Vice President of Sany: China's economy has bottomed out and the equipment industry has warmed

and newsThe Boao Forum for Asia Annual Conference 2009 was held in Boao, Hainan Province on April 17-19. The theme of this year's annual meeting is "Economic Crisis and Asia: Challenges and Prospects", and Premier Wen Jiabao will gather in Boao with more than 10 heads of state and more than 1,600 high-level representatives from governments, businesses, academia and media at home and abroad. On April 17, He Zhenlin, vice president of Sany Heavy Industry (600031, stock bar) Co., Ltd., told Hexun.com that the data in the first quarter of this year showed that the equipment manufacturing industry has warmed. The following is the transcript:

Overseas M&A is easy to fall into the cultural trap

Hexun.com: Mr. He, hello, the main topic of this year's Boao Forum for Asia is related to the financial crisis, which has been extended to all levels of economic life, how do you think the crisis is reflected in Trinity?

He Zhenlin: We feel that this crisis is just an opportunity for our company, because in the first quarter of this year, our year-on-year growth was 38% on the basis of last year, which is the government's 4 trillion pull. The reason why the financial crisis is an opportunity for us is that Sany has the core competitiveness over the years, as well as the accumulation of its own benefits, so that it has abundant cash flow to cope with this crisis.

You see, at present, most companies are tightening their pockets and believing that cash is king, but we are bucking the trend and investing 100 million euros to build a factory in Germany, which is China's investment in Europe *5655 so far.

Hexun.com: What is the scale of the factories that Sany is building overseas?

JL: We invested $60 million in the United States, $60 million in India, and then we invested 100 million euros in Europe.

Hexun.com: Has it been completed and put into production?

He Zhenlin: India's has already been built, and the United States is in full swing.

Germany just signed it in January this year, and it is also China's investment in Europe*5655 so far. It will be built in about two years. 100 million euros is also the initial investment, if in the future according to the needs of production capacity, we build a factory in Germany is not just a production base, more importantly a research and development base, and then an assembly base, which is also a unique strategy in our internationalization, that is, we just talked about the problem of internationalization, the problem of internationalization path.

Hexun.com: Now that Sany is investing so much in Europe and India, while foreign demand is declining, how can input and output be balanced?

He Zhenlin: There is a company in China that has acquired a company, and its input-output ratio is about 1:0.75, and we now expect Sany's input-output ratio in Germany to be about 1:3.5.

This is a matter of grasping the timing, we estimate that it may take about two years to come out of the economic downturn abroad, and we will take two years to build a factory, so that we can flexibly adjust our investment and effectively avoid the trap of internationalization.

Hexun.com: Do you think that for some domestic people, now is a good time for them to go overseas and explore the market?

He Zhenlin: You can't generalize, because the overseas market is a very complex issue. Sany has taken a unique path in developing overseas markets: it is to build factories, not mergers and acquisitions. Why? There are deep-seated reasons for this, China's process of internationalization is very difficult, there are extremely few successful cases, and failure cases abound. That's a matter of paths.

M&A is not a bad form, it can get all the resources quickly, but it also has several fatal problems: *5656 cultural trap, you buy and acquire a business, you have to integrate into the culture of the country, and to build a factory, I can effectively use my culture to choose the local people who adapt to our culture.

Second, if we use a merger, we have to accept its capacity and its factories and even everything about it. What do you do when you encounter an economic downturn? For example, last year, we had a company that acquired a foreign company, which has nearly 1,000 people, and the production capacity of this enterprise is rigid, facing the abuse, spread and expansion of the financial tsunami, what should you do if the foreign demand is sluggish? Do you dare to lay off employees, there are strict labor laws abroad, what do you do with so many people, what do you do with so much equipment, what do you do with so many resources, so it has a rigid problem. We Sany is exploring a path of internationalization with a unique style to promote strengths and avoid weaknesses, because we have analyzed the lessons of the failure of many domestic enterprises, and feel that this way of building factories seems to take a long time on the surface, but it effectively avoids the traps of culture, capacity rigidity and labor law. Therefore, we are independent of CCB both overseas and domestically. There is also a trap in domestic mergers and acquisitions, for example, a large number of state-owned enterprises are waiting to be fed, which is a good time for acquisition, but there is a problem of cultural integration between state-owned enterprises and private enterprises.

The equipment industry has warmed up

Hexun.com: Now that some data in the first quarter have come out, some users have suggested that China's economy has picked up, what do you think?

He Zhenlin: It should be said that China's economy has begun to come out of the trough, and it should be bottomed out, because bottoming out is not a simple question of which day and month, it is a question of a period, and it should be said that China should have bottomed out. We estimate that China's economy will definitely be able to flourish in the world, the reason is because China has started to pull investment, and China's investment pull space is more favorable than that of developed countries, developed countries basically have no space, and China's space is very large, China's national savings are also very high, and the government attaches great importance to this.

Hexun.com: Do you think the equipment manufacturing industry has warmed up?

He Zhenlin: Judging from the figures released in our industry, it is basically an increase over the same period last year. Therefore, there are all kinds of signs that the equipment manufacturing industry is generally warmer.

Hexun.com: The equipment industry is also in the top ten revitalization industries set by the state, and now the specific rules have not yet come out, what aspects do you think the rules should be reflected?

He Zhenlin: There are many big provisions for the revitalization of equipment manufacturing that are very beneficial to us, for example, for enterprises that use new products for 5,656 times, they can be exempted or given preferential treatment, which is a very good opportunity for innovative enterprises. In addition, there are some preferential policies for import substitution, and Sany is committed to building an international brand. In addition, there are some big policies for the whole integration. In general, the policy is of great help to the revitalization of equipment, but we hope that the detailed rules can be issued sooner, because the introduction of the detailed rules involves how to grasp the specific situation, how to implement the policy and how to obtain this preferential treatment.