The paper presents an in-depth case study of the Shanghai Baosteel Group as a contribution to overall assessment of the competitiveness and catch-up capability of the Chinese national champions after China's WTO accession. Significant competitive advantages of the firm within the domestic industry are identified, with cautionary remarks concerning future stiff competition with the global steel giants. Through detailed examination of the corporate governance mechanism and the industrial policy implementation in Baosteel and the whole steel sector, the paper sheds light on the institutional and policy challenges that the Chinese government faces in building up big businesses. It is concluded that the future ability of Baosteel to emerge as a globally competitive steel firm depends critically upon the effectiveness of both further reform of the state-dominated corporate governance system and improvement of industrial policy enforcement.