On July 20, the New Rules for the Steel Sector was promulgated by the State Council, giving a clear direction to development of the iron and steel industry in China. Under the new ruling, the Baosteel Group needs to find a different method of new development.

Xie has her own opinions. She said that although China's steel industry output has led the world for nine years in succession, reaching a peak of 273 million tons in 2004, the product structure of China's steel industry still needs attention. Of this volume, about 60 percent was ordinary steel, but high-leveled special steel, which is required in the auto industry, shipbuilding industry and household appliances industry, still needs to be imported from other countries. The problems facing investment in China's steel industry also influences healthy development of the industry as a whole.

Xie thinks the Chinese Government should come up with a steel industry standard to ensure strict limits to scale, equipment and products' structure of all steel companies.

The New Rules for the Steel Sector provide support for Xie's ideas, clearly indicating the boundaries for various steel companies, including state-owned companies, private companies and foreign-funded companies. This process allows companies like Baosteel, producing high-leveled steel, to flourish.

The New Rules for the Steel Sector also allow the construction of two super steel group corporations with an expected 30-million-ton yearly output in China. This has given Xie much confidence and she said as the current output of Baosteel has reached 21 million tons, it is possible to reach the goal of 30 million tons during the "11th Five-Year Plan" period.

Taking Action

Recently, multinational steel corporations have speeded up their steps to annex Chinese steel companies. In dealing with this situation Xie said that Chinese steel companies should try to streamline and optimize their own operations instead of waiting for purchase by foreign corporations. She said during the reconstruction and mergers that created Baosteel the number of staff was reduced from 176, 000 to 90,000 and 10 billion yuan ($1.23 billion) was spent on technological alterations over a seven-year period. It is only because of their effective reorganization that Baosteel has power to make acquisitions elsewhere, Xie said.

At present, there are two opportunities for Baosteel--building a joint-stock plant in Brazil and a new plant in Zhanjiang, Guangdong Province.

Xie said that the investigation into building the joint-stock plant in Brazil with CVRD has been basically completed and the item suggestion report has been authorized by the Central Government. At present, the Brazilian side is researching local environment, land and the project status. "Our original plan is to put in 1.5 billion yuan ($187.03 million) but we expect this to increase slightly," Xie said.

At the same time, Xie said the plan to build a plant in Zhanjiang has not received authorization from the government, but it is in accordance with the requirement of encouraging steel corporations to invest in coastal areas, as laid down in the New Rules for the Steel Sector, so she is not unduly worried about it. Xie also said that the Zhanjiang plan hopes to combine the reorganization and alteration of such old Guangdong enterprises as Shaoguan Iron and Steel and Guangzhou Iron and Steel.