The Hottest Thing In Cold Steel

Success has its price. Just ask Li Ming, 69, the spirited chairman of Shanghai-based Baoshan Iron & Steel Corp. While perhaps half of China's state-owned enterprises are bleeding red ink, Baoshan boasts an efficient workforce and management, and sales of $2.85 billion. And that's exactly why the Shanghai municipal government now wants Baoshan to take charge of three money-losing steel plants that employ 130,000 workers. Li, whose lean staff of 10,500 employees produces more steel than the other three plants combined, isn't interested. "If these companies are merged," he says, Baoshan's "economic efficiency" surely would suffer.

Li's focused strategy has helped make Baoshan China's most modern and competitive steelmaker. An engineer by training, Li began paring the huge conglomerate into subsidiaries in 1988, three years after the plant started production. Years before China began deregulating its state-owned steel industry, Li downsized Baoshan's workforce and shed unprofitable sidelines. The company outsourced the traditional "iron rice bowl" burden of providing schools and health care for employees, contracting out these responsibilities to local governments. Baoshan also invested heavily in upgrading technology, buying the latest machinery from Japan and Germany. "Baoshan is simply the best in China," says a Hong Kong-based steel trader who deals with the company. "They have the most advanced technology, they're progressive in their business dealings, and they're profitable."