A Nine Dragons Memory

A very enthusiastic recommendation for Evan Osnos’s excellent profile of Cheung Yan and the Nine Dragons Paper empire in the March 30 issue of the New Yorker. Spectacular stuff. Now, Cheung’s name may not ring a bell, but her reputation, might: she was, until recently, the self-made Trash Queen, the richest woman in China, and the mastermind behind the unstoppable Nine Dragons Paper empire. Alas, despite all of its success, Nine Dragons proved to be as sensitive to the global economic crisis as other recycling companies, and – like many of its Chinese peers – it’s facing deep financial difficulties.

The Osnos piece is impressive for a number of reasons, not least of which is the access Osnos obtained to Cheung, her husband, Liu Ming Chung, and the Nine Dragons facility [update 3.26.09: and here, on his blog,  Osnos gives a very entertaining explanation of how he pulled it off]. That’s no small trick. Cheung and Liu are notoriously stingy with the media – especially foreign media – preferring, instead, state-owned outlets and trade publications. For years, that PR approach allowed them to create an impenetrable image of success that was only punctured, in the last year, with the decline of the markets, several ill-advised remarks by Cheung, and temperamental labor activists. So, perhaps, the couple felt that they had nothing to lose by opening up to a profile.

In any case, earlier this decade I made several efforts to profile Cheung, but without success. Then, in September 2005 I was invited to join a delegation of nine US paper executives on a trade mission to several Chinese mills, including the Nine Dragons plan in Dongguan. I accepted immediately.

The account that follows is excerpted from a much longer account of that visit, to appear in 2010. Please keep in mind that the visit took place in a far different market environment, and during a period of expansion and growth for Nine Dragons. The company, as described by Osnos, is a much different place these days. The one that I visited was flush with success, and a bit unguarded in the presence of American paper suppliers:

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Despite jetlag and the rigors of traveling to two different Chinese cities over the space of four days, all nine members of the delegation were waiting in the hotel lobby at 9 AM. Nobody had missed breakfast, and nobody was going to miss the chance to visit Nine Dragons. We were joined by two members of the US Commercial Service attached to the Guangzhou Consulate. They’d arranged the visit, and they beckoned for us to follow them away from the front doors, and out a back entrance, where a van was waiting to take us to Dongguan accompanied by two marked police cars, courtesy of Nine Dragons.

… [M]ost of the delegates sold to Nine Dragons via its American trading arm, or were directly impacted by its pricing. During the 90-minute drive, they traded stories about the company’s US-based representatives, wondered at the scale of South China’s growth as seen through the van’s windows, and laughed at the ineffectiveness of the police escort. Then, atop a bridge, one of the delegates looked down and saw the largest inventory of scrap paper that he or any of the delegates had ever witnessed: closet-sized bales of paper were piled two-stories high across a thirty acre site.

“That must be it,” said one of the delegates.

Sure enough, we began to exit down a cloverleaf. But, at the bottom, instead of turning to the paper yard, we drove in the opposite direction, into a confused former countryside town where five-story white tile buildings were competing for space with farmer’s fields.

“That’s Lee and Man,” explained a Commercial Service representative. “We’ll go there tomorrow.”

The roads were rough and filled with potholes, but after a few minutes we turned onto a newly paved road crowded with container trucks that were rushing to and from the nearby port.

“Holy shit!” Exclaimed the delegate in the seat next to mine.

Outside the window, on the left, and then the right, bales of cardboard were piled two and three high, like highway fencing, extending into the visible distance. In the course of thirty seconds we might have passed the total production volume of the delegation – and we drove for another five minutes, at least, until we were waved past a gate and a guard into a very modest parking area beneath a six story, white tile office building [I believe that this is the building which Osnos describes as a “manager’s dormitory.” In 2005, it also housed several floors of offices and a conference room].

Standing in front of it, atop three steps, was a tall, unusually barrel-chested Chinese man dressed in a tan Nine Dragons uniform. As we disembarked, he shook our hands, greeted us in lightly accented English, and handed out business cards that identified him as “Liu Ming Chung – General Manager.”

An assistant guided us into the building, and as we walked into the non-descript, frills-free lobby, several of the delegates looked at each other with creased brows. The Liu Ming Chung they’d heard about was the co-founder and CEO of Nine Dragons – as well as the husband of the woman (Cheung Yan) recently being touted as the richest in China. Within the industry, many whispered that he – and not Cheung – was the real reason that Nine Dragons had achieved a dominant place in the global recycling industry.

… [T]he Nine Dragons headquarters lacked an elevator, and so we were led up four flights of stairs, to a conference room filled with a laminated table that left just enough room for chairs. Bottles of water and Nine Dragons prospectuses were arranged as the table settings. … [T]he walls were entirely empty but for two two photos: the left-hand one showed Cheung Yan shaking hands with Jiang Zemin; the right-hand one showed her standing beside a smiling George W. Bush.

Liu swept into the room and introduced himself, again, and the company in a brief address. … [H]e described the company’s ongoing expansion, and – in answer to technical questions – demonstrated his mastery of the technical aspects of secondary papermaking. The conversation then switched to exports, and Liu spoke frankly, telling the assembled delegates that the quality of American recycled paper had become inferior to its European competitors. “You are shipping us a lot of garbage these days,” he explained with a wry smile.

The back-and-forth lasted for ten minutes, but despite the criticisms, Liu managed to charm the (mostly) starstruck delegates with his smile, self-deprecation, and candor. Finally, he suggested we take a tour.

… [O]n the way out, I followed behind him and a delegate who expressed surprise that he was in uniform, at the mill. “I live here,” Liu explained.

The delegate laughed knowingly. “Ah me too.”

“No, no,” Liu said, tapping the delegate’s back. “My apartment is on the top floor. I’ve lived there for two years. My children come to visit me and they cry real tears because their father lives in the factory.”

“You don’t have a house?”

“My house?” He asked with a wink. “Maybe twenty-five thousand square feet. But I’ve lived here for two years. Maybe I leave on Sundays for brunch at the China Hotel.”

… [O]utside, a Nine Dragons company van was waiting to take us on a facility tour. I boarded and sat in the back. Liu boarded last, but instead of sitting, he assumed a place on a step below the driver, and grabbed a microphone hidden beneath the dashboard.

“I am your tour guide.”

As the van rolled through the facility, he provided details on its individual lines, pollution control systems, and production volumes. Each statistic, each revelation, was received with smiles and shaking heads. The scale, by any standard, surpassed anything in the West.

… [F]inally, the van stopped between two large warehouses where new packaging lines had recently been installed. Liu distributed hardhats and led us out of the van, into the sweltering South China heat, and into the even warmer buildings housing the lines. The roar of equipment precluded Liu from offering anymore details, so he allowed the delegates to run ahead, like eager children, really, to admire the imported European packaging lines.

Liu, however, walked slowly, running his eyes over the rollers and the digital readouts, and finally slipping away, into an air-conditioned control room where I watched him lean over the shoulders of technicians, speaking calmly, pointing at screens, readouts, and spinning equipment. He seemed to be enjoying himself, and he left little doubt as to his mastery of this, the world’s largest papermaking plant.

… [H]e rejoined us at the end of one production line and announced that it was running packagain material destined for an “international” shoe company (I later learned which one). Later in the day, he told me, they’d begin a run for another company.

Back in the van, the delegates fanned themselves and muttered their grudging admiration for production facilities that one described as “close to what we expect in the United States.” Liu caught that comment, and though he didn’t say anything, his smile conveyed pity more than tolerance. That look, however, was quickly interrupted by a delegate inquiring into the cost of importing paper making equipment into China. Liu gave a general answer that touched on currency issues and taxes.

“How about buying the company?”

“The company?” Liu asked with an amused look, his eyes cast downward at the American. “Oh, I don’t know if you can afford it. Perhaps you can borrow some money?”

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I have more, but this is getting long, so I’ll end this post with a brief, defensive comment on behalf of Nine Dragons.

In his piece, Osnos documents the withering criticism that the company has taken over worker and environmental conditions at its Dongguan plant. Though my one and only visit was 3.5 years ago, I will say that – based upon the two hours I spent there, and the many, many hours I’ve spent in other Chinese paper plants, before and since – it is, by far, the cleanest, most environmentally sound Chinese recycling plant that I’ve ever seen. I can’t speak to labor conditions beyond what I saw in the plants themselves (and, before reading the Osnos article, I’d never heard about the Nine Dragons penalty system), but those conditions were awfully good, by comparison. If China’s labor and environmental advocates are looking for papermaking targets, I’d happily provide them with a list of far worse offenders [UPDATE, thirty minutes later: Actually, I wouldn’t. Got a little ahead of myself there. Please, no more email requests for the list.]

Oh, and I’m trying to dig up my photos from that visit. They’re around here somewhere …

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A quick, personal note. For various reasons, professional and personal, I’ve been away from the blog for the last six weeks. That silence is coming to an end. And so, for those of you still reading: I’ll resume regular posting during the first week of April. For now, consider this the equivalent of a pre-season game.

8 comments

  1. You might want to consider editing this more. It’s kind of long. Anyway, am I reading between the lines too much or are you saying that Liu is the brains behind ND?

  2. Thanks for posting this. After reading it and the Osnos story I get the feeling that Liu is very good at adjusting his behavior for his audience. Maybe neither of you saw the real guy? I haven’t spent much time in China but I was there on business twice a few years ago and I remember feeling that the people I was meeting were just putting on a show for me.

  3. Zhou – I meant to write “paper recycling plant.” It’s the cleanest, most environmentally secure paper recycling plant that I’ve seen. I can think of at least one metal recycling plant that exceeds it. Maybe two. Either way, it’s up there.

  4. Well the good news is, at least there are SOME clean recycling plants in China, and it’s definitely good to see high quality paper recycling there.

  5. May be you should take your time visit some new paper mills in Vietnam, Adam, the clean works are not just there in China 🙂

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