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To: Robert Douglas who wrote (2800)	1/2/2001 2:17:56 PM
From: Ahda	Respond to of 3536

Shanghai Baosteel is without dispute the most efficient and profitable steel company in China. It is sitting pretty on the Shanghai Stock Exchange after the biggest share issue in the country's history (it listed on December 19th), and it now has its eyes set on Wall Street. In a sector wracked by over-capacity and low quality, Baosteel is a star that the government wants to shine ever brighter. The Rmb7.9bn (US$950m) it just raised will certainly help. Competition is world wide the labor rate, building costs are lower. China will learn from Taiwan. Europe is closer continent wise. China has much untapped energy.

To: Robert Douglas who wrote (2800)	1/2/2001 3:10:25 PM
From: Lee	Read Replies (1) \| Respond to of 3536

Robert, It’s not always clear to me the difference between a supply-induced or demand-induced recession. For example, I certainly agree the Fed raised rates because of excess demand and that these rate increases worked. Less demand produced excess capacity, which we now have and that can be re-worded as excess supply. At this point it’s easy to make a mistake and think the problem is supply. Its also hard to make a case for a supply problem when oil and labor costs are adding to inflation. However, the problem the economy faces is a result of the image of unlimited growth seen during the past two years in telecommunications and the internet. For example, at this stage the economy is in trouble, yet housing remains strong, consumer spending is still at record high levels, and consumer savings at record low levels. The higher interest rates popped the IT boom but not yet the consumer (car dealers may disagree). Consumer spending will pop as a result of decreased valuations of stocks, lower profits, and job losses. In fighting demand the Fed first hit the mark on an area of the economy that was in over supply. Raising rates helped force people to re-think valuations and rates of return. As a result, investments in certain telco and internet projects dropped. We will now see a period of increasing unemployment while inflation remains in check or falls barring more OPEC supply constraints. If the Fed does lower interest rates 200-300 we may again add to excess supply in telecommunications and the internet. Two months ago my thoughts were along the lines that we had a mini boom-bust scenario occurring with-in a long-range investment-productivity induced expansion. In this scenario, by July telecommunications and the promise of fiber-optics put us back on the go-go path. However, I have become pessimistic as I learn more about the state of the telco firms. Lee