The guru of Chinese private entrepreneurs highly values the opportunity of becoming CMIG's shareholder. For his part, this is not only a cooperation at capital level; more importantly, this helps him find a group of like-minded partners to revitalize China's industrial development.
The development philosophy of Zongshen Group: develop identified hubs, build industry integration network, break three-island chain and enter into new blue sea. Looking into the future, Zuo Zongsheng indicates that Zongshen Group will build a new industrial pattern featured by the joint development of industry, financing and network by centering on the three hubs of "green power hub", "financial service hub of industrial chain" and "O2O transaction hub", with a view to enter into the new era of "Zongshen with RMB100 billion in sales revenue" in 2020.
Zuo Zongshen told us that CMIG is committed to China's industrial transition and upgrading as well as strategic emerging industries, such as new energy, high-and-new-technology, advanced manufacturing, energy saving and environmental protection projects, while the transition and upgrading of Zongshen is built upon the original industries to look for long-period major industries and aim to become the mainstream enterprise of key industries. The fields involved in recently are based upon the same starting point, including general aviation, large agricultural machinery, LNG, electric vehicle, and the finance and O2O transaction platform for industrial chain which is currently building with all strength. CMIG and Zongshen share same ideas. So he hopes CMIG and Zongshen could find meeting points and engage in relevant cooperation for mutual benefits and win-win outcomes.
CM New Times: Chairman Zuo, thank you for receiving the interview of CM New Times. Please share with us the development of Zongshen Group in recent years and your outlook on the prospects in the coming years.
Zuo Zongsheng:Zongshen Industrial Group was established in 1982 and after over 30 years of development, Zongshen Group has evolved into a business group with nearly RMB20 billion in total assets. Zongshen Group has been ranked among top 15 of Top 50 Industrial Enterprises of Chongqing Municipality for 15 consecutive years, and been elected to the rank of Top 500 Privately-run Businesses of China, Top 500 Mechanical Enterprises of China, Top 500 Manufacturers of China, and China Top 500 Enterprises. In 2014, Zongshen Group registered RMB17.2 billion in operating receipt, RMB15.6 billion in total industrial output value and US$400 million in foreign exchange earnings.
The development philosophy of Zongshen Group: develop identified hubs, build industry integration network, break three-island chain and enter into new blue sea; development target: realize RMB100 billion in annual sales revenue by the end of the 13th Five-year Plan Period (2020) and step into the era of "Zongshen with RMB100 billion in sales revenue". Zongshen will build a new industrial pattern featured by the joint development of industry, financing and network in the coming five to ten years by centering on the three hubs of "green power hub", "financial service hub of industrial chain" and "O2O transaction hub".
With regard to "green power hub", Zongshen mainly focuses on the following four areas:
First, to develop general aviation and unmanned aerial vehicle (UAV) industry. China's aviation industry is faced with two major opportunities: 1) the gradual opening of low-altitude area. China's low-altitude industry is described as the "last area opened in China" with trillions worth market space. China's general aviation industry is stepping into the fast development period as China's lowaltitude area is opened over time and other industrial conditions are in place; 2) rapid development of UAV field. Zongshen has aimed at these two opportunities and taken them as one of its development directions;
Second, develop LNG industry. The main tasks are to give play to the manufacturing advantage of Zongshen, independently design and produce small LNG deep and cold skid-mounted devices, develop and utilize unconstrained isolated well gas and unconventional natural gas resources in an in-depth way to address the liquidity thereof. In the meantime, Zongshen has made investment in vehicle LNG modification and "gasification of the Yangtzer River" (ship LNG power modification) projects;
Third, develop large complete set of agricultural equipment. The joint venture plants of Zongshen and Minsk Tractor Plant and Gomel Agricultural Machinery Plant, largest central-owned enterprises of Belarus, are expected to commence construction in Hebei and Gansu, China and will mainly produce 150-450 horse power tractors and large complete harvesters;
Fourth, develop electric vehicles. This year, Zongshen will significantly increase t he production a nd s ales volume of low speed electric vehicles through cooperation a nd other means. In t he meantime, Zongshen will s eek to increase t he m arket share of Zongshen Auto's m inibus, big m inibus, m initruck and l ight t ruck powered by l ithium. We will engage i n mergers & a cquisitions in t he f ields of electric m achine, battery a nd electronic control, s eek breakthroughs i n core t echnologies and reserve h igh-end electric vehicle technology.
As for "financial service hub of industrial chain", Zongshen Power, an A-shares listed company, established Zongshen Microloan Company in 2013. Beyond that, we have set up Zongjin Asset Management Company and Zongshen Capital Management Company to conduct financial operations of industrial chain; Zongshen owns multiple private equity funds, including the "Israel Infinity Chongqing Fund" invested in 2011, "Chongqing China-Israel Agricultural Fund" jointly set up in 2014 and "Shenzhen Zongshen Private Equity Fund". The size of first round of fundraising of the three funds have surpassed RMB2 billion. We kept up with the new development trend of Internet finance and became the controlling shareholder of Shenzhen Zongshen Financial Information Service Company in 2014. Zongshen Finance Company in preparation will build the internal "settlement bank" of Zongshen.
The financial investment of Zongshen supports the development of main businesses and opens flexible windows to such emerging industries as Internet, Internet of Things, big data, cloud computing, high-and-new-technology, environmental protection industry and circular economy while ensuring Zongshen's rigid perseverance in the manufacturing sector.
When it comes to the "O2O transaction hub", Zongshen now has 800 "Master Zuo" chain service outlets across China, culminating in a offline service platform covering the entire country. Built on this, Zongshen is making investment in an e-commerce company and an e-exchange to build the largest comprehensive service platform for the transaction of automobile, motorcycle and parts & components, farm machinery and general machinery, develop a complete system with an integration of spot trading market, e-marketplace and mid and long-term transaction market of bulk commodities, and construct an "one-stop" integrated service platform in the Internet era. Based on online and offline platform, Zongshen will phase in an industrial ecological transaction network to serve the real economy in an all-round way.
CM New Times: UAV has sparked wide attention from all segments of the society and Zongshen Group has made presence in this industry. Please tell us the highlights of Zongshen's UAV project and your expectation on the future of the project.
Zuo Zongshen: The development of China's general aviation is significantly lagging behind the United States and other developed economies. According to the data in 2013, the total working hours of general aviation of China were only 591,000 hours, 2.5% of that of the United States. The number of aircraft is 1,519, 0.55% of that of the United States. At the same time, China is largely lagging behind the United States in terms of general aviation operators, number of airports and pilots, which is 18.9%, 1.25% and 5.9% of that of the United States respectively.
The large gap points to huge development space. The Civil Aviation Administration of China estimated that by 2020, the total size of general aviation fleet in China would reach 10,000 and the composite growth rate of the industry would be about 30%. On top of that, driven by military and civil use, UAV industrialization has started in China. Among others, military deployment becomes the general trend while civil use has just kicked off yet with enormous potential. The general aviation industry involves huge industrial chain and is closely linked with relevant primary, secondary and tertiary industries, thus ensuring that sustainable industrial development could maintain a technology-intensive ecological chain, while aircraft manufacturing and operation is in the core position of the entire industrial chain.
Against such a backdrop, Zongshen is certain about the development in the general aviation industry and will make arrangements from the entire industrial chain, covering UAV, UAV power, seaplane operation, seaplane manufacturing, and airspace evaluation and planning design.
The first area to be involved is airspace evaluation and planning design. Zongshen Power became the shareholder of Beijing Hua'an Tiancheng Company in November 2012 which possesses the certificate for the scientific research and production of weaponry and the national second-grade confidentiality unit qualification, and is the national technical support unit for airspace evaluation awarded by the Office of the National Airspace Management Commission. After share participation, Zongshen has worked with Hua'an Tiancheng in completing the development plan of the general aviation industry of Inner Mongolia Autonomous Region, and joined hands with the Government of Banan District, Chongqing in conducting airspace evaluation in the jurisdiction, and engaged in deep communication and cooperation with Gansu, Guangxi, Sichuan and other provinces and regions in developing general aviation industry and conducting airspace evaluation.
The second area is the manufacturing of complete unit of UAV and UAV power. Over the years, the worldwide UAV industry has entered into a period of rapid development. For now, China is home to about 300 UAV operators, but most of them have yet to form scale benefit with product fields relatively scattered. Most of them mainly specialize in providing popular entertainment, experiment and trial, and the technical strength and profitability are relatively weak.
Zongshen Power, a listed company affiliated to Zongshen Group, worked with Tianjin Internal Combustion Engine Research Institute to initiate the TD0 UAV power research & development project in August 2014, which is well-underway at the moment. In April 2015, Zongshen Power signed a strategic cooperation agreement with Qingdao Hong Baichuan Metal Precision Products Co., Ltd. under which strategic cooperation in the fields of research & development and manufacturing of complete unit of UAV and precision parts and components will be conducted by increasing capital and expanding share capital to Hong Baichuan Company, establishing joint venture and other methods. Of course, Zongshen is also pressing ahead with joint capital and cooperation with other well-known UAV companies.
The third area is related to seaplane operation and production. Zongshen Group signed a strategic investment agreement with the world's largest airplane operation company in February 2015, holding 49% of share and becoming the largest shareholder of the company. At this point, this deal is waiting for the examination and approval of the Transportation Department of the host country. Once the transaction is closed, Zongshen will replicate its operation mode in China and promote the development of seaplane operation network in Southern China, Hainan and Southwest China.
In the meantime, Zongshen is engaging in in-depth negotiations with North American manufacturers and planning to build joint venture factory in China to manufacture seaplane.
In a word, after years of exploration and arrangement, Zongshen's layout path of whole industrial chain of general aviation industry has become clearer, which ranges from front-end airspace plan, mid-range overall unit and power platform, to back-end network operation,.
CM New Times: As the sponsor shareholder of CMIG, what's your expectation on CMIG's development in the future?
Zuo Zongshen: CMIG is committed to China's industrial transition and upgrading as well as strategic emerging industries, such as new energy, highand- new-technology, advanced manufacturing, energy saving and environmental protection projects, while the transition and upgrading of Zongshen is built upon the original industries to look for long-period major industries and aim to become the mainstream enterprise of key industries. The fields we're involved in recently are based upon the same starting point, including general aviation, large agricultural machinery, LNG, electric vehicle, and the finance and O2O transaction platform for industrial chain which is currently building with all our strength. CMIG and Zongshen share same ideas. In this case, my expectations on CMIG are as follows:
First, I hope CMIG and Zongshen could find meeting points and engage in relevant cooperation. In particular, Zongshen has accumulated experience in the fields of general aviation, transport equipment and high-end equipment building, which also meet the investment orientation of CMIG. Cooperation is viable and could realize mutual benefit and win-win outcomes.
Second, as a member enterprise of CMIG, I hope we can enter into cooperation with other members through such an enabling platform.
Third, I hope we could access to excellent assets and resources both at home and abroad and expand the business development space through this platform.
CM New Times: Premier Li Keqiang indicated in the Report on the Work of the Government during the Two Sessions that we must work hard to ensure that the economy performs within an appropriate range while promoting economic transformation and upgrading, and maintaining sustainable economic growth. What role should CMIG, the pioneer of private investment, play during China's economic transition and upgrading?
Zuo Zongshen: CMIG is the largest private investment platform in China with a high starting point. I hope it will become the "private version" of the Asian Infrastructure Investment Bank. I think she will accomplish much in the following three areas as the Chinese economy undergoes transition and upgrading.
1. Make investment in strategic emerging industries. For now, developed countries are magnifying respective advantages with a view to seize on and build industrial advantages. For instance, remanufacturing of the United States and Industry 4.0 of Germany will become the catalyst of the new round of economic growth and the driving force of high-end manufacturing. China has successively released a series of plans and policies for strategic emerging industries, including high-end equipment building and Internet Plus. CMIG is advised to take advantage of this opportunity, capture breakthrough points to make large-scale investment, conduct mergers & acquisitions, realize industry-finance integration and grow itself both in size and strength.
2. Integrate with China's "One Belt One Road" strategy. CMIG is expected to expand road for the globalization and joint development of China's private capital.
3. Make a difference in developing mixed ownership economy. To develop mixed ownership economy, we need to give play to the advantage of public and private economy, contribute to economic growth, and allow private capital to take part in monopolized or semi-monopolized industry, thereby boosting the development of the Chinese economy.