China's paper tiger

Cheung Yan, the founder of Chinese company Nine Dragons Paper, resembles the legendary American industrial giant Andrew Carnegie in terms of her energy, ambition and sheer ability to create one of the world's foremost manufacturers from scratch in only 12 years.

by The Economist
Last Updated: 23 Jul 2013

Like Carnegie Mrs Cheung experienced early hardship after her father was jailed during the Cultural Revolution, after which time she worked in a textile plant to support her siblings and mother. Later, after getting a job in a paper plant in southern China, she learnt about the business and saw the opportunity to make money out of supplying waste paper that could be recycled into packaging material.

After opening a business in Hong-Kong in 1985 she realised that there were bigger opportunities in the US, where she ended up creating a business out of collecting the packaging materials that brought goods from China and sending them back to be re-used.

Undaunted by the dwindling margins experienced by other global paper firms, Mrs Cheung set-up Nine Dragons in 1995 in Dongguan in southern China. From the early days to 2005, her plant's capacity increased from 200,000 tonnes of paper to a staggering 5.4m tonnes, due to her investment in machinery.

Mrs Cheung is planning to increase capacity even further in the belief that greater scale creates greater efficiency and reduces the cost per unit of output. Her boldness in an industry not known for its courage is going to see her company becomes the world's largest paper producer in 2008.

Net profit margins have increased from 6% in 2005 to 20% in the most recent quarter, and the company's share incentives for managers is based on the notion that profits will grow at an annual rate in excess of 35% for five years.

For Mrs Cheung, who is now the wealthiest self-made woman in the world, this is eminently achievable: the company has grown at a faster rate in the past.

Face value: Paper queen
The Economist
9th June 2007
Review by Morice Mendoza

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