Vice President of CMIG, Kong Linshan: Future Strategic Development of CMIG Focuses on “Three Financial Groups+ Three Industrial Brands”

Honorable members, distinguished guests, ladies and gentlemen, good morning. According to the conference agenda, I will give a brief introduction of CMIG’s business development and strategic layout.

I. CMIG’s Business Development over the Past Two Years

Over the past two years since establishment, CMIG has been adhering to the principle of “following the national strategy, improving the economic vitality and synergizing the capital”, creating both corporate value and social value, and achieving self-development and acting as a role model for others. We have made a head start with all development goals being met.

(1). Rapid growth in assets. By the end of this June, CMIG’s total assets have risen to almost RMB200 billion, nearly 6 times the value at the time of establishment (RMB 33.5 billion ). Since the beginning of this year, our assets have grown at a rate of 35%. We have achieved accumulated profits of RMB9 billion, and paid taxes worth of RMB3 billion.

(2). Rational arrangement in business structure. In terms of investment structure, financial assets amount to around RMB120 billion, occupying 60% of the total assets, and mainly in insurance, leasing, investment banking, asset management and other fields; while the industrial assets have reached RMB80 billion with a ratio of 40%, mainly in the new energy, prefabricated construction, community home-based senior care, health care, financial property, general aviation and other industries; in terms of regional distribution, domestic layout accounts for 80% of the business, with business mainly distributing in the Yangtze River Economic Belt, the Beijing-Tianjin-Hebei Synergic Region, and provinces involved in the “Belt and Road” strategy; the overseas layout takes up 20%, primarily including the financial investments in countries alongside the “Belt and Road” and developed markets in Europe and America.

(3). Initial establishment of core projects. As for new energy, by the end of this June, the company has obtained 1.4GW quota for PV projects, with grid-connection capacity of 1.1GW, marking the fastest growth among similar projects in China. As for prefabricated construction, more than 900 patents have been acquired, with an annual production capacity of 1 million square meters; over RMB13 billion worth of EPC framework agreements have been signed, and 8 industrial parks have been arranged domestically. The state-level laboratory has been founded in the Changsha base, which has become an industry leader in China. As for health care, a total of 750 ward beds have been acquired, and multiple projects are being launched in key cities including Beijing, Tianjin and Guangzhou. As for financial leasing, the total assets have reached more than RMB23 billion after only a year of operation, and the company has basically become the largest helicopter leasing provider in China. As for financial property, the Dongjiadu project in Shanghai with an investment of over RMB60 billion has been put into construction, which, upon completion, will become a new landmark in the Bund, Shanghai. As for property, centering on property management and home-based senior care, the company’s market share has been expanded swiftly. With current area under management reaching 180 million square meters, the company has edged into domestic top three. And as for general aviation, through M&As and integration, the company has developed into the world’s second-largest business jet firm.

(4). Remarkable results in overseas investments. Proactively seeking overseas investment opportunities, and building an international holding investment platform in Singapore, with four powerful investors introduced and the registered capital reaching USD2.2 billion; establishing CMIG International Financial Leasing Co., Ltd. by joining hands with South Korea-based Hana Financial Group; founding a financial holding group in Hong Kong; acquiring two business jet providers in Luxembourg; Setting up a fund management company by pooling capital with British Savills; thus an international strategic investment platform has been basically formed. Especially early this year, by investing USD2.5 billion, the company has acquired the US-based Sirius Group, the world’s second-largest reinsurance company that has been operating for 70 years, significantly paving a way for CMIG’s international layout. 

(5). Constant improvement in brand influence. First, the leading role if prominent. After CMIG was founded, six “local-version CMIG” groups including Zhejiang United Investment Group, Jiangsu Private Investment and Holdings, USUM Investment Group and Zhongji Investment Group have also been established, exhibiting the trend and vitality of development model of gathering private capitals. Second, the performance in market credits is good. Financial institutions both at home and abroad have granted high credit ratings for CMIG, thus CMIG needs far lower costs for financing compared with other domestic private enterprises. Meanwhile, local domestic governments and enterprises have great intent to cooperate with CMIG, and major media agencies have extensively covered CMIG’s undertakings and achievements. Third, the social image is widely recognized. The supportive “PV+” development and well-targeted poverty alleviation model created by CMIG has been widely recognized by governments at all levels and local people; mainstream media including People’s Daily and Xinhua News Agency have spoken high of CMIG; and projects including new rural construction, village-level power stations and rooftop photovoltaic power station construction have brought more benefits to poverty-stricken areas.

(6). Scientific and Efficient Corporate Governance. The governance structure comprising the Board of Directors, the Board of Supervisors, Global Advisory Council and the Management Team has been established, with emphasis on recruiting international and professional top-notch talents. Currently, the members of the core management team average 44 years old, among whom those holding doctorate degrees occupy 11% and master’s degrees 49%; the new executives of the invested companies are influential experts in their respective fields. The “CMIG Global Advisory Council” and the “Institute for Global Industry 4.5”jointly founded by CMIG and Tsinghua University are playing increasingly important roles, thereby forming a folk think tank with CMIG features.

II. Main Characteristics of CMIG's Business Development

CMIG has continuously improved the development strategy and elaborately planned strategic layout in the light of domestic and international economic situation over the past two years, planning and executing along with the current trend, and have developed increasingly unique characteristics and outstanding advantages.

(1) The capital operation model led by stock equity, supported by funds and sponsored by debts has been primarily established. 

(2) The setup of business model with the rate of capital return as the core indicator while liability-asset as process management has been accelerated.

(3) The development strategy of “developing both at home and abroad, integrating industry and finance and going global in groups” has been basically formed.

As for the stock equity, in the wake of capital increase last year, several invested companies have released equity through transfer of old stocks and seasoned equity offering; and the mechanism for exiting after gaining proceeds has been constantly improved. As for fund, together with shareholding companies and renowned investment institutions home and abroad, the company is actively promoting the funds operation for clean energy, financial property, property M&As, aviation tourism development, financial industry,overseas insurance investment and M&A investment, with initial results achieved. As for debts, the company is steadily promoting cooperation with banks and non-banking financial institutions, and has established credit financing business cooperation with insurance companies including China Life Insurance and Taikang Life Insurance Co., Ltd.

The Group guides and assists each invested company to form sustainable business model with core competitiveness. On the basis of determining business model, the management model with the rate of return on capital, cash flow and business income as key indicators is established. The asset management scale and asset operation capacity of each invested company have been improved, and the level of return on capitals increased, so as to take a lead in corresponding industry.

As for optimizing capital portfolio model, under the comprehensive comparison of the domestic and international markets, the four times of bond issuance being completed by CMIG through the inter-bank market and stock market turned out to be long-term bonds with low costs, with the term of three to five years. The research on Group’s liability-asset model has been conducted to analyze and figure out the current situation of assets and long-term and short-term investment, as well as achieve dynamic tracking, process management and risk prevention and control of liability-asset.

The company initially formed the development strategy of developing at home and abroad, integrating I=industry and finance and going global in groups. By virtue of the integrated platform, the company can achieve development both at home and abroad. Particularly, taking full use of the differentiation between the development of industry and finance at home and abroad, it has successfully promoted the appearance of domestic high quality industries in global capital market. By multiple financing means, the company selects key target industries, implements strategic integration, and forges leading industries, to create a unique business model, thereby forming incomparable development advantages that are hard to be duplicated. The company generally invites shareholders and other domestic private companies to invest in its projects, and establishes the “Going Global" team of Chinese private enterprises in the way of "applying resources to projects, integrating capital and management", thus effectively overcoming the difficulties of financing, poor ability of risk prevention, being ill-informed and backward in management of an individual enterprise. Overall, the company's development strategy gets more clear, and has achieved the desired development goals.

These advantages come from the two years of practical experience of CMIG, and also are the advanced model to be continuously uphold and carried forward in the future development.

III. Major Plans for CMIG’s Future DevelopmentG

The future strategic development of CMIG will get more focused and concentrates on expanding “three financial groups”, reinforcing “three industrial bands” 

and facilitating the implementation of the “Belt and Road” strategy. 

(1). Expanding “three financial groups” 

As for financial leasing, CMIG aims to establish a financial leasing group with the registered capital of RMB 15-20 billion, targeting transportation,medical care, new energy and logistics with Shanghai and Hong Kong as its main platforms; it also rapidly aims to expand the market via M&As to develop advantages within the industry and increase market share in a short term, thus creating the largest financial lease group in Asia.

As for insurance, CMIG plans to build platforms in Shanghai and Singapore to establish an insurance group, and rapidly expands business in Asia, especially in China, by virtue of Sirius International Insurance Group acquired and its team.

As for asset management, CMIG has founded an asset management company with the registered capital of RMB 10 billion in Beijing, and will rapidly expand business based in Beijing and London, and further expand asset management business in Europe.

(2). Reinforcing “three industrial bands”. CMIG will establish the group management in new energy, prefabricated construction and home-based senior care, so as to reinforce the three industrial brands and rapidly cultivate core competitiveness. As for new energy, CMIG will continuously develop the “new energy +” mode, integrate overall industrial chain, make breakthroughs in the comprehensive supporting industries such as intensive processing of animal husbandry and make contribution to poverty relief on the basis of the “comprehensive demonstration zone of new energy”. The zone is a project under the cooperation with provincial government of Ningxia Hui Autonomous Region with an investment of RMB 15 billion. Meanwhile, CMIG will vigorously promote distributed PV projects in East China to popularize clean energy. The company strives to gain new energy assets of more than RMB 100 billion to rank top three nationwide by the end of the 13th ”Five-Year Plan” period. 

Secondly, as for prefabricated construction, based on 8 industrial parks including that in Changsha, CMIG will accelerate business development to achieve design capacity of 18 million m2 within three years and assets of more than RMB 100 billion within five years.Moreover, it will improve independent research and development system to maintain technical-leading position within the industry.

Thirdly, as for home-based senior care, CMIG will mainly provide value-added services based on property management, home-based senior care and inclusive finance with the aim to satisfy and stimulate residents’ demand, and plans to manage 1.5 billion m2 property and serve 50 million core residents by the end of the 13th Five-Year Plan period, becoming the largest community value-added service provider in China. 

(3). Facilitating the implementation of the “Belt and Road” strategy. In China, CMIG will continue to take Shanghai as its leading development area, enlarge the layout in the Yangtze River Economic Zone; meanwhile, the company will give play to the leading role of Shanghai and continually accelerate the Beijing-Tianjin-Hebei Region’s synergetic development. In overseas market, CMIG will carry out the “going global” strategy, with focus on nations alongside the “Belt and Road”.

In the Southeast Asia, the group will focus on the construction of industrial parks, new industrial cities and future communities, and accelerate the construction of the 50 km2 Southeast Asia industrial park with the total investment of RMB 5 billion. The group will strengthen the strategic cooperation with the Kingdom of Cambodia in new energy, finance, general aviation and urbanization, and hold the first China-Cambodia entrepreneur forum this year. The group will explore opportunities of energy industry, and carry out resource cooperation and development in Central Asia. The group will seek Financial Service M&A opportunities in developed European and American markets.

Distinguished GAC members, ladies and gentlemen, the development of CMIG relies on the care of All-China Federation of Industry and Commerce (ACFIC) and Shanghai municipal government, as well as the support of all members. I expect all of us to provide suggestions as always on the development of CMIG and contribute wisdom and strength to the transformation and upgrading of China’s economy. Thank you all!