Fashioning a future

12 July 2011 Last updated at 23:21 GMT Zheng Yonggang is an unusual entrepreneur, for many years he has insisted on only working eight hours a day

Zheng Yonggang is unusual amongst China's top entrepreneurs.

Firstly, his $600m (?377m) fortune was built by taking a state-owned firm into the private sector, whereas most wealth is made from companies started from scratch.

Secondly, Zheng does not owe his success to sheer hard work. For many years he has insisted on working no more than eight hours a day and he even has a 20-minute nap on weekdays.

He enjoys having his meals at home and accompanying his wife for a walk each day when most of his fellow-entrepreneurs are still at their desks.

Zheng has developed his own management strategy which he calls "pagoda structure management". Instead of micro-managing, he adopts a more Western style, with a team of senior staff responsible for their own departments.

Innovation

Zheng was born in 1958 in Ningbo, Zhejiang province. He joined the army when he was 18 and dreamed of being a general.

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Over the next weeks we will profile six of China's richest entrepreneurs, and report how they fit into the country's society.

After he retired from the army he was assigned to an international trade company but quit two years later, because he found it "too limiting".

He moved to Ningbo glove factory, a loss-making enterprise, and turned it around in two years.

Age 30, he was then asked to repeat his success at a larger, clothing manufacturer, which he promptly named the Yonggang costume factory. It later changed its name to Shanshan.

This was at the dawn of China's move to a market economy and Yonggang was one of the first companies to issue shares. Its other major innovation was to create a network of franchises, unheard of in China at that time.

Diversification

For the next two decades Zhen continued to build Shanshan, using the cash flow to diversify from clothing into rare earth minerals and real estate, buying stakes in mines from Australia and Argentina to secure supply for lithium battery operations.

In February 2010 Japanese conglomerate Itochu Corporation acquired 28% of the Shanshan Group - investing 10bn yen (?79m).

The relationship started in 1993, when Itochu consigned production of export-quality shirts to Shanshan.

Their three priority investment targets are apparel, cutting-edge technology - notably lithium-ion batteries - and real-estate development.

In apparel Shanshan has started production for Itochu's joint-venture operations, with designer brands like Renoma Paris and Le Coq Sportif.

In the aftermath of the earthquake Itochu is in a position other Japanese companies might envy, with access to production across China.

This might be Zheng's greatest opportunity yet.

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Tepco's future

19 May 2011 Last updated at 16:07 GMT Viewpoint by Penn Bowers CLSA Asia Pacific Masataka Shimizu, Tepco President apologise to evacuees who lived near the Fukushima nuclear plant Just as the conditions at the Fukushima nuclear plant are fluid, so are Tokyo Electric's financial prospects.

Last week, the government announced a plan to create a body to help Tepco compensate the victims of the nuclear accident.

The plan is not yet law and was little more than a broad framework with a scant nine bullet points on the details of the new body.

This signals just how much contention there was within the ruling Democratic Party of Japan.

Clearly the plan will face much greater scrutiny and even more heated debate when it makes its way to the Diet floor.

So the future of Tepco remains unclear, but some options seem more likely than others.

Unacceptable

Tepco provides power to 44.5 million people in an area that accounts for about a third of Japan's gross domestic product (GDP).

A formal bankruptcy would put all that at risk, as Tepco would struggle to procure fuels and services that allow it to supply power to the region.

Not ruled out

According to the framework, the new body could inject funds through acquiring preferred shares. Given the scale of capital likely to be needed, this could mean the company would effectively be nationalised.

The government is already closely monitoring management and could have more direct say once national funds are injected.

That being said, most statements suggest the government is wary of going down the route of nationalisation.

Likely

Between decommissioning costs and compensation related to the disaster, Tepco will likely face trillions of yen in fresh liabilities.

This is on top of increased fuel costs and one trillion yen ($12.2bn; ?7.5bn) of debt that must be repaid within the year.

Farmers hold cabbages to protest against the nuclear accident

The new body will probably have the ability to support not just compensation liabilities but Tepco's other ongoing cash needs.

While this would allow the company to stay afloat, the prospect of profits could be years away as the company struggles to pay the body back out of its future profits.

Ultimately, there could be some cap put on the liabilities, but multiple years without profits or a dividend seems reasonably likely.

Unknown

One little-discussed option is for the company its shareholders and or bondholders to fight back.

The Nuclear Act technically absolves a nuclear operator for liabilities arising from an extraordinarily large natural disaster.

While government officials have suggested this could not apply here, there has been no legal decision.

The design of the plant has not been shown to be outside of the guidelines and certainly the drive towards nuclear as a secure and clean energy supply was a matter of national policy.

Just last year the Ministry of Economy Trade and Industry had targeted nine new reactors to be built by 2020 giving credibility to calls for the government to take more responsibility itself.

In the long term we could potentially see the toxic assets that are Fukushima and its associated liabilities simply picked up by the government.

A changed country

It appears the entire power industry will be changed.

There is renewed talk of separating the grid from the power-generation facilities and nuclear policy is at the mercy of the residents of the areas surrounding the plants.

No matter what form Tepco eventually takes, Japan has a lot to think about.

Penn Bowers is a Tokyo-based analyst for CLSA Asia Pacific Markets.

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