Through the "Belt and Road", Sany will create new fulcrums for businesses such as residential industrialization and smart ports

In recent years, many domestic manufacturing enterprises are facing the problem of overcapacity. The promotion of the "Belt and Road" initiative has brought a new way out for this part of the excess capacity, and many enterprises rely on the "Belt and Road" to expand their international business, which has alleviated the operating pressure to a certain extent.

Sany Group, a construction machinery company, is a typical representative of this. According to the annual report released by Sany Heavy Industry, a listed company under the group, in 2015, the company's gross profit margin in the domestic market was 27.16%, a year-on-year decrease of 1.45%, while the gross profit margin in the international market was 22.77%, an increase of 2.28% year-on-year. In the first half of 2016, the company achieved international sales revenue of 4.61 billion yuan, accounting for 41.6% of the company's main business income.

In addition to relying on the "Belt and Road" initiative to export construction machinery and equipment and expand international production capacity, Sany Group is also exploring the feasibility of directly participating in overseas projects, such as residential industrialization projects and investing in local manufacturing parks. On March 15, Sany Group signed a memorandum of cooperation with Saudi Arabia's Al Merry Investment Company, under which the two parties will jointly develop, design, construct and debug residential houses of 5,000 to 50,000 units.

During the Boao Forum for Asia Annual Conference 2017, on March 23, Duan Dawei, director and vice president of Sany Group, interpreted the group's existing layout and new strategy along the "Belt and Road".

"Many countries along the Belt and Road have the need to accelerate industrialization and urbanization, and have great market potential, while China has good technology and production capacity, if you can find good partners in local countries, you can carry out good production capacity cooperation, China's technology and production capacity has reached the stage of reverse output. I believe that the Belt and Road Initiative will bring a long-term development opportunity for 10-20 years not only to Chinese enterprises, but also to local enterprises. Duan Dawei said.

China's technology and production capacity have reached the stage of reverse export

Q: How exactly does Sany Group participate in the Belt and Road Initiative?

Duan Dawei: There are three main sectors of Sany Group involved in the "Belt and Road" business, one is the machinery and equipment of the listed company Sany Heavy Industry to serve the infrastructure interconnection of the "Belt and Road". In fact, Sany Heavy Industry has been internationalized for more than 10 years, and its sales have covered more than 120 countries and regions around the world. In recent years, with the advancement of the "Belt and Road" initiative, it has provided a new source of power for our international business, and many Chinese enterprises have contracted projects and investments in countries along the route, and our equipment has "hitchhiked" to the sea, and the international production capacity layout has become more and more extensive. The second part is the listed company Sany International, whose main business includes port infrastructure and energy equipment, and port infrastructure products have broad application prospects in the "Belt and Road", especially the Maritime Silk Road. In addition, many countries along the "Belt and Road" are developing energy. The third part is some new businesses in the unlisted sector, including wind power, residential industrialization, etc. I believe that the Belt and Road Initiative has brought a long-term development opportunity for Chinese companies not only to Chinese companies, but also to local enterprises in a long period of 10-20 years.

Q: What is the sales layout along the "Belt and Road"?

Duan Dawei: At present, Sany Heavy Industry's sales cover more than 120 countries and regions around the world, including many countries along the "Belt and Road", and mainly developing countries. Sany originally had 6 overseas sales areas, but this year it was adjusted to 10, which are divided according to the country and are becoming more and more refined. Especially in developing countries, the demand for infrastructure construction has huge potential and a large demographic dividend, which brings many opportunities to Sany. However, there is a stage imbalance between different countries and regions, such as Brazil's economy in recent years, a bit difficult, during this period of construction machinery, including our domestic counterparts in the local sales in a state of adjustment, but at the same time, the Indian market is in an upward period. In general, with the increasingly broad international layout, the ability to resist risks is also getting stronger and stronger.

Q: What is the layout of production capacity along the "Belt and Road"?

Duan Dawei: Sany's production capacity layout is also very consistent with the "Belt and Road", from China's southeast coast to the central and western regions, from Xinjiang to Turkey, and then to Germany, in addition to India and Indonesia also have factories. We have two major sites in Germany, one of which we invested in and the other that we acquired in Germany in 2012Concrete machineryCompany Putzmeister.

We have 50 factories in China, and in recent years, with the expansion of overseas markets, we have also continued to expand overseas production capacity, and currently have 15 factories overseas, of which 10 are obtained through the acquisition of Putzmeister, and the production capacity covers North and South America. In the future, some new capacity cooperation will be developed in some countries. Many countries along the "Belt and Road" have the need to accelerate industrialization and urbanization, and have great market potential, while China has good technology and production capacity, if you can find good partners in local countries, you can carry out good production capacity cooperation, China's technology and production capacity has reached the stage of reverse output.

New business: Actively develop residential projects in countries along the Belt and Road

Q: How did the two parties integrate after the acquisition of Putzmeister?

Duan Dawei: It has been 5 years since the acquisition of Putzmeister, and in terms of personnel, no senior executives were sent to Germany after the acquisition, and the original team was maintained. We have adopted a dual-brand strategy in the concrete machinery business, Putzmeister originally had a good reputation and influence in the international market, and after the acquisition, it was mainly aimed at the international market, and Sany continued to do the Chinese market. We shared our technology to help improve product quality and accelerate product innovation. In terms of industrial chain sharing, the overall scale of Putzmeister is much smaller than Sany, and the industrial chain is relatively short, Sany has established a relatively complete and solid industrial chain over the years, on the one hand, it uses the technology of the other party to improve our internal industrial chain technology, and at the same time supplies parts that meet the standards for the other party to help the other party reduce costs. For another example, Putzmeister is located in Stuttgart, Germany, and is also the headquarters of the German car company Mercedes-Benz. However, after the integration, Putzmeister's purchase price was also reduced. Of course, we do not rule out exploring new overseas M&A opportunities in the future, but we ourselves are more cautious and prudent about M&A.

Q: I learned from Sany's official website that in addition to the construction machinery business, Sany will also build a new business fulcrum of the "Belt and Road" through residential industrialization projects, smart ports, new energy technologies, etc. What is the logic behind this? How's it going?

Duan Dawei: Regarding the residential industrialization project, that is, the partialization and standardized production of housing, it is characterized by high efficiency and environmental protection. We have observed that many countries along the "Belt and Road" have obvious demographic dividends, young population structure, and many countries have reached the stage of large-scale housing construction to improve living conditions, similar to the situation in China in the 90s of the last century, but these countries lack the corresponding technology. Sany Group is also exploring direct investment in overseas projects and looking for opportunities, and is still focusing on housing industrialization, and other infrastructure projects are still participating as an equipment supplier. In terms of port business, we not only provide hardware equipment, but also start to get involved in the Internet of Things software technology business for smart ports.

Q: What is the progress of the Ethiopia-Hunan Equipment Manufacturing Park in which Sany participated?

Duan Dawei: Sany participated in the Ethiopia Hunan Equipment Manufacturing Park, is a project led by the Hunan Provincial People's Government, Sany as one of the main participants and initiators, participated in the investment, is an important investor, is still in the stage of building a platform, the specific scale is not convenient to disclose, the future will be considered according to the development needs of the market to consider the selection of projects, the issue of entering the park. The overall situation in Ethiopia is relatively stable, the local government has a strong desire to develop the economy, and bilateral relations with China are relatively good. Whether it is "going to sea in a group" at the enterprise level or international cooperation organized by the government, the ways and platforms of cooperation will become more and more diversified in the future, bringing us more development channels.

Q: *In recent years, the RMB exchange rate has fluctuated frequently, how does Sany manage exchange rate risks?

Duan Dawei: Exchange rate changes are a normal situation, and it is also a problem that international enterprises must face, and it is necessary to do some normalized work on exchange rate risk management, including the judgment of sales policies in each market at the business level; What management tools are mainly used at the business level, such as doing some hedging or retaining some exposure. As an enterprise, we still hope that the RMB exchange rate can remain stable, expectation management is very important, especially the exchange rate of RMB against the US dollar, if the stability of the exchange rate between the two currencies can be relatively high, then for enterprises, it is better to manage expectations and avoid risks.