Source: Daily Economic News

A new round of Northeast China's revitalization policy has hit a "heavy blow". Recently, the three-year rolling implementation plan of Northeast China's revitalization has officially landed, with an estimated total investment of about 1.6 trillion yuan.

Recently, Zhongwang, the representative of Northeast private enterprises and China's high-end manufacturing industry, has also heard a lot of important news. On September 6, its proposal of splitting up A shares was approved by the shareholders'special meeting, including approving the asset transfer agreement signed by the group and Zhongfang Real Estate Co., Ltd. ("Zhongfang Share", Shanghai Stock Exchange Stock Code: 600890) and approving the proposal of splitting Liaoning Zhongwang, which indicates that the main business of Zhongwang splitting back to A shares has achieved another stage of results. As a shell company, Zhongfang will become the second largest industrial aluminium extrusion product R&D manufacturer in the world and the largest industrial aluminium extrusion product R&D manufacturer in Asia and China.

Another source of global concern over the same period was the announcement by Zhongwang USA LLC, the parent company of Zhongwang International Group Limited, of China, to acquire a full stake in Aleris, the world's leading research and development manufacturer of aluminium calendering products, with a corporate value of $2.33 billion, which is collared by aluminium in aerospace and automotive industries. The leading supplier is Airbus, Boeing, Bombardier, Mercedes-Benz, Audi, BMW and other enterprises. Once the deal is completed, it will become the largest overseas acquisition in the history of overseas M&A of Chinese enterprises in the field of high value-added metal manufacturing.

Against the background of the overall economic downturn and enormous challenges in Northeast China, this enterprise, which originated in Northeast China, has grown into one of the top-end aluminum processing R&D and manufacturing enterprises in the global industry. It not only accelerates its development, but also chooses to "face the whole world and take root in Northeast China" for more projects.

Return to A Share and Build High Quality Projects Based on Northeast China

At the beginning of this year, Zhongwang of China announced that it would split and return to A shares, and its planned assets amounted to 28.2 billion yuan, which aroused concern. Recently, Zhongfang shares, the backdoor object of Zhongfang shares, issued a report on the replacement of major assets and the issuance of shares to purchase assets and raise matching funds and related party transactions (draft), which shows the details of Zhongwang's development strategy and layout in Northeast China.

From the published draft, we can see that after this reorganization, Zhongwang Industrial Aluminum Extrusion and All-Aluminum Special Vehicle Business will be listed in A-share. On the one hand, Zhongwang Group can further focus on the development of high-end industrial Aluminum Extrusion Business through A-share listed company platform, and provide impetus for the follow-up development with the help of the merger and integration function of capital market; on the other hand, Hong Kong listed companies. Zhongwang of China will further enhance its core competitiveness in the global market, release the intrinsic value of enterprises, and continue to expand the industry's leading edge.

"A + Red Chip dual listing platform, so that the development of Zhongwang industry will be more flexible." Industry personage analysis, "In fact, the internationally renowned equipment manufacturing enterprises all have the ability of positive interaction and mutual promotion between industry and capital. Equipment manufacturing industry belongs to the industry with large investment and long return period. When the enterprises break the huge market demand by product and business model, they continue to expand production capacity, recruit staff and promote R&D, they are flexible, efficient and efficient. Low-cost capital operations are often the key step.

In recent years, Zhongwang has invested in many major projects in Liaoyang, Yingkou, Panjin and other places in Northeast China, including Liaoyang Deep Processing Center, Yingkou High Purity Aluminum and Special Aluminum Alloy Project, Liaoyang Special Vehicle Project and Panjin Industrial Aluminum Extrusion Project.

In this restructuring, Zhongwang has also incorporated its aluminium alloy vehicle manufacturing plate into A-share listed companies. Zhongwang has a long-term layout and won many long-term partners in promoting aluminium for transportation and lightweight automobiles. Chery, BYD, Beijing Great Wall Huaguan, Huachen Bus, FAW, Shenyang Hualong, Shenzhen Wuzhou Dragon, and Zhuhai Yinlong have all cooperated with Zhongwang in new energy vehicles and buses.

At the same time, Zhongwang is also pushing two high-quality projects located in Liaoning Province. Among them, "the project of industrial aluminium extrusion products with high strength and large cross-section of 600,000 tons per year" is one of the projects to enhance Zhongwang's core competitiveness. Zhongwang originally has the comprehensive supporting advantages of alloy casting, die design, advanced equipment and product research and development. This project is more conducive to its technical and productivity advantages in industrial aluminium extrusion products with complex and large cross-section. Aluminum extrusion business in motor industry is further developing towards high-end. After the completion of the "All-Aluminum Special Car Project", the production capacity of 50,000 semi-trailer cars, 20,000 tank cars and 10,000 special car cars will be formed.

According to a government leader in charge of industry in Liaoning Province, Zhongwang's return to A-share with its core business and part of its potential business will have a positive effect on the upgrading of local industries in Northeast China, including expanding investment, promoting employment, attracting talents, and promoting the development of a series of local supporting industries.

A Sample of Private Enterprises Revitalized in Northeast China through Transformation and Upgrading

In Northeast China, Zhongwang has been listed as a model for enterprises by the local government for many years. The company, listed in Hong Kong in 2009 as China Zhongwang Holdings Limited (1333.HK), is currently the world's second largest industrial aluminium profile R&D manufacturer in Asia and China.

Since 2012, Zhongwang has maintained a steady growth rate no matter how the economic environment changes. In recent years, the company's net profit was 1.807 billion yuan in 2012, 2.127 billion yuan in 2013, 2.477 billion yuan in 2014 and 2.805 billion yuan in 2015. The annual net profit of the company maintained an increase of more than 13%.

From 2013 to 2015, Zhongwang in Liaoning Province paid a total of 4.433 billion yuan in taxes and provided more than 20,000 local jobs.

In fact, at the beginning of its founding, Zhongwang was only a very ordinary member of numerous private enterprises that could hardly speak the word "scale". Zhongwang, founded in 1993, mainly produces aluminium profiles for door and window frames in construction industry. With the expansion of its scale, Liu Zhongtian, founder and chairman, sees that the competition in the Red Sea market will become more and more fierce, while the industrial aluminium profiles with higher technology threshold are rarely involved by Chinese enterprises. In 2003, Zhongwang opened its first transformation and turned its development focus to industrial aluminium which was completely unfamiliar at that time. Profile field. This strategic decision is correct, so that Zhongwang maintained the advantage of advanced entry and high profit. In 2009, Zhongwang successfully listed in Hong Kong under the image of "the world's leading aluminium extrusion manufacturer", and created the largest single IPO in the world in that year without the aftermath of the financial crisis.

In 2011, Zhongwang started the second transformation, which extends to the deep processing business and the aluminium calendering business with higher technology content on the basis of the original industrial aluminium extrusion business.

Zhongwang Deep Processing Center, located in Liaoyang, was put into operation in 2013 and brought real gold and silver profits to the company the following year. At present, the aluminium calendering base in Tianjin has realized small-scale trial production, and it is the largest single aluminium calendering material project with the most complete supporting facilities in the world.

Through the second transformation, Zhongwang's products not only occupy an absolute dominant position in the domestic market, but also sell abroad, including the United States, Europe, Brazil, India, Australia, Japan and Korea and other countries and regions.

It is precisely because of the expansion of deep processing and aluminium calendering business, Zhongwang began to prepare for the split listing. In March 2016, the restructuring plan of backdoor Zhongfang shares announced that Zhongwang realized A-share listing by splitting industrial aluminium extrusion business into Zhongfang shares, and Zhongfang shares became subsidiary companies of Zhongwang in China, while the fast-growing aluminium deep processing business and aluminium calendering business in Hong Kong remain.

In August 2016, the Zhongwang United States announced its acquisition of Aili, which attracted worldwide attention. Many professionals around the world believe that this merger and acquisition is a milestone not only for enterprises, but also for China's aluminium processing industry. With the maturity of China's economy and the expansion of domestic demand, the development of manufacturing industry has become more sophisticated. Previously, the government has repeatedly proposed to solve the problem of overcapacity and encourage industries to produce more high-value-added products. "In the past, China pursued upstream resources overseas, but this time it was downstream. This move is also in line with the Chinese government's major goal of upgrading manufacturing and the economy." Yi Zhu, an analyst at Bloomberg Intelligence in Hong Kong, said.

"Regardless of the transformation, listing, or returning to A shares, what Zhongwang has done can be summed up in one sentence: focus on the market trend, focus on high-end aluminium processing industry, and make good use of the capital platform." China Zhongwang President and Executive Director Lu Qing said.

Zhongwang experience has also become a "business card" of the local economy. Zhou Jianping, Director of the Northeast Revitalization Department of the National Development and Reform Commission, went to Zhongwang in May this year to conduct a survey. He highly appraised Zhongwang's development and achievements in recent years, and highly recognized Zhongwang's strategic initiatives such as "basing on big traffic and devoting to lightweight development". Zhou Jianping also places great hopes on Zhongwang and other enterprises, hoping that these enterprises can develop into the "engine" of regional economic growth and the main force of the revitalization and development of the old industrial bases in Northeast China.

Zhongwang Experience: Technology Leadership, Global Competition, Capital Utilization

Zhongwang's achievements and growth are in sharp contrast to the deep loss and shutdown of most enterprises in Northeast China.

The chronic disease of Northeast China is a heavy burden left over from history. Liang Qidong, Vice President of Liaoning Academy of Social Sciences, in an interview with the media, pointed out frankly that the "institutional recession" is one of the factors contributing to the overall economic decline in Northeast China, because "Northeast enters the planned economy the earliest, withdraws the latest and executes the planned economy the most thoroughly".

Due to the accumulation of state-owned enterprises in Northeast China, under the "public-owned" ownership structure and the "work-integrated" industrial structure system, redundancy, debt and enterprise-run society have gradually become the "three mountains" on top of state-owned enterprises.

A large state-owned enterprise is a self-contained "small society": schools, kindergartens, fire stations, public security bureaus, hospitals, neighborhood committees... All of them bring heavy burden to enterprises.

There are nearly 10,000 workers in a state-owned refinery. In Germany and Japan, the number of refineries at the same level is 3,500, and the number of private refineries in China is 5,600.

And it seems that a group of representatives of Northeast private enterprises are particularly vibrant because they rely on the genes of the old industrial base in Northeast China and conform to the tide of market-oriented development.

In Zhongwang's factory, few people sweat like rain. In the huge workshop of aluminium extrusion workshop, three or five workers operate giant extrusion machines, which press large aluminium bars into all kinds of designed shapes under the pressure of thousands of junctures. In the deep processing workshop, robots are working busily in the welding production line, waving rotating manipulators.

Most of the work is handed over to machines, and a few workers supervise the production process. "By introducing advanced equipment such as large extruders, the group will consolidate its leading position in research and development and production of high-end industrial aluminium profiles; introducing various robotic systems will not only reduce labor costs, but also effectively improve production efficiency and product competitiveness." Zhongwang related person in charge of the introduction.

In the control of financial factors such as cost, inventory and account period, Zhongwang also has its own set of effective systems: through the production and procurement modes of "ordering by sales" and "ordering by production", to avoid overstock of products and raw materials; through the pricing principle of "aluminium ingot price + processing fee", to reduce the profit risk caused by fluctuation of raw materials prices; through the long and short account period, Zhongwang also has its own effective system. In terms of effectiveness control, Zhongwang keeps accounts receivable and bad debts at a very low level.

Back in 2003, Zhongwang was born ten years ago, which initiated the transformation from building aluminium profiles to industrial aluminium profiles. Almost all liquidity has been invested in plant construction and equipment customization. This transformation faces a long investment period, and the manufacturing cycle of equipment alone is about 3 to 5 years. At that time, private enterprises were very passive in seeking bank loans. Liu Zhongtian decided to go to Hong Kong for listing because of the shortage of working capital.

In March 2016, China Zhongwang, which created the largest single IPO in the world in the financial crisis in 2009, announced that it would divest its industrial aluminium extrusion business and put it into A-share listed companies. Meanwhile, aluminium calendering projects reserved for listed companies in Hong Kong are ready to be launched.

In August 2016, Zhongwang USA announced its acquisition of AILI USA. "In this acquisition, China is the winner, Zhongwang is the winner and Aili is the winner." Paul Adkins, managing director of AZ China Ltd., an industry consulting firm, commented on the deal and said a reshuffle of the global high value-added aluminium processing market was inevitable.

In the "Northeast Revitalization Forum 2016", Zhang Zhanbin, director of the Department of Economics of the State Administration College, said: "Without the development of private economy and private capital, Northeast revitalization is almost impossible and unsustainable."

In the recent issue of the "Three-year Rolling Implementation Plan for Promoting the Revitalization of Old Industrial Bases in Northeast China (2016-2018)", the NDRC also clearly defined the tasks of deepening the reform of state-owned enterprises and promoting the development of private economy.

As a leader of private enterprises, Zhongwang's successful experience may open up more ideas for other Northeastern enterprises to explore the way out.