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Leadership throughout the crisis
By Ren Jianxin (chinadaily.com.cn)
Updated: 2009-05-10 08:58 Editor's note: Ren Jianxin, president of ChemChina, divulges his perspective on the current ongoing financial crisis and the need for corporate leadership during the economic turmoil on the 5th anniversary of the founding of the company. May 9 marks the fifth anniversary of the founding of ChemChina. The past five years have been an extraordinary time for the company. It has seen it enjoy a rollercoaster ride of development and consolidation. During these five years the total assets of ChemChina increased from 22.96 billion yuan to 156.9 billion yuan while its prime operating income jumped from 15.2 billion yuan to 122.6 billion yuan, rising by 5.9 and 7 times respectively since its founding. Meanwhile, the total profits of the company have grown almost a dozenfold.
To date, ChemChina is ranked 19th amongst the top 100 chemical companies in the world, 28th among the top 500 Chinese companies and No 1 among all the Chinese producers of chemical raw materials and chemical products. The company was recently recognized by the senior officials of the Chinese Central Government to "have achieved outstanding leap-forward development" — high praise indeed, and something we should all be proud of. However, the past five years have been far from plain sailing for ChemChina. They were years in which we needed to surmount numerous difficulties and scale record-breaking heights. During these years, we were focused on strengthening our core businesses and raised 32.3 billion yuan to complete 85 key construction projects. During this time, we adhered to the strategy of internationalization and successfully acquired four overseas businesses, including Adisseo in France, Qenos in Australia and the organic silicone business of Rhodia in France. We then integrated the acquired businesses with the company's existing businesses in advanced chemical materials. We additionally introduced, into BlueStar, strategic investment from US-based Blackstone through a process of overall restructuring. During the last five years we persevered in scientific and technological innovation and mobilized significant resources to achieve breakthroughs in a number of projects. These included pioneering projects under the state's "11th Five-Year Plan (2006-10), the 863 Projects, key specialized R&D programs and other projects in energy conservation and emission reduction. More than 600 research findings passed authentication checks and 148 won provincial or state-level awards for scientific progression. To date, ChemChina is ranked the 4th among all the central state-owned enterprises in terms of the number of patents owned. While experiencing rapid expansion and development, we also come across difficulties and have to face new and tougher challenges. For instance, compared to global leading chemical producers, who generally have no more than four business units, ChemChina, in spite of its painstaking restructuring efforts, still has six business units, which makes us obviously over-stretched. In introducing global best practices, continued structural adjustment is a test on our resolution and responsiveness. In terms of IT construction, an over-complex human resource structure and the shortage of skilled personnel have proved to be the bottleneck for management transformation. Safe production and environmental protection have historically been weak for us, while "chemical production equals pollution" in some ways remains part of the reality for us. As such, we still have a long way to go to meet our objective of energy conservation and emission reduction. Worse still, the sudden onslaught of the financial crisis presents yet another challenge for us: prices are falling, facilities are running at half capacity or closed temporarily and plants are struggling to break even. All of this will indeed test our resolve. The questions being asked are "Is ChemChina strong enough to withstand the global financial turmoil and what are the prospects for ChemChina?" A global crisis of this magnitude is not only a tough test of the resilience of the company it also promotes changes in the industry. How can we, having battled forward amidst intensive competition, answer the call for change? To seek changes in a difficult situation is our abiding philosophy. However, it is always easier said than done. The global financial crisis, at first glance, appears to be the result of the "bubble bursting" in the financial and real estate sectors. However, it is my belief, that what we are witnessing is symptomatic of a loss of direction for the global economy as a whole. In an unbalanced global economy, investment, albeit ample, suffers from a blurred sense of purpose while innovation lacks source and impetus. In fact, ever since the end of the 18th century, every wave of economic boom comes with a landmark in innovation. For instance, the first economic boom was marked by the advent of the spinning machine and the steam engine; the second and third booms came with the appearance of steel and railways, electrical, chemical and automotive industries respectively. These were swiftly followed by the coming of the automobile, computer, information and biotechnologies, which heralded the last two waves of great economic prosperity. Commercialization of technological progress and the deepening of the division of labor constitute the driving force for the global economy. However, today when the workshops like China are running at full steam and nearly two decades after western consumerism, typically represented by the US, began to prevail, the world should be suffering dearly from the imbalance between real and virtual economies, sluggish market demands and lack of traction. Until now there has been no obvious strong point of economic growth capable of contributing to wide scale employment and active consumption. Yet, as I witness all the financial bail-outs of the money-hungry companies responsible for the crisis, I can only believe that the world economy, once it emerges from this crisis, will find new sources of growth. As Keynesian theory suggests, consumption is "the obvious end and object of all economic activity", and we can be sure that there will never be an end to human consumption. (For more biz stories, please visit Industries)
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