China produced 4 percent of the world's steel. The government estimates that China plans to mine more than half this year - a record 923 million tonnes. It overtook the United States in steel production in 1993, overtook Japan in 1996, and produced three times more steel last year than the United States, Russia and Japan combined. Steel has made China's shipbuilding and automotive industries the largest in the world.

In the US, Chinese steel is used for everything from bridges and oil pipelines to household appliances and cutlery.

China's rise over four decades was driven by global demand and government subsidies, cheap credit and tax breaks, helping the country become the world's second largest economy and one of the poorest. It is also one of the main factors affecting trade tensions in the global economy.