STEEL giant Beijing Shougang Corporation is a member of China's corporate elite. Its connections with China's most prominent families and its partnership with Hong Kong blue chip Cheung Kong have helped it to make a significant impression in the territory as well. Since November 1992, Shougang has taken controlling interests in five Hong Kong companies and made investments in a further three, transforming itself into an empire with a Hong Kong market capitalisation of $11 billion. The architect of these moves is Zhou Beifang, chairman of Shougang (HK), the local flagship of Beijing Shougang. In his first interview with a newspaper in the territory, Mr Zhou told Sunday Money that Shougang's local buying spree had ended and the group was entering a new phase of strengthening the management and earnings of its subsidiaries. Shougang has earned the reputation of being the most efficient steel enterprise in China. It has fixed assets of more than 88 billion yuan (HK$79.2 billion) and last year imported more than 30 million tonnes of iron ore, accounting for more than half China's total. Mr Zhou, 41, has been with Shougang since 1976 and is the son of Beijing Shougang chairman Zhou Guanwu. Despite the relationship, he laughed off the suggestion that he would some day become chairman himself. 'Chinese tradition dictates that only the sons of the emperor can inherit their father's title. We are not emperors. Like ministers, we are here to serve,' he said. His service extends to being the assistant general manager of Beijing Shougang. Mr Zhou is sensitive to accusations that he has been able to climb to top management level because of his family connections. He insisted: 'If I were not at Shougang, I think my position would be much higher.' However, Mr Zhou's empire is no small achievement. Shougang has bought controlling shares in Kader Investment, San Tai Manufacturing, Eastern Century and Hoi Shing, and has investment interests in Paul Y-ITC, Four Seas Mercantile Holdings and Companion Building. Each of these acquisitions reflects the diversification of the group. The former Tung Wing Steel, now known as Shougang Concord International, manufactures and trades in steel, Shougang Concord Grand is its property arm, Shougang Concord Technology (formerly San Tai) is engaged in electronics manufacturing, Eastern Century is its non-ferrous metal subsidiary and Hoi Shing is its construction arm. Mr Zhou said the back-door listings had linked Shougang's operations in China with Hong Kong's financial services, enabling it to establish its headquarters in the territory. 'Our Hong Kong operations are similar to the brain in the human body, and the mainland manufacturing and production part is like the body,' he said. Shougang's Hong Kong development could be split into three phases. The first was when Shougang started its shell-buying spree, and the second was the raising of funds to consolidate its business. 'We raised about $7 billion in total through bond and rights issues last year, which helped to fund our injections of mainland assets into Hong Kong-listed companies.' Mr Zhou said Shougang had now entered its third phase in Hong Kong in which it will strengthen its earnings and look to expand its overseas operations. Shougang will set up Shougang (Overseas) to hold all its subsidiaries outside China and Hong Kong in the first half of next year. The move is to transfer technology from the US, Europe and Canada into its subsidiaries in Southeast Asia. In fact, Shougang has already set up Shougang (Singapore) to invest in listed companies in Southeast Asia markets. 'We aim to invest in heavy industrial companies which can also establish trading relations with our existing companies in Hong Kong,' he disclosed. The group's steel company in Peru, Shougang Hierro Iron Mining Company, is considering the possibility of listing in the US, hopefully as early as the second half of next year. At the moment, Shougang is looking at setting up joint ventures in Italy with its domestic heavy industrial companies. MR ZHOU named two local figures, tycoon Li Ka-shing and businessman Martin Kwok Ying-cheung, as being instrumental in the establishment of the Shougang empire in the territory. In late 1992, through Beijing Shougang's office in Hong Kong, Mr Zhou contacted Cheung Kong, Mr Li's flagship, to register his interest in buying Tung Wing Steel. Cheung Kong helped Shougang to buy Tung Wing Steel and still holds about 13 per cent. Mr Kwok, another close friend who has extensive experience in property and securities investment in Hong Kong, is still a director of Shougang Concord Grand. Deng Zhifang, the second son of China's paramount leader Deng Xiaoping, has since become the chief executive of the company. Mr Kwok has stepped down from daily operations but still holds three per cent of the company. Two former Hong Kong-based executives of Shougang, managing director Zhang Yusang and deputy managing director Jia Baoluo, were for long the two main spokesmen for the company in the territory, but both have since been transferred to Beijing. Despite the changes in upper management, Mr Zhou said they did not constitute a major reshuffle as his own had been the only top-level appointment in Hong Kong and there had been few other changes. With its management pedigree including Mr Deng and Mr Li's son Richard Li Tzar-kai, the group has excellent access to business opportunities in both China and Hong Kong.