RISI’s Asian CEO of the Year


RISI’s Asian CEO of the Year

An interview with Cheung Yan, chairwoman of Nine Dragons Paper


After 20 years of fast and steady development, Nine Dragons Paper Group is now the world’s largest recycled-based paper manufacturing group. Much of the credit goes to its chairwoman, Cheung Yan. RISI has named Cheung Yan its Asian CEO of the Year for 2017. This award is nominated by a group of investment analysts, industry consultants, and commentators covering the Asian and global pulp and paper industry. This year marks the second time Cheung has been selected as Asian CEO of the Year, recognizing her continued leadership, vision, and strategic expansion.

PPI:The packaging board industry in China has demonstrated strong demand and pricing in the past few months, which partly contributed to the increase in Nine Dragons’ sales, profit, and profit margin. What is your view on the phenomenon?

Cheung: First, from the aspect of the Chinese market, strong and powerful macro-level government control policies havedriven economic recovery and elevated the quality of GDP. Such policies include adjustments on industry structures, trans-formation and upgrading, supply side reform, persistent environmental enforcement with high pressure, and the elimination of outdated capacities. We are very supportive and agree on these mega-directions of government policies. Our papermaking industry also benefits from these, with positive trends emerging.

Second, from the aspect of the international market, we can see that even the US and European paper markets are very ro-bust, in particular the undersupply situation in the US market. Take recovered paper as an example. I have operated our re-covered paper trading business in the US for almost 30 years. In my memory there were only two times when recovered paperprices did not drop after Thanksgiving—one of them was in 2016. Packaging paperboard is closely related to everyday living, and is a good reflection of the consumption and economic conditions of a certain region. Therefore, based on the above, both the Chinese and the global economies are moving progressively into recovery.

Of course, since economic recovery has just started, the foundation is not very solid yet. Furthermore, influencing factors such as market conditions, raw materials, and seasonality may all bring uncertainties and fluctuations to prices, so there will be some occasional painful periods. However, as a whole and from the long-term perspective, we are positive about the funda-mentals of the Chinese market and international markets, and believe that profitability can be assured within a reasonable range.

Regarding supply and demand in China’s recycled containerboard market, what do you think is the main reason behind the sudden shortage of supply perceived by many downstream customers in the past few months?

Earlier I stated the analysis that economic recovery in China has brought additional demand in a market with a population of 1.4 billion. As the economy grows, people’s living standards are raised, and there is consumption growth brought by the con-venience and benefits of online shopping. Demand growth has also fueled the packaging paperboard price hikes in the last few months. We can see that the price hikes this time were not just a flash in the pan, but have been sustained for over one quarter. Yet, the market is not an undersupplied one, because the total amount of packaging paperboard imports is still very limited.

Overall, packaging paperboard supply in the Chinese market can fulfill its demand. Supply and demand are growing in par-allel, and the total production and sales volumes are balanced. It is only during a certain period of time that inventories were on the low side in both the downstream sector and our own sector, leading to relatively tighter supply at that stage.

Prices for Chinese recovered paper (RCP), both imported and domestically collected, have been soaring, and supply has been tight. As founder of America Chung Nam (ACN), the world’s largest RCP trader, how long do you think the RCP price surge will last? Is RCP availability going to be a big challenge for Chinese recycled board producers in the future?

I spoke earlier about the continuously rising prices of recovered paper in the 4th quarter as a result of robust demand in the Chinese and US markets, which were passed onto products so product prices also continuously rose. Recently, we observed that, due to seasonality and the cyclical nature of the market, recovered paper prices (whether domestic or imported) have shown some adjustments to a certain extent. These were already transmitted to product prices. All these are normal market

Back around 2010, there was a gap in our recovered paper raw material market. Less than 10 percent of the recovered paper we used was domestic, and for about 90 percent we had to rely on imports. When raw material prices soared, we could not pass that on through our product prices, and there were no other market adjustment mechanics; this resulted in a quick decline in profitability, and our slim profit had to be compensated by larger sales volume. The share price of our listed company was thus depressed.

Subsequently, as consumption in China grew, we progressively increased the purchasing of domestic recovered paper raw material. Now we procure about 40 percent from the domestic market. As living standards are raised, the volume of domestic recovered paper is still increasing progressively. Therefore, my view is that the current recovered paper supply situation does not represent any challenges. It is in a manageable, sound, and healthy condition.

Nine Dragons has recently announced that it will start up PM 2 at the Vietnam base by the end of June and add new containerboard machines by the end of 2018 at four existing production bases in China: Quanzhou, Chongqing, Hebei Yongxin, and Shenyang. What is your strategic planning behind these capacity expansions, both within China and abroad? What is your view on the prospects of containerboard demand in Southeast Asia? What do you find is the biggest advantage and challenge in overseas investment?

As a listed company, Nine Dragons has a responsibility to its investors. Hence, while maintaining sound and healthy opera-tions as the backbone, we should also identify and target markets with potential for development, building the capability of “ moving outward.” Of course, our major strategic direction is that we should first fulfill the demand of the population of 1.4 billion in our country before we “ move outward,” and each such move should be made in an extremely prudent manner.

The investment in PM 2 at our Vietnam location is mainly based on the development status of local market demand, in as-sociation with China’s “ Belt and Road” policy. Though the Vietnamese market is not large, we believe entering it now is a secure opportunity.

PM 2 is a new paper machine that represents the world’s most advanced Industry 4.0 standards. After it begins production, Nine Dragons will not only be the market leader in the Chinese paper industry, but also in the Vietnamese market. This realizes for us a truly international brand in papermaking, and lays a good foundation for building what we call “ an enterprise that can thrive for a century.”

The growth of Nine Dragons’ production capacities must be based on growth in market demand. The regions for which we have announced the four new paper machines are the regions where we have the smallest capacities. In our observations of actual market conditions, we noticed that these markets have recovered requirements for additional supply after government supply-side reforms led to the elimination of outdated capacities. Based on such a key criterion, our addition of advanced ca-pacities in these production bases is reasonable and appropriate for the market.

I am very positive about the future packaging paperboard market, because packaging paperboard is closely related to eve-ryday living and consumption, and its demand will grow as people’s living standards are raised. My view is that packaging paperboard is making good use of waste paper in a paper regeneration process that is continually recycling, and is in line with global trends in green development. So far, we have not discovered any other product that can substitute packaging paper-board in similar massive amounts but is more environmentally friendly.

As the largest containerboard supplier in China, do you also have an eye toward building box plants to further extend the industrial chain? Does Nine Dragons have any plan to expand in other paper and board grades or diversify into other sections—for instance, tissue and hygiene?

We already had our own box plants before Nine Dragons was publicly listed. Our box plants are mainly for supporting up-stream and downstream relationships in the periphery of our paper production bases. We shall persist on our core business in paper making, and box plants will not be developed in a significant manner.

Currently, we have no plans to enter the (tissue paper and hygiene products) sector, and will remain focused on container-board.

The new US administration has cast uncertainty over the country’s trade policies by withdrawing from the Trans-Pacific Partnership and urging US manufacturers to keep jobs at home. Do you think this may affect your business?

The “ Back to the USA” policy for manufacturing is not just proposed by the current US administration; the previous administration had proposed similar policies, and we have seen certain results. I believe that in the long run this will be good for em-ployment and stabilizing the economy. Of course, there is further room for improving on the details. Earlier I explained my views on the relationship and trends of the raw material and product markets. What we produce is a traditional product, and an everyday necessity for the people, which will move up with the market at the same time. So I believe that the policy will not have much impact on us, but that we should remain well-prepared.

Paper manufacturing has traditionally been seen as a high pollution, high energy consumption industry, and the Chinese government is introducing ever stricter environmental regulations. What is Nine Dragons’ experience in energy conservation and emission reduction?

I think the main reason that in the past papermaking was seen as a high pollution business was because some non-complying businesses did not rigorously implement government environmental standards. In the last few years, when the government has performed supply-side reform and eliminated outdated capacities, there has been enormous determination and power put in environmental protection; maintaining high pressure, stringent controls; and continuously lifting standards. On the one hand, our environment is getting better; on the other hand, advantages enjoyed by disciplined large enterprises with good environmental management have become more prominent. Over the years, our investment in environmental manage-ment has received recognition and generated returns.

Nine Dragons is committed to the green development philosophy of “ No environmental protection, no papermaking.” We have always put environmental management as the top priority. We have brought in technology and equipment that meet the most advanced international standards, and we are moving with the times in upgrading and enhancing our equipment to ensure that all our emission and energy consumption indices consistently perform better than government standards. Our experience consists of persistent management, rigorous controls, continual innovations, learning from advanced experi-ences in the world, and making faster progress in environmental management.

You are considered one of the most successful entrepreneurs in China. What are the key factors to your success?

I feel that if I am an entrepreneur wishing to become successful, first I must possess market sensitivity and be good at grasping opportunities. Second, I should have persistent perseverance and be focused on one industry, achieving the ideal of “ join the industry, love the industry, stay in the industry.” Third, in conducting ourselves we should always have a contented mind; however, we should not have a mindset of satisfaction in pursuing our career. Instead, we should have the conscious-ness to keep on chasing and innovating. This is very important.

My own objective is to integrate the ideas of “ informatization, automation, and intelligentization” to make Nine Dragons a “ century-long manufacturer.” This will create better, more passionate work lives for our staff, while fulfilling our responsibilities to the government, our investors, and our communities. We are always moving ahead.

Meanwhile, I agree with the proverb that “ the world is as large as your heart.” Everyone will experience different stages when progressing in life. There are the bright and brilliant times as well as frustrating and difficult times. Hence, a positive mindset is very important. When facing difficulties and frustrations, we should address them with optimism and overcomethem with courage so that we do not feel fear. We should see them as life experiences to help ourselves grow and improve. Therefore, I believe that we should maintain a sunny character, learn to feel grateful, and always review ourselves. In this way we can keep a calm and peaceful mind, know how to cherish the things and people around us, as well as overcome the frustrations and difficulties that come into our lives.

Shawn Wang is associate news editor, PPI Asia. Contact her at [email protected].

Meet Cheung Yan


Cheung Yan is the chairwoman of Nine Dragons Papers (Holdings) Limited and founder of American Chung Nam LLC. She is a member of the National Committee of the Chinese People’s Political Consultative Conference, Justice of the Peace of Hong Kong, standing vice president of China Overseas Chinese Entrepreneurs Association, honorary chair of China Federation of Overseas Chinese Entrepreneurs, vice president of China Paper Association, vice president of China Paper & Pulp Industry Chamber of Commerce, vice chair of Guangdong Federation of Industry and Commerce, standing vice-president of Hong Kong China Chamber of Commerce, honorary life chairwoman of Hong Kong Federation of Overseas Chinese Associations, and vice chair of New Home Association of Hong Kong.

Cheung is a founder of the Nine Dragons Paper Group, the world’s largest recycled-based paper manufacturing group, which operates with modern and environmentally-friendly management. The group has a total annual production capacity of more than 13 million metric tons. Its production bases cover the main manufacturing centers in China, and in the “ Belt and Road” country of Vietnam.Nine Dragons headquarters campus in Dongguan, China. Inside a Nine Dragons facility. “ I am very positive about the future packaging paperboard market, because packaging paperboard is closely related to everyday living and consumption,” says Cheung