By LIU WEILING and DIAO YING (China Daily)
Updated: 2007-08-14 17:10

Acquisition of the German factory proved to be a major turning point - it nearly doubled Shagang's capacity, and more importantly, its technology enabled the company to make more profitable high-quality steel products.

Humble beginning

Shen grew up in the poverty-stricken 1960s. He lost his father in early childhood, and his mother and six children lived on one meal a day. He joined a local cotton factory as a common worker in 1968 after graduation from high school.

At that time, under the planned economy, the obscure town had difficulty getting the steel that it needed for industrial development.

The factory where Shen worked, the largest in town, was encouraged by the local government to build a steel mill itself, so the factory purchased a set of equipment with 450,000 yuan they borrowed.

When Shen became the head of the factory in 1984, the annual steel output of Shagang was less than 10,000 tons. He soon found that there were growing demands from the housing market, so the company began to study making steel for window frames.

"To open your palm is not as good as to hold your fist," Shen says, knowing "Shagang would need its own fist product".

He sent workers to Shanghai and to steel plants in Northeast China to study window frames and learn the latest technology. Window frame steel earned the first big profit for Shagang as its output reached 130,000 tons and took 60 percent of the window frame market in China. By the end of 1988, Shagang had assets of 100 million yuan.

Many thought Shen and his workers could live a decent life at that level, but the man did not rest there. He heard in 1988 that a 75-ton electric arc furnace capable of producing 250,000 tons of reinforced steel bars was up for sale in the United Kingdom and he decided to buy it.

His decision met opposition from both the government and workers at his factory, who thought the deal would be too bold even for a State-owned enterprise, let alone a privately owned company, but Shen insisted that importing new technology was the only way to catch up.

"If it fails, we will use the equipment for a museum and I will be there selling tickets," he said at the time.

It took him three years to ship and reassemble the furnace. Shortly after the project was completed in 1992, China experienced an infrastructure boom which greatly benefited Shagang's growth and expansion.

Winter is coming?

Shen's bold moves at expansion have not always turned out according to plan. Faced with a surging trade surplus, China removed tax rebates for exported steel this year and has started to control the scale of steel enterprises.

"I can feel the winter is coming for the steel industry in China," says Shen. The withdrawal of tax rebates has had a significant impact on his business, as it is estimated that the profit of the company could be reduced by 1 billion yuan in 2007.

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