Data source: CNBM

Released on: December 12, 2011

From December 9 to 11 of 2011, the 10^thChina Entrepreneur Summit themed by “2012: System Evolution and Market Dignity” was held in Beijing. Song Zhiping, President and Secretary of Party Committee of China National Building Materials Group Corporation (CNBM), as well as President of China National Pharmaceutical Group Corporation (SINOPHARM) was invited to attend the theme forum at the opening ceremony, and had a wonderful dialogue with Ma Weihua, President of China Merchants Bank, Luo Tao, General Manager of China Nonferrous Metal Mining (Group) Co., Ltd., Liu Jiren, President of Neusoft Corporation, Zheng Guohan, President of HKUST Business School, and Joseph B.Fuller, CEO of Monitor Group with regard to “2012: Will It Be Another 2008”.

From December 9 to 11 of 2011, the 10^thChina Entrepreneur Summit themed by “2012: System Evolution and Market Dignity” was held in Beijing. Song Zhiping, President and Secretary of Party Committee of China National Building Materials Group Corporation (CNBM), as well as President of China National Pharmaceutical Group Corporation (SINOPHARM) was invited to attend the theme forum at the opening ceremony, and had a wonderful dialogue with Ma Weihua, President of China Merchants Bank, Luo Tao, General Manager of China Nonferrous Metal Mining (Group) Co., Ltd., Liu Jiren, President of Neusoft Corporation, Zheng Guohan, President of HKUST Business School, and Joseph B.Fuller, CEO of Monitor Group with regard to “2012: Will It Be Another 2008”.

The following is the dialogue memoir of President Song Zhiping:

Host:Let’s welcome Mr. Song Zhiping. Please give us a brief and clear answer. Are you optimistic or pessimistic about the macro–forecast of Chinese economy in 2012? Please give us a brief judgment.

Song Zhiping:Similar with the idea of President Ma, I am optimistic about the tendency of the next year, and I do not agree to compare2012 to 2008. If the year 2008 was difficult for us, I think it is going to be over until now. As far as I am concerned, the economy of next year will be moderate and stable, and it will be better than that of the second half of this year.

Host:What do you think of the macro economic policy of the next year?　　

Song Zhiping:As for the macro economic policy, I hope that the monetary policy will be moderately easing next year. Actually, the monetary policy this year is very stable, but the reserve fund has been raised much, which led to the financial strain. Knowing the decrease of reserve fund, I feel that a good time is coming. Just like me, I engage in building materials and mainly supply materials for infrastructure, so I am also sensitive, and I hope that it will be easing next year. After a period of time, the currency inflation has reached its turning point, and it may not be the first issue in next year. I think we should balance the stable growth, structure adjustment and inflation prevention in a large system.

Therefore, I hope our infrastructure project will keep on according to the “12^thFive-year Plan”, and promotion of consumption through tax reduction should be conducted in the down to earth way. Besides, the export trade friction is serious, so the government should protect and support our export enterprises, encourage them to positively participate in the international competition. And I hope that we can spend the next year with comprehensive and balanced thoughts.

Host:As you engage in building materials, you hope the policy can be easing, and the high-speed rail can be continued, which is understandable for us. However, President Ma talked about more details, such as he hopes that the monetary policy will not be too easing but stable, maybe the periodical or structural financial policy; and some National structural supportive policy could be a little easing? As for the monetary policy, financial policy and administrative policy, you hope all of them will be easing, more easing or tighter?

Song Zhiping:As a whole, for example, after the reserve fund is raised, the others will all be tight. At present, we carry out directional easing policy which is very difficult to operate. On the whole, as for the overall pressure of currency inflation, we can moderately ease it, and provide capital market an easy environment, and offer greater support for some SMEs. For the support, I have a suggestion that the SMEs can not just rely on the bank. The capital resource of SMEs is the outsourcing for large enterprises. In other words, it is a system, and the large enterprises should support small enterprises.

The small river will be full if the big river has water, while the small river will be dry if the big river has no water. Where has the money of large enterprises gone? In fact, it has gone to the small enterprises through the outsourcing of products and services. For example, after the bubble economy in Japan, many big enterprises moved away, which resulted in the hollow situation of Japanese industry. SMEs suffered the most, as they were attached to large enterprises. So the banks may not want to loan money to the SMEs, as there is high risk. While the banks hope to loan money to large enterprises, however, the money will go to SMEs at last through large enterprises. I think we should see the relation of capital flow in a systematic way.

Host:Just now, you said that the small river will be full if the big river has water. Your enterprise can be regarded as a big river, and your position is very sensitive, as both the building materials and medicine you engaging in are competitive industries. As for the competitive state-owned enterprises, we just talk about its way of development but not the philosophy. We just admit that these big state-owned enterprises should face with the competition, while as for the SMEs in the competitive industries, how can they go on? Can you tell us some ways under the circumstance which may not be good next year?

Song Zhiping:I think many industries in China have entered in the stage of surplus and market saturation. At this stage, if the enterprise continues the rapid development in the past thirty years, I think it is impractical.

Therefore, in each industry, we have to explore a new way to go on, by which we mean the development way of the whole group such as steel industry, cement industry, automobile industry and pharmaceutical industry, but not a single enterprise. And we need to explore how we can grow in a better way.

In this case, we have to explore how the enterprises will grow if we reduce the production quantity. In my opinion, there are two ways: The first one is consolidation and reorganization. We should unite to reorganize and realize concentration, thus achieving healthy development. The benefit of industry is higher than that of enterprises, and the benefit of enterprises should lie in that of industries. This is the way of development. In the past several years, many SMEs in building materials industry and medicine industry of China have joined hands with. For example, this year, both the industries had suffered a lot. However, the sales revenue of building materials increased by 50%, and its profit increased by 100%; while sales revenue of medicine increased by 40%, and its profit increased by 20%, which are all obtained in a relatively difficult environment.

Of course, we called it “inclusive growth”, that is to say, when we merge together with SMEs, they are also stockholders in the companies after consolidation and reorganization. In the past, the SMEs were absolutely managed by themselves, and they would be bankrupt in case of loss. Now, after entering into building materials industry or medicine industry, they may maintain the growth of 30%-40%, so they can make a profit. Meanwhile, a credit system has also been set up. So this is that the large enterprises and SMEs make up an enterprise system. Actually, all the large enterprises started from small enterprises, and they were not large enterprises at the very beginning. I propose that we should pursue the inclusive growth in the whole system of the industry.

The second is the optimization of stock. After consolidation and reorganization, we can increase the concentration ratio of industry and the right of enterprises to speak. Then we can promote the competitiveness of enterprises with technological innovation and structural adjustment, so that our enterprises can get through all the difficulties. Our difficulties are not only in 2012. In the course of industrialization, our nation will come across the big issue of overproduction and market saturation, which we have to face with. Therefore, I hope we can jointly promote the unity of central enterprises, local state-owned enterprises and SMEs, and pay more attention and offer more support.

As for the central enterprises, Director Shao said that the central enterprises could be divided into two categories. CNBM belongs to the second one – central enterprise with full competitiveness in the industry. The enterprises enlarge the scale according to the market rules. However, in the financing process of capital market, the proportion of government capital gradually lowered, for example, the government capital of CNBM and SINOPHARM are all less than 50% of the whole capital funds of the group. I give you an example to help you understand it more easily. The biggest building material company Saint-Gobain Group in France belonged to the imperial family at the earliest, and then the nation. After it went public, now, it does not belong to the nation any longer. With such a kind of growing process, Saint-Goabin has constructed the most competitive jumbo company with sales revenue of RMB 500 billion Yuan in global building materials industry. Therefore, I feel that some problems in enterprises can be gradually solved in the market in the course of development.