China was leaving behind decades of deep poverty when Vice Premier Deng Xiaoping flew to Japan in 1978 to seal a historic peace treaty between the two nations. Mr. Deng’s trip featured a lower-key, but equally important visit—to a state-of-the-art plant owned by Nippon Steel Corp.

The Japanese steel mill was seen as the model for a manufacturing beachhead China wanted to build in Shanghai, called Baosteel. It was the linchpin of plans to transform China’s agrarian economy into an industrial powerhouse.

Baosteel’s...