Slipping Out of Zhu's Squeeze

Beijing backs down on the economic czar's short-term austerity, even as it pushes for medium-term reforms

HEADQUARTERED IN A SPRAWLING, 1950s-era complex just outside Beijing, the Shougang steel company is a symbol of China's economic prowess -- and its problems. Earlier this year, when credit was easy and the economy was steaming ahead at a 17% annual clip, the state-owned conglomerate and its 270,000 employees could hardly keep pace with consumer demand. Profits soared. Then came the credit crunch orchestrated by economic czar Zhu Rongji, and Shougang felt the sting at once. Customers slashed their orders, and soon Shougang could not pay its bills. The company last month was forced to take out a $70 million loan...

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