2016/10/21

CMIG to build a world brand for China’s private businesses

After more than two years of operations, China Minsheng Investment Group (CMIG), the mainland's largest non-state investment conglomerate, is lifting the veil of secrecy surrounding it while unveiling its ambitions of creating a gargantuan business empire that could set a healthy tone for the nation’s privately-owned companies.

President Li Huaizhen said that CMIG would take a proactive approach in chasing a rapid growth in its asset scale, aiming to operate businesses worth of 1 trillion yuan by 2019, five years after its inauguration.

“We have quite a few segments, encompassing financial and industrial assets. To be precise, we are involved in industries including new energy, property management, prefabricated construction, investment banking, leasing and insurance,” Li said. “We are developing the businesses according to our script. It’s certain that the goal of establishing a one-trillion-yuan-level mammoth conglomerate after five years of operations can be achieved.”

The president added that CMIG would focus on insurance, leasing and asset management as it bolstered its financial businesses while consolidating its foothold in the fields of new energy, care of ageing population and prefabricated construction.

CMIG, founded in 2014 as a brainchild of Chinese Premier Li Keqiang, has been drawing rave reviews over the past two years at a time when a slowing national economy continued to wallop privately-owned businesses. 

It was initially dubbed as a copycat of China’s sovereign wealth fund with ambitions of breaking up the monopoly of the state-owned juggernauts.

The president, a former chief of the mainland banking regulator’s accounting department, tried to provide more clarity of CMIG’s strategy, depicting a rosy picture of the group’s business structure.

“CMIG is a group that engages in both financing and manufacturing industries, targeting both the domestic and international markets,” he said. “After two years of running, we have figured out the focal points. We want to bundle all the resources of different private businesses to play a leading role in the Chinese economy.”

His remarks showed that CMIG would take a different approach than the sovereign wealth fund, or China Investment Corp that focuses on investments rather than running the businesses on its own.

Founding members of CMIG with registered capital of 50 billion yuan include 59 leading non-state-owned companies such as Suning Commerce Group and Yida Group. 

It is headed by Dong Wenbiao, former chairman of China Minsheng Banking.

CMIG embarked on banking loans and other means of debt financing to expand its business scale in the past two years.

To date, its total assets broke through the 200-billion-yuan mark following a clutch of investment and acquisitions.

The mainland economy, despite growing on a fast track during the past three decades, started to unnerve Chinese leaders in the face of a monopoly enjoyed by state-controlled businesses.

The birth of CMIG resulted from the leadership’s decision to inject new vigour into the world’s second-largest economy amid worries about the expansions’ durability as a thinner profit margin and worsening business climate hurt morale of thousands of mainland entrepreneurs.

“Its business strategy, performance and pace of growth are definitely watched closely by private entrepreneurs although they are not a member of the conglomerate,” said Chen Xiao, owner and chief executive of Shanghai Yacheng Culture. “Bosses of privately owned companies will view the company’s moves as a barometer to gauge the outlook of their own businesses.”

Anecdotal evidence showed that a rising number of entrepreneurs have either started or planned to transfer part of their personal wealth abroad to dodge an economic downturn or even a social unrest in China, battered by worries of a slower economic growth, a slumbering stock market and a depreciating Chinese yuan.

As CMIG sheds light on its development strategies, its bullishness about the business prospect is in some ways discordant with other economic figures due to entrepreneurs’ lack of confidence in the mainland economy saddled with overcapacity, rising labour costs and sky-high land prices.

China’s private investment growth slowed to a record low of about 2 per cent this year, raising fears of bumper-to-bumper anguish among the privately-owned businesses which contributed 80 per cent of jobs to the national economy.

However, Li expressed his unflappable confidence.

Allaying concerns about the future growth of the mainland’s privately owned businesses, the president tried to direct the discussion to the nub of the problem, or to be precise, the cyclical nature of the economy.

“My observations are that the slower private investment growth would be temporary,” he said. “As China’s economy reaches to the current level, a short-term slowing investment is inevitable. But it will eventually rebound.”

Beijing is making an all-out effort to buoy the economy through expanding consumer demands instead of investment and exports, envisioning a slower but sustainable growth pattern.

Li said that CMIG would follow the government’s directions of stimulating  

consumer demand to pursue a long-term growth.

He likened the efforts to create a business chain dealing with the care of ageing population as building an ecosystem in line with the government’s guideline.

CMIG has delved into property management businesses and it’s likely to manage a total of 300 million square metres of residential homes by the end of 2016.

“When the figure hits 1 billion square metres, we will be able to access 40 million residents who receive services from us,” Li said. “We could help those senior citizens manage their wealth and offer them proper nursing services to ease the ageing problem.”

Economists said that CMIG was attempting to form industry chains that could have an impact on the daily life of people in the sectors that are of vital importance to the country’s economic development.

It also plans to chart a course into healthcare in tandem with people’s rising awareness of their health conditions.

In November CMIG led a consortium of investors to pay 24.85 billion yuan to purchase a 200,000 square metre parcel of prime land on the west bank of Huangpu River, starting to build a mega commercial complex in Shanghai.

In April this year, its CMIG International completed the acquisition of Sirius International Insurance Group for US$2.6 billion.

Laurence Liao, chief executive of CMIG International that oversees the group’s overseas investment, said the United States, Europe and Southeast Asia would be the major markets where CMIG would do more investments and seek acquisition targets.

“CMIG is to build a brand for China’s private businesses across the world,” Liao said.