Song Zhiping Interview: Why Do Chinese Enterprises Go to the United States to Build Factories?

Wangwang think tank: In recent years, the manufacturing industry in the United States has returned. Since Trump was elected president of the United States, more tax reforms will be implemented to attract global enterprises to the United States. How do you think about the future development and confrontation of the manufacturing industry between China and the United States?

Song Zhiping: The United States has suffered losses in the course of economic development in the past few years. It once over-developed the virtual economy and excessive financial innovation, which triggered the financial crisis in 2008. After the financial crisis, the United States summed up the lessons and found that the real economy is very important as the foundation. The United States is not a small country like Luxembourg, the development of funds and other financial industries can, the United States has a huge consumer market, if there is no real economy, its foundation is gone.

Therefore, the United States reflected on the financial crisis and proposed to return to industry. In fact, not only the United States, including Europe, has reflected on the virtual economy and the excessive innovation of financial derivatives, but also proposed re-industrialization. History is always compared with each other in the process of repetition, and gradually changes, so is the United States.

As for the global economic balance, Stephen Roach, a senior professor at Yale University in the United States, wrote a book called Economic Rebalancing two years ago. The core idea is that the global economic balance depends on the economic balance between China and the United States. He believes that there were two problems in the past. One is that China shipped a large number of products to the United States. The other is that the United States issued a large number of treasury bonds to China, which is equivalent to the United States using Chinese products and spending Chinese money at the same time. He believes that this is unsustainable. He believes that the solution is that China should not rely too much on the U.S. market, expand its domestic demand, and the United States should not rely too much on Chinese products, but should speed up its real economic development. He believes that in the future economic balance between China and the United States, whoever recognizes this first will succeed.

In fact, I think both China and the United States are aware of this problem. The United States is revitalizing its real economy, and China is also trying to expand its domestic demand market. But this is not a problem that can be solved at once, and it will take five to ten years to reach a balanced state slowly.

Wangwang think tank: Not long ago, Cao Dewang pointed out that the cost of China's manufacturing industry is high. Many people think that Cao Dewang went to the United States to build a factory, which is called "Cao Dewang ran away". Some enterprises under China Building Materials also went out. What do you think of Chinese enterprises investing overseas?

Song Zhiping: I don't think so. It is inevitable for Chinese enterprises and Chinese industry to build factories in the world, not which conditions are good or which conditions are not good.

For example, China Jushi's products are very popular in the United States, but the cost of transporting them from China to the United States is very high. In order to consolidate our market in the United States, we need to build factories in the United States.

Not long ago, I had a meeting with a person in charge of Owens Corning Company in the United States. Our two companies have a joint venture special fiber project in Taian, China. At that time, he also asked this question, why do we want to go to the United States to build a factory? Zhang Yuqiang, president of China Jushi, told him that just like you build factories in China, we also have a market in the United States, and we go to the United States to build factories to serve our American customers.

What he said is very common but profound, because Chinese products have been exported to many countries after years of export-oriented economic development, and the next step will be to build more factories overseas to consolidate and develop overseas markets.

In the past, China was the world's factory, raw materials and markets were outside, and processing sites were in China, which was only the first stage. Now in the second stage, the whole world is China's factory, and China wants to open factories all over the world. This is also a historic leap forward in China's reform and opening up in the past 30 years. This is a big rule. No matter what the domestic industrial policy is, we can't build all the factories in China, which is also illogical. We should build factories in the nearest place to the market, especially in countries where market demand is close to the origin of raw materials, which is a major development trend.

Japan is a big manufacturing country, and after building factories all over the world, it has changed from focusing on GDP to GNP, from focusing on GDP to GNP. I think China is also making this progress. It is not that China's environment is not good, nor that foreign countries' environment is better than ours. This is the law of economic development.

China Jushi's investment in South Carolina is indeed an enterprise's investment behavior, but if we look at the general trend, the trend of Sino-US economic relations and the growth of Chinese enterprises, China is moving from acting as the world's factory to making the world China's factory, and China's economy is gradually moving from GDP to GNP. The behavior of this enterprise is actually a spray in the whole tide.

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International production capacity cooperation is a future direction .

Wangwang think tank: Many domestic enterprises have invested and built factories in developing countries, and some Chinese building materials enterprises have moved to developed countries. Take China Jushi as an example, the United States is the birthplace of glass fiber, and was once the world's largest producer and consumer of glass fiber. The local people think that this is to build a factory on the territory of the biggest rival. How do you consider this?

Song Zhiping: There are many enterprises in China, and most industries have excess capacity. Where are so many technical equipment and manufacturing capacity in China? We have adopted international capacity cooperation, which is also a direction for the future development of our enterprises.

We should focus on increasing investment in developing countries along the "the Belt and Road", but if there is an opportunity, we will also seek to invest in moderately developed countries and developed countries. China Jushi built a large glass fiber base in Egypt a few years ago, and now the third phase of construction has been carried out, which is our benchmark enterprise in the "the Belt and Road". Now the return of the United States to industry and the re-industrialization of Europe also need to carry out some industrial projects, Chinese enterprises are very competitive, fully capable of entering these so-called mature markets. These mature markets need to make up for the lesson of the real economy, which is also an opportunity for China to carry out international capacity cooperation.

Moreover, compared with developing countries, developed countries have relatively stable political situation and low exchange rate risk. In some smaller countries, the money earned is the local currency, and the foreign exchange control is strict. Once depreciated, the money earned will be wasted overnight. In terms of investment, each country has its own advantages and disadvantages, and enterprises should also make a comprehensive analysis.

Now that China's industry is moving towards the middle and high-end, our enterprises should not only focus on those developing countries, but also enter the moderately developed countries or even developed countries, so China's building materials have also entered some manufacturing fields in the United States and European countries. At that time, Toyota and Honda of Japan built factories in the United States. With the improvement of China's industrial level, Chinese enterprises will also occupy a place in the manufacturing industry of the United States.

The United States is such a developed country, and its economic development is not balanced. For example, South Carolina is an economic region in urgent need of development, so South Carolina has great enthusiasm for overseas investment. The governor has come to China many times to attract investment. China Jushi's project in South Carolina also has very good conditions, including land prices, natural gas, power supply and gas supply conditions. The other party has built natural gas stations and substations at the gate of the plant, and has promised a tax rebate of $100 million in the next ten years. These are all very good conditions.

In the process of returning to industry and re-industrialization in the United States and Europe, our country's enterprises producing high-end and high-end products have great opportunities, and we should seize this opportunity. We are not simply transferring excess capacity. When it comes to international capacity cooperation, people will think that you are transferring low-end capacity. Our project in South Carolina is a very advanced production line, which also shows two problems. First, Chinese enterprises can now achieve first-class level. Second, going to the United States is like going to the international arena with the best equipment. Jushi of China recently invested in a 400,000-ton intelligent base in Tongxiang, Zhejiang, and selected the intelligent control system of the German SIEMENS through global bidding. In our international production capacity cooperation, we do not rigidly adhere to all domestic equipment, just like the project in South Carolina, the equipment adopts global bidding, who is good at using who, to ensure the best technical level.

In fact, building factories abroad can also reduce the impact of trade protectionism on us. In recent years, the United States and the European Union have been dumping Chinese enterprises at every turn, which has made us lose many of our original markets. Trade protectionism holds that a large number of products enter the United States, impacting the American market, affecting American enterprises and affecting American employment. All America cares about is jobs.

Wangwang think tank: We also understand that the United States is different from China in attracting investment. The United States pays special attention to employment and does not pay much attention to GDP indicators. It is said that your project in South Carolina can bring 400 jobs to the local area.

Song Zhiping: In a country like the United States, not to mention the employment of 400 or 40 people, they all see it as very important. We were quite surprised at this point at the beginning. Attracting investment in the United States is not about how much investment, how many products are sold, but about how much employment, because if there is no full employment, there will be political problems. Some state governments in the United States put employment first.

The return of the United States to the real economy is largely based on increasing employment, so this should be taken into account in the process of economic rebalancing between China and the United States.

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Pursue green production and transformation development, and be a thorough environmentalist .

Wangwang think tank: Cao Dewang, for example, said that the profit of making factories in the United States is higher than that in China, the land in the United States is basically free, the electricity price is half of that in China, and the natural gas is only 1/5 of that in China. In addition, China has high taxes, high transportation costs, high financing costs and so on. How do you view the pressure of excessive costs on the manufacturing industry?

Song Zhiping: Our country is also vigorously supporting the real economy. The country is very concerned about the development of the real economy, including tax cuts for the real economy, reducing various expenses, and so on. They have begun to tilt towards the real economy. I think there is a consensus on reducing the pressure on the real economy. Not only Cao Dewang has seen this, but many people, including the government, have seen this. Policies are also tilting in this direction.

The business of China National Building Material Group is a very real economy, including cement, glass, glass fiber, new building materials, etc. In the past few years, we have indeed paid a lot of taxes to the state, paid a lot of interest to banks, and made a high contribution to society.

I have reported to the leaders concerned before that if our interest rate can be lower, tax revenue can be further reduced, and enterprises can accumulate more, enterprises can use these accumulations for reinvestment, which will be better for enterprises. If the real economy is too bitter, it will lead to two problems, one is that the real economy lacks the ability to reinvest, the other is that new investment is not invested in the real economy, but in the virtual economy, which will lead to the hollowing out of the real economy. This is what happened in Japan, the United States and Europe.

Fortunately, we realized this problem earlier. Now, while the real economy is not seriously shrinking, we should give some support to the real economy, including arming the real economy with intelligence, which is not only a guarantee for economic development, but also a solid foundation for other virtual economies.

The development of China's real economy also needs transformation, which needs to be transformed to the middle and high-end or high-end, rather than to develop the middle and low-end overcapacity and the backward real economy, and not to develop a lot of backward capacity under the guise of developing the real economy.

Outlook think tank: The glass, cement and other industries under China Building Materials are considered to be relatively surplus industries, which are associated with haze and surplus. What experience do you have in the transformation and upgrading of these traditional industries?

Song Zhiping: Our country is still a big construction market today. You will see that the whole country is engaged in construction. Cement needs 2.4 billion tons a year, and steel demand is about 700 million tons. These are astronomical figures. Construction is impossible without these raw materials, just like food can not be separated from flour and rice. Steel and cement are still necessities for our large country with a population of 1.3 billion.

Look at our country's housing construction, if you only look at Beijing, you will find that Beijing's houses are not enough, and then go to the second and third tier cities or rural areas to see, China's rural areas have 30 billion square meters of rural housing area, neither earthquake-resistant nor energy-saving, nor comfortable, transformation can no longer use traditional red bricks, we have to use new building materials. Rural villages also need roads and so on, so from this point of view, the building materials market is still very large. I sometimes joke that "Ma Yun is doing the Internet economy, but the house Ma Yun lives in must be made of building materials".

The severe haze in recent years has taught us a lesson, which makes us seriously reflect on how to develop the real economy. I am a thorough environmentalist. At the World Climate Conference in Paris two years ago, I delivered three speeches there to let the world listen to the views of Chinese entrepreneurs on climate issues. I believe that through hard work, economic development and environmental protection can be achieved at the same time. Now we think the most expensive thing is the house, which is made of cement and steel. On the one hand, we hate the haze caused by the production of steel and cement, on the other hand, we can not do without the building materials such as cement and steel. For Chinese building materials, we are doing two things, one is that we produce a large number of energy-saving building materials to reduce the energy consumption of buildings. Second, the production process of building materials is green. Now our cement plants have dust removal equipment, electrostatic dust collection and bag dust collection twice. The factory does not smoke. You think it is not in production, but it is in production. Factories are also equipped with desulfurization and denitrification devices, and we pursue near-zero emissions.

China Building Material Group has a blue sky action plan, and we have a lot of investment in the environmental protection of the factory every year. The cement factories of Chinese building materials have become factories in gardens, forests and grasslands, and the transformation of the real economy is towards the "four modernizations" of high-end, green, intelligent and international.

China National Building Material Group has launched a 5.0 energy house, which combines geothermal, photothermal, photovoltaic, household wind power and biogas. Before, our house was called an energy-saving house, then it was called a zero-energy house, and now it is called an energy house. A house is not only self-sufficient in energy, but also can transmit surplus electricity to the grid every month to generate hundreds of yuan.