No.12 2015 | www.chemchina.com

Planned revitalization

Smart and honest leader

Refine tactics In this issue of ChemChina’s employees excelling in their performances, the two leaders expanded their companies’ growth by improving tactics, improving their teams' professional quality and professional ability.

Integration with trust China National Tire & Rubber Corp, a tire company under ChemChina, and launched the first phase of a 50-day integration project. 02 FEATURE

Editor’s note: Tactics are a combination of knowledge, method, strategy and experience. In this issue of ChemChina models that excel in their performance, the two people in leading roles expanded their companies’ growth by refining their tactics and improving their team’s professional quality and professional ability. Lan Ning, project manager of Bluestar Cleaning, has continually set new records in contracting industrial cleaning deals. An Chuyu, chairman of Guangxi Hechi Chemical Co, managed to cut losses and increase revenue by all-around marketing and management innovation.

Smart and honest leader

It is difficult to schedule an interview “We had never encountered such strict with Lan Ning, project manager for Beijing requirements and advanced practices,” Lan Bluestar Cleaning. said. He noted all the details of the project “It is my routine to be away on business and practiced them on subsequent con- trips. There were 300 days away one year,” tracts. said Lan, looking guilty as he recalled a At the suggestion of Lan, Bluestar Clean- time when his son treated Lan as a stranger, ing created a safety, health and environ- having seen so little of his father. ment system and now operates much more However, Lan takes great pride in his carefully. achievements. He has contracted industrial “We should sum up good methods quickly cleaning deals worth 60 million yuan since and apply them to our work. All these good 2008. He successfully negotiated an LNG habits will turn into our corporate culture cleaning deal in Turkmenistan, the compa- and behavioral norms,” Lan said. ny’s first in an overseas market. He also beat the world-leading oil service company Bak- Quality always counts er Hughes and won a deal for natural gas Lan defines himself as an introvert. “I’m purification from oil giant Chevron. not good at expressing myself. I try to win Lan, who is an awkward conversation- our customers’ trust by improving technol- alist, achieved these major deals through ogy and knowledge,” he said hard work and integrity. His customers view Lan as reliable and honest. If he thinks some equipment does Learning from best practice not need cleaning, he tells the customer so. Industrial cleaning was the first busi- “We don’t earn the money we shouldn’t,” ness for ChemChina, the parent company Lan said. The motto of Bluestar says, “The of Bluestar Cleaning and now a Global For- quality of a person manifests the quality of Lan Ning tune 500 company. Ren Jianxin, chairman a product”, and Lan believes thinking from project manager of ChemChina, started the industrial busi- the customers’ perspective leads to long- Beijing Bluestar Cleaning ness in 1984, together with seven young term relationships. Since 2008, Lan has secured deals of colleagues and with the backing of a 10,000 An ethylene project in Sichuan is a good industrial cleaning worth 60 million yuan yuan loan. example. The project was a small one, val- and negotiated a LNG cleaning deal in When Lan came to Bluestar Cleaning af- ued at hundreds of thousands of yuan, but Turkmenistan, the company’s first in an ter graduation, he was deeply touched by was very complicated. The project had five overseas market. Ren’s entrepreneurship and worked hard engineering companies that then trans- for his company. ferred the contract to several separate com- When Lan was involved in his first big panies. When Lan tried to bid for the indus- project, a cleaning project at Kodak’s Xia- trial cleaning contract, he had to talk to a men Plant, he was surprised by the plant’s number of companies to learn the details of high standards on quality, health and safety. the project and discuss the cleaning tech- “It completely opened my mind,” Lan nologies applicable. For such a small pro- said. Previously, it had been usual for Blue- ject, he had to work many long nights and star to discharge liquid residue onto the prepared the bid for half a year. His efforts ground after cleaning, which was not ac- paid off. After the first project, Lan got lots cepted by Kodak because no such leakage of subsequent contracts from the project was allowed. Kodak also has strict require- because of his hard work and professional- ments on staff wearing personal protective ism. The total value of all the contracts was equipment. 18 million yuan. 03

Planned revitalization

Hechi Chemical Co Ltd is a ChemChina performances. It was hard to implement subsidiary located in a mountainous area such a measure in a former State-owned of the Guangxi Zhuang Autonomous Re- company but An managed it. gion. The company was once in the spot- light when it went public in 1999 and acted Frugal management as an important capital platform for Chem- An, who used to be responsible for the China, but its former luster has gone. The centralized purchasing system for Chem- company had 3,000 employees at its peak, China, knows better than most the benefits but now has only 1,000. Much of its equip- of bulk purchasing. By using the parent ment has been in service longer than it was company’s purchasing platform and buying designed for and the technology is out of from producers rather than agents, An cut date. It earned revenue of 550 million yuan the cost of the company’s coal by 6 million last year but posted a loss of 390 million yuan in his first eight months. yuan. He also stipulated more strict procedures An Chuyu, a young man from Beijing, to reduce wastage of coal during transpor- had a heavy burden when he took the helm tation, warehousing and processing. By of the company a year ago. improving technology and executing new procedures, coal wastage reduced from 10 Carrot and stick incentives percent to 5 percent. At half past four every afternoon, em- On equipment purchases, An tried to find ployees gather around a blackboard near inexpensive but good machines as some of the gate of the plant. People stretch their the company’s counterparts closed up shop necks looking for their names and numbers and sold their equipment. For example, the on the board, as those numbers means dai- company spent 270,000 yuan to buy some ly bonuses. new compressors valued at 4 million yuan When An came to the plant, the scene when the owner closed business in April. An Chuyu was very different. Few employees seemed An also set up a bidding committee for chairman to care about their work and many were purchasing bulk commodities. In his first Hechi Chemical Co Ltd considering new jobs. An realized he need- eight months, purchasing through bidding An managed to cut costs and increase ed to stimulate enthusiasm in the employ- totaled 25 million yuan, saving 2 million revenue with his marketing and management ees. yuan. innovations. As his first step, he encouraged energy saving. Based on the consumption of coal Humbling salespeople for every metric ton of urea produced, he The company faced more pressure when announced everyone would receive a bonus other urea producers began to focus on the when the consumption dropped. Guangxi market last year. Some large dis- When An saw an accountant shaking tributors chose the new producers rather hands with a machine operator and saying than Hechi Chemical. “We were worried. It thanks for the bonus, he knew the plan had was a crisis of survival,” An said. worked. Staff members began to care about An led his sales department to the coun- costs and take care during production. tryside, where they talked to farmers and The consumption of coal per ton of urea visited small distributors. Small farm sup- dropped by 1,352 kilograms in the first plies stores in the village became their pri- eight months, which cut the total cost by ority and the salesmen had to visit more 130 million yuan. Bonuses during the same customers. After one year, the company’s period totaled 3.79 million yuan and the sales volume rebounded although the sales- average income increased by 50 percent. men had to do more work. Cost-cutting became the word of mouth for Facing the new market situation, An de- all employees. cided to encourage all staff to become sales- With everybody happy about their bo- people, and announced that all employees nuses, An implemented his second step — would earn commission on their sales. The punishment. He knew he could not achieve 1,000 employees tried to sell urea through the desired revitalization only by means of relatives, friends and the Internet. In the bonuses so decided to further enlarge the first eight months of the initiative, sales in- income gap by penalizing those with bad creased by nearly 28 percent year-on-year. 04 FOCUS

ChemChina stresses trust and respect in integration with Pirelli

On the morning of Oct 20, ChemChina for F1 racing cars. Its tire products outper- Chairman Ren Jianxin was appointed chair- form its rivals in terms of speed, maneuvera- man of Pirelli, signaling ChemChina’s con- bility, safety and reliability. trolling shareholder status in the highly rec- For ChemChina, revitalizing an interna- ognized tiremaker. tional brand with a brilliant history involves Ren said in a letter to Pirelli employees great integration. On Nov 17, ChemChina’s that “in the merger of the Pirelli industrial tiremaker China National Tire & Rubber Corp tire business and the China National Tire & and Pirelli launched a meeting to discuss in- Rubber Corp, we see an extraordinary oppor- tegration to kick off the first phase of a 50-day tunity to double the output of industrial tires. integration project. CNRC General Manager We will establish a leading growth pole in Bai Xinpin welcomed the 20-member project emerging markets and play an important role team from Pirelli. in implementing the ‘Made in China 2025’ Marco Tronchetti Provera, the former strategy”. chairman and now executive vice-chairman Founded in 1872 in Milan, Italy, and listed and CEO of Pirelli, gave a briefing about Pire- in 1922 on the Milan Stock Exchange, Pirelli is lli’s plan. Giovanni Pomati, who is in charge a multinational company with a history of 140 of the integration team, introduced the struc- years. It ranks fifth among global tiremakers ture, responsibilities, working procedures and in revenue and first in the high-end tire mar- detailed plan for the first 50 days of the in- ket globally. Among its original equipment tegration process. Yang Xun, CNRC chief op- manufacturing revenue, 70 percent comes erating officer, introduced the support team from high performance tires used in middle- from CNRC. and high-end passenger cars. Ren stressed that Pirelli is a symbol of first- Currently, Pirelli is the exclusive supplier class quality and service in the world. The

merger between the CNRC and Pirelli must boost the competitiveness of both sides. He believed Pirelli’s brand, management team and technologies, through integration, would help ChemChina’s tire business expand. Ren said he is confident in the integration between the CNRC and Pirelli and called for all sides, including branding, marketing and sales, technologies and production, to work cohesively. He asked the CNRC team to em- brace the integration process and realize that there is a gap between the company and Pire- lli. He also called on the Pirelli team to point out problems without hesitation. As part of the first phase of the integration process, a Pirelli team of eight traveled to Qingdao Yellow Sea Rubber Co, a subsidiary of the CNRC. Yellow Sea Rubber has 9 special groups to handle its integration. On Nov 19, the general manager of Yellow Sea introduced the com- pany’s development history, operations, man- agement and future plan to the Pirelli team. They decided on a group structure and work focus for the next step of integration. 05

Integration creates value the merger to be the first in the tire industry to have a long-term strategy, to foresee the In 2014, there were 107 cars for every 1,000 to reach the goals of “Made in China 2025”. future of the company,” Ren said. people in China. In 2024, it is predicted that The integration will split Pirelli’s high-end Adisseo, for example, was acquired in there will be 257 vehicles per 1,000 people. car tire business and truck tire business. Af- 2006, and its revenues have since quad- The auto industry is also quickly develop- ter the integration, Pirelli will focus more fo- rupled, with its EBITDA rising around 12 ing hybrid, electric and clean energy cars. It cus on high value-added car tires and bring times. ChemChina acquired Qenos in Aus- is easy to see how the market will undergo better experience for consumers. Its truck tralia, a leader in the production of polyeth- profound changes and how new technologies tire business will merge CNRC’s and tap ylene that has internationally leading prac- will accelerate the renewal of the car, which into new business opportunities in emerging tices in safety, health and environment. In presents an opportunity for the tire industry. markets like Asia. 2011, ChemChina acquired Elken of Norway, At the recent United Nations conference, “This opportunity will allow us to double which has helped ChemChina manage and President Xi Jinping made a commitment to volumes in the industrial segment through turn around five plants in China through lower China’s carbon dioxide emissions by the merger of Pirelli’s business and the tire the Elken business system, a lean manufac- 45-50 percent by 2020. The government has activities of the CNRC,” said Ren. turing management system. REC Solar, ac- established incentives for new-energy car quired earlier this year, has already seen its purchases, which will increase demand for ChemChina’s internationalization third quarter sales increase by 40 percent high-quality tires that can help the owners Economists expect the merger to have a year-on-year. save on gas or electricity. 25 percent chance of success and a 75 per- To ChemChina, the keys to a successful Here at ChemChina, we think we will cent chance of failure, though ChemChina integration are respect, trust and empow- achieve great results thanks to China’s “Made has carried out seven M&As before its ac- erment of the management. Another fun- in China 2025” plan, which is similar to Ger- quisition of Pirelli and they have all been damental element is cultural integration, many’s Industry 4.0 strategy, because the successful. which is about understanding and respect- policy provides incentives for innovation. As To be successful in international alliances ing different cultures. the world also understands the importance and investments, it is important to keep in For the past 25 years, ChemChina has held of innovating manufacturing, the marriage mind the industrial strategy of the company the Bluestar International Summer Camp of Pirelli and the CNRC will bring techno- rather than just capacity or size. that has been attended by the children of logical improvement as well as brand and “You cannot simply add together produc- employees from around the world. Ren has manufacturing excellence that will enable tion capacity or market presence: you need attended the camp every year. 06 UPDATES

ChemChina launches e-commerce platform project Chemchina-supplied train passes major test ChemChina has launched off a pilot pro- project selected ChemChina Petrochemical ject called ChemChina E-commerce Plat- Co Ltd and its four subsidiaries — Shan- A Chinese electric multiple unit form. Based on China’s Internet Plus strat- dong Changyi Petrochemical Co Ltd, Shan- train reached a speed of 385 kilome- egy, which seeks to create economic growth dong Huaxing Petrochemical Group Co Ltd, ters per hour in a high-speed test on by integrating Internet technologies with Zhenghe Group Co Ltd and Zhonglan Petro- Nov 18. The train is equipped with manufacturing and business, this project chemical Corp — to establish the platform. hose assemblies supplied by ChemChi- aims to accelerate the company’s transfor- The first phase of the project began in No- na’s Nanjing 7425 Rubber and Plastics mation from production-oriented manufac- vember this year. An online test run is sched- Co Ltd. turing to service-oriented manufacturing, to uled for June 1, 2016. Passing the test was a major step integrate its traditional business model with By learning from the best practices of before the train officially goes into op- the emerging Internet industry and to estab- the industry and working within the busi- eration. The test was conducted in a lish a highly efficient commercial system and ness and operation models of the company, number of tough rail conditions, such innovative commercial model. the project will plan, design and develop a as on bridges, in tunnels and on slopes At its launch meeting, the project team, self-contained e-commerce platform with and turns connecting Datong in North composed of the company’s information the ability to provide “one-stop trading and China’s Shanxi province, with Xi’an, center and several well-known technology whole-procedure service”. It aims to develop the capital of the northwestern prov- and consultation suppliers, reported the pro- the platform into the most influential e-com- ince of Shaanxi. gress, purpose, scope, content and strategy merce trade and service platform in the Designed and manufactured by CSR of the e-commerce platform, and made spe- . Qingdao Sifang Co Ltd, China owns cific arrangements about forthcoming tasks. ChemChina General Manager Yang Xing- the intellectual property rights to the The e-commerce platform will develop a qiang said it’s important to have a self-con- train. Nanjing 7425 Rubber & Plastics comprehensive platform for the diversified tained platform to enhance the core compet- Co Ltd provided its hose assemblies features of the company and for the chemical itiveness of all sections, improve operational at the end of last year and the train industry. As the first phase of the develop- and management levels and develop core rolled off production lines in June. ment of the e-commerce platform, the pilot businesses.

Shenyang Chemical surpasses energy- conservation target

Shenyang Chemical Group saved more than 25,000 metric tons of coal this year, easily surpassing its annual target, by intensifying its management of operations and continuing to im- prove its efficiency. By upgrading its equipment for ion film electrolysis, the company saved 1.8 million kilowatt hours. Improve- ments to 10 technological devices also cut the use of steam by over 20,000 metric tons. Other technical improve- ment reduced the use of water by over 500,000 tons. The company also intensified its evaluation of employees’ performanc- es in the consumption of water, elec- tricity and steam, helping the compa- A salesman from Huaxing Petrochemical ny surpass its yearly target for saving Group Co Ltd talks to a client about trans- energy. portation safety in cold winter conditions. 07

China National Tire and Rubber suppliers focus on buying in bulk

China National Tire and Rubber Corp re- gan its bulk procurement operations in 2014, cently opened a seminar for its natural rub- with support from ChemChina’s department ber suppliers to focus on the application of of commerce and cooperation with its sup- bulk procurement. China National Tire and pliers. Rubber Corp Chairman and General Manag- China National Tire and Rubber Corp re- er Bai Xinping and Chief Operation Officer cently completed its acquisition of globally Yang Xun attended the seminar. recognized tire brand Pirelli and has begun While growth in the tire industry is slow- its integration with the manufacturer, which ing amid fierce competition, there is an over- will improve its competitiveness internation- supply in natural rubber and a drop in prices ally. Pirelli’s procurement director presented for the resource. the company’s procurement management at China National Tire and Rubber Corp be- the seminar.

China Reform visits Adisseo plants in Spain Shenyang Paraffin-wax Chemical holds a China Reform Holdings Corp, an invest- perts in feed additives. The group relies chemical leak safety drill. ment firm that participated in Bluestar’s ac- on its seven research centers and its pro- quisition of Adisseo, visited Adisseo’s plants duction sites based in Europe and China in Spain recently. to design, produce and market nutritional China Reform Holdings, which gave a high solutions for sustainable animal feed. With rating of the performance of Adisseo and its 1,800 employees, it serves more than 2,600 management, said Adisseo is one of its best customers in over 100 different countries Sales for investments and promised to increase in- through its global distribution network. In vestment in R&D and new business. 2014, Adisseo achieved a turnover of more Changyi soar 32% Adisseo is one of the world’s leading ex- than 1.2 billion euros. this year

Sales this year for Shandong Changyi Pet- rochemical Co Ltd until Nov 12 shot up near- ly 32 percent. Because of a greater number of products and improved sales policies, its sales revenue jumped to 21.82 billion yuan. The company shifted its business outlook from products to customers this year. By increasing interaction with customers, the company can focus on products and servic- es based on a customer’s need. For example, the company plans to launch China V diesel, a cleaner diesel, in December in response to customer demand. Based on its market research, the compa- ny shifted it sales strategy to make Shanghai and Nanjing high-end markets, increasing sales of cleaner gasoline. The company also increased sales with an e-commerce platform in cooperation with Alibaba and WeChat. By uploading its products on Bohai Commodi- ties Exchange, the company managed to gain higher bidding prices.

Employees at Adama’s representative office in Beijing watch videos telling sto- ries about ChemChina’s employees who excelled in performances in 2014. 08 AROUND CHINA

China’s currency takes major step forward

The reached a new milestone that the gradual accumulation of assets on its journey to becoming a global cur- globally will lead to a greater issuance rency on Nov 30 when it was included of yuan-denominated bonds, particular- in the International Monetary Fund’s re- ly sovereign and quasi-sovereign bonds. serve currencies basket. This, in turn, will encourage more over- Economists say the decision, although seas issuance of renminbi bonds, while initially symbolic, will have long-term yuan-denominated assets would become global implications as China continues to more available overseas, he said. ease controls on its currency and capital This year, the People’s Bank of China, markets to meet its new responsibilities. the central bank, issued its first offshore The IMF decision “is a symbol of where renminbi bonds in London, a major step the currency is already at and will give a in the currency’s internationalization. push to where the currency will be used in Malcolm said the depreciation of the terms of trade and central bank reserves”, yuan was a demonstration of greater flexi- said Mark Boleat, policy chairman for the bility and that the new exchange rate was City of London Corp. made as a response to market forces. Duncan Innes-Ker, regional editor for In August, the yuan depreciated by Asia at The Economist Intelligence Unit, about 3 percent against the dollar. likened it to “an athlete winning a medal”. Because the CNY (onshore) exchange “The winning of the medal is a sym- rate is more controlled than the CNH bolic event, but the benefits for the ath- (offshore) rate, the central bank made a lete’s performance and body come from change to the CNH rate as a guide to bring the hard work done in the run-up to that weightings of their foreign currency hold- the CNY rate more in line with the true achievement.” ings, including sovereign wealth funds,” market-driven rate, Malcolm said. The IMF created its basket of special she said. “Countries that export energy “The adjustment was also a demonstra- drawing rights, supplementary foreign to China, such as Russia and the Middle tion for the IMF to see China has a more exchange reserve assets, in 1969. The as- East, will adjust their renminbi reserve open structure in reacting to market forc- sets can be exchanged among members as holdings to support the private sector, as es. The SDR inclusion will be expected to freely usable currencies in times of need. the new weighting will be a better reflec- lead to a closer alignment between the The fund’s executive board reviews which tion of their trade relations with China.” onshore and offshore renminbi exchange currencies to include every five years. She expects to see China further ease rates.” From Oct 1, the renminbi — commonly controls on its bond market and stock The decision to include the renminbi referred to as the yuan — will become the market, opening them up more to foreign was made with three main points in mind, fifth currency in the basket, joining the players, as well as allowing more Chinese he said. The first was quantitative, how dollar, euro, yen and pound sterling. to invest abroad. much of it changes hands internationally; IMF Managing Director Christine Foreigners can currently access Chi- the second was to what extent the curren- Lagarde described the Nov 30 decision na’s markets only if they are a qualified cy is freely usable; and the third was the as an “important milestone” in the inte- foreign institutional investor or renmin- operational practicality of using the cur- gration of the Chinese economy into the bi-qualified foreign institutional investor, rency overseas. global financial system, and “recognition or if they buy through the Shanghai-Hong According to research by Linklaters, of the progress Chinese authorities have Kong Stock Connect. Carr says QFII and China’s currency has already achieved made in reforming monetary and finan- RQFII quotas should be increased to allow some measure of convertibility in 37 of cial systems”. more access, while extending the Stock the 40 capital account items on the IMF Within the basket, the renminbi will Connect to Shenzhen next year should list, although in most cases subject to have a weight of 10.92 percent, while the help reduce China’s market controls. continuing quotas, qualifications and dollar will take up 41.73 percent, the euro European companies will be encour- registration requirements. Although the 30.93 percent, the yen 8.33 percent, and aged by the IMF decision, said Alain renminbi is not “freely convertible” in the the pound sterling 8.09 percent. Le Couédic, partner and vice-president Western sense, it should be remembered Miranda Carr, senior analyst at Haitong of Roland Berger Strategy Consultants that China’s goal for now is “managed Securities, said the renminbi weighting Greater China. convertibility”, Malcolm added. displays the IMF’s faith in the currency. “It shows companies that more reforms Initially, her team had expected a 5 per- are to come, which is a positive signal. cent weighting that would gradually in- European companies hope China will con- crease to 15 percent as China implements tinue to open up its currency while main- necessary reforms. taining the currency’s stability.” For more information about “The immediate implication would Andrew Malcolm, head of Linklaters’ ChemChina Newsletter, be for global institutions to adjust the capital markets group in Asia, predicts please contact [email protected]