Jiang Xipei: The RMB100 Billion Industrial-Financial Group, Yuandong and Its Business Partners

    This text is extracted from the speech of Jiang Xipei at the 5th Industrial-Financial Night held by EBM-CHINA Board Member Club on September 23. With more than 20 years of development, Yuandong has developed to a comprehensive industrial-financial holding group with a sales volume of more than RMB10 billion and it is now striving for the sales volume of RMB100 billion. At present, Yuandong has invested in 329 enterprises, 82 of which are listed on the stock market (including 27 new three board listed companies). Jiang Xipei made the following three conclusions: 1. Sharing is very important and share incentive mechanism shall be actually implemented; 2. Attention shall be first given to the main business and then to the diversified investment; 3. The key to investment is investing in projects with excellent teams. I can use five key words to describe Jiang Xipei: broad-minded, thoughtful, positive, insensitive, and wise.

     Dear friends, good afternoon!

    EBM-CHINA Board Member Club was founded four years ago and it is a forward-looking platform. Few people can come up with such an idea to gather the boards of directors from different companies on one platform, while the founder of EBM-CHINA Board Member Club is farsighted. The club is devoted to serve the excellent directors and boards of directors and focus on integration of industry and finance. For the organization of a company, the board of directors is very important. The company cannot operate well without the board of directors, especially without excellent directors. So, it is important for the sustainable development of a company to organize a competent board of directors.

    Yuandong has a history of 26 years, and if we add the previous five years when Yuandong operated small factories, Yuandong has a history of more than 30 years. Many enterprises can only survive for only three to five years. Even so, we still think that Yuandong just start and we still have many things to do.  

    As long as we choose to start a business, we must do it well. If we cannot make the present things well, everything else is impossible. Nowadays, the society more and more advocates success. Flowers and applauses will be presented to the successful people and organizations, and many resources will also be allocated to such successful organizations and excellent people.

    Our enterprises have missions and responsibilities. We hope our choice is correct and our decision is feasible. Meanwhile, we believe that we people valuing dignity will affect a batch of similar people. However, we cannot feed ourselves with face and dignity. If we are too addicted to face and dignity, it is hard to create a better future and we cannot make many good friends.

    Yuandong now has more than 11000 employees and we believe that we will have 20000 to 25000 employees in five years. By then, our revenues will be RMB100 billion, market value about RMB150 billion, and assets to be managed over RMB100 billion. The income of employees will be doubled and about 20% of our employees will become our business partners.

    The term of business partners first appeared 20 years ago in Yuandong. There was only one stockholder when Yuandong was founded. However, in the recent 20 years, our stock ownership system has experienced five changes, which are forced. To survive and develop, no enterprise is willing to play with the stock ownership system. What we did is really forced.

    At that time, there is only a small gap between green channel and red line. Some people were put into jail in the name of speculator because they are too clever to take the lead to make trade. Some people went against the law because they failed to make the registered capital in place or they misappropriated the registered capital for other purposes.

    Therefore, doing businesses depends on good timing, geographical convenience and good human relations. One must have the quickest thinking, the perfect foresight, and the best decision. However, who can be so intelligent? It is very important to work with right people. We hope to make friends and work with those officials, famous persons, and like-minded persons to share the common cultural identity and rules.

    Yuandong’s business partner system implemented more than 20 years ago follows this rule and we hope every core employee has the opportunity to become our business partner. 80%-90% of the employees can be satisfied with the salary, bonus and other welfares. Most employees are willing to work for the enterprise only because of the salary, bonus, platform and relationship with the founder, and few people are willing to become a shareholder and work for the enterprise to the end.

    More than 20 years ago, our stock incentive system specified that general employees can buy the company share in a proportion of 1:2, intermediate management staff 1:3, and directors, supervisors and senior management 1:7. In other word, if you give RMB100000, we will give you corresponding shares to you without any premium at any time. Even so, few people are willing to buy the shares. No matter what I said, only less than 100 employees contributed only RMB18 million at last.

    In the next year, we were distributed with shares at a rate of 130% (that is, the original RMB18 million becomes RMB54 million) and more people were willing to invest after seeing the actual profit. Even so, only about 15% of the employees were willing to participate in this stock incentive system. Two production supervisors even thought that the company forces the employees to buy shares and thus asked the employees to strike.

    Then, I told the employees that if you missed the first opportunity, please do not miss this opportunity to buy the shares and houses.

    Yuandong develops and constructs a best building in Yixing, which can be regarded as the first class building even in the whole country.

    We sell the houses to employees at a price of 60% of the cost price. If employees do not have enough money to buy houses or shares, they can borrow money from the company. We distribute shares according to their posts, working years and incomes. Salary system is the No.1 system of Yuandong because it is very important for every employee. We implement structural salary system, including basic salary, post salary, and incentive pay, with basic salary accounting for 30% and incentive pay 70% (for marketing personnel, incentive pay accounting for even over 90%). Different posts have different assessment indicators, so different employees have different incomes.

    According to our present system, there is a lower limit and upper limit regardless of the post, position, and present shares hold, namely RMB0.5 million to RMB28 million. Moreover, you cannot buy all the allowable shares at a time. Generally, one can buy the shares by use of the amount three times the total accumulative net salary from 2014 to the month before the day of procurement. For marketing personnel, they can buy the shared by use of the balance available at the day of procurement.

    Since the stock market crash last year, regulators ask the listed companies to take measures and hope the directors, supervisors and senior management of each company can buy more shares. However, we will still value the principle of voluntariness despite many restriction measures like no selling and no transfer.

    Among the nearly 3000 listed companies, more than 800 companies have stock incentive system. However, many companies’ stock incentive systems are hard to be implemented. Yuandong’s stock incentive system is feasible and the duration of implementation is long. You can exercise your right in the future 9 years. Yuandong’s stock incentive system is quite different from that said by the governmental regulators.

    All these need our thorough research. We can make the management easy only when we have made thorough research and let the employees to do and learn. If every employee is willing to do and learn, the boss can take everything easy. As far as we are concerned, we hope to make a good system to gather the people with ideas and dreams on this platform and let them have no regret choosing this platform.

    We have two important choices in our lives, namely life companion and work partner.

    Since the economic crisis in 2018, it is already eight or nine years, but the impacts still last. Regulators beat their brains out to find how can keep the rapid growth or proper growth. You can feel this stress when you see extensive policies are issued. These policies are even too hard for our enterprises and publics to digest, but they appear to be very important.

    We can succeed and gain leaping development only when we take advantage of the opportunities and policies. For example, the central government is asking us to establish industrial-financial fund and industry support fund, and many township governments, village governments and village committees rush to give money.

    We certainly hope that we can gain more business opportunities for our enterprises and we should seize the opportunities. Industry is the basis for finance and the foundation of society. Without industry, everything is meaningless.

Now, there are many investment opportunities, but many things have two sides and are dialectical. One of my friends who are engaged in film investment said few days ago that there were only 1000 similar film investment companies two years ago and 2000 last year, but this year, there are already more than 8000 such companies.

    Though there are so many companies in each sector, the economic and social law shows that financial and social resources are always concentrated to few advantageous companies. The top three companies in each sector may hold 50% to 60% of the market shares and the top 10 companies certainly hold about 90%.

    Nowadays, many people choose to start up business, but I think we should have a correct understanding of entrepreneurship. Entrepreneurship, including investment, is the choice for the minority because the success probability is extremely low, positively 10%-20%. Therefore, you do not have to start a business or operate a company on your own, and you can find a good platform where you can become the core stockholder based on their business partner system and realize your dream.

    Yuandong adheres to the development strategy of “main business + investment” during the past years of development. The board of directors and Harlyn Investment Management (Beijing) Co., Ltd. are responsible for the investment. We have invested in 329 enterprises, 82 of which are listed on the stock market (including 27 new three board listed companies). The core basis for our investment decision is that the project must have an excellent team.

    Yuandong will make the Smarter Energy (600869) powerful and make the smart energy and smart city system services better and better.

    Yuandong have achieved No. 1 in terms of production and sale scale for 19 consecutive years; new energy lithium battery is regarded as No. 1 in China and No. 3 in the world; electric power design EPC qualification ranks first among the private enterprises; line detection business is also reputed as No. 1 in China. We must do our best to rank top three or No. 1 in the industry.

   Can you surpass Ma Yun and Ma Huateng if you are engaged in Internet field and social contact field? I think the probability is very low. What we should do now is to consider the situation, find the correct direction and adhere to the excellent people-oriented route.

    Last year, I saw that Ren Zhengfei from Huawei advocates the striver oriented route. For my opinion, strivers do hard works even if they do not have prominent contributions.

    It is very important for Yuandong to adhere to the excellent people-oriented route. EBM-CHINA Board Member Club is good platform to gather a batch of excellent people. I believe it will have a huge influence and effect in the future. If we are now establishing a solid foundation and gathering a good many of recourses, we believe that we can welcome a better future. Wish all of you have a better business and life.