Rags to riches

Zheng: rags to riches

Born in Ningbo, a city near Shanghai, in 1958, Zheng Yonggang retired from the army in 1979 and began work as a driver for a trading company. Over the next four years he learned how the company operated and he then offered himself as the boss of a loss-making cotton mill, turning it around in a further two years. In 1989 he was asked to repeat his success at a larger state-owned firm, the Yonggang costume factory. He renamed it Shanshan, the Chinese name for a cedar tree.

Big break

In the early 1990s China still lacked a luxury goods sector and Zheng seized the initiative, spending money on local designers to build Shanshan’s image as China’s Western-style suit manufacturer. It paid off, when wealthier male consumers began to favour a Shanshan suit for their marriage ceremonies. By 1997 sales had reached Rmb1 billion, with Shanshan’s market share in men’s suits peaking at 37.4%.

In 1991 Zheng had purchased the state’s shares and turned Shanshan into a private company. In 1996 it had also become the first clothing company to go public in Shanghai.

Transforming

With entry into the WTO in 2001, there was an increase in competition from fashion brands from France and Italy, as well as aggressive new domestic rivals like Youngor and Septwolf. In 1999 Zheng moved the company headquarters from Ningbo to Shanghai, and diversified into the high tech industry, investing Rmb80 million in a lithium battery project in Anshan. To beef up his R&D capability, Zheng also acquired Kinwa, a listed high-tech firm belonging to the Chinese Academy of Sciences, and bought stakes in mines in Australia and Argentina to secure supply for lithium battery operations.

Shanshan is now China’s largest lithium battery provider, with 2010 revenue of Rmb 1.2 billion.

Another lucrative sector for Zheng: financial services investment. Shanshan is a shareholder of Ningbo Bank, Anhui Merchants Bank and Shanghai Pudong Development Bank.

Diversification has continued and by 2010, total revenues at Shanshan hit Rmb14.2 billion.

Need to know

In February 2010 Japanese conglomerate Itochu acquired 28% of Shanshan Group for Rmb746 million. And last month, Shanshan Group announced it will build the highest building in Zhengjiang with Itochu, for a total investment of Rmb9.7 billion. Combining a shopping mall, luxury hotel and office building, the project is planned for completion in 2017. Zheng believes working with the multinationals like Itochu will improve his own firm’s management.

Relax

Zheng plays golf twice a week and is thinking about buying a golf course after he retires. Unusually he works less than six hours a day, preferring to spend time walking with his wife or thinking about strategy.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.