Critics of the Belt and Road Initiative say China is exporting its excess construction capacity. The head of China's largest construction materials group says they couldn't be more wrong.
China National Building Material Group (CNBM) is the result of a merger between China’s top two building material companies -- CNBM and China National Materials Group Corporation -- which took place last August. It is mainly engaged in cement, lightweight building materials, glass fiber and composite materials and engineering services, including 15 listed units and having annual sales of 270 billion yuan (38 billion US dollars).
With a resume that includes merging eight state controlled companies and chairing two major SOEs, CNBM chairman Song Zhiping likens the integration to cooking a tasty stew – as opposed to throwing vegetables into a bag.
“We have done a few things: optimize strategy, structure, platform, consolidated the culture, organization, market, international business - a lot has been done to achieve seamless integration. The process has been very good. In the next step, we want to become a first-class industry investment company, I want us to manage the equity of large listed companies,” Song said.
Addressing the suspicion that China is exporting its outdated capacity in the Belt and Road Initiative, Song laughed and said it was the exact opposite: poorer undeveloped countries are demanding newer equipment because they lack the maintenance expertise.
Besides, Song pointed out that it doesn’t make business sense to work with outdated equipment because it lowers productivity.
“We do not dismantle old lines and move them overseas. Not one of them is like this... In our South Carolina glass fibre plant, the equipment is state of the art. Our equipment is sophisticated and cutting edge. We position ourselves in the mid- to high-end segments of the market. We have longer product life, we also offer good value for money. Good quality, less cost,” Song said.
Starting out with product exports, then equipment sales, CNBM is now investing heavily overseas. It has built production lines in 75 countries, including Egypt, Zambia, India, Mongolia and South East Asia.
“We are more welcome locally when we build factories than we export,” Song told CGTN. And that might be the reason why Song has ambitious goals to build factories wherever CNBM has customers.
On the risks of investing overseas, Song admits paying dues in many areas, mentioning legal rules and forex risks particularly.
“Take legal rules, small countries’ laws often change, we need to be sensitive to them and adapt accordingly. Some small countries are forex controlled, no free capital flows, we made a lot of money but sudden currency depreciation means no profit. We have to overestimate risks, like having to build cement factories in 50 degree weather, we have to factor all this in,” Song said.
Song’s vision is for CNBM to go from big to great. If the track record of the quiet executive is anything to go by, the company is on course.