Zhongyi ZHAO Spoke on the 6th China-ASEAN Expo


The 6th China-ASEAN Expo (CAEXPO) was held in Nanning City of Guangxi Zhuang Autonomous Region from October 20th to 24th, 2009, which was broadcast by Sina Finance. Jiuding Capital’s Executive President Zhongyi ZHAO was pictured while giving a speech. (Photo by Chen Xin from Sina Finance)

Zhongyi ZHAO: Today, I want to share my points of view, which may be discussible among the guests. I declare that the following viewpoints are my own opinions without prior communication with sponsors or the organizational committee. I and Jiuding Capital will be responsible for them.

Cooperation has become a global topic recently and is discussed in today’s forum. Some cooperation can help the relevant parties realize a win-win result, but some act bad.

What ensures cooperation successful? What are the incentives? Today, I want to discuss from three aspects, namely cooperation, judgment about international situations and PE firm’s roles in cooperation or development.

First of all, trust is the premise of cooperation among individuals, organizations and countries. If relevant parties do not trust each other, they will never cooperate. What’s trust? I think it can be learned from three aspects:

 (i) Partners should have basic ethical standards so as not to cheat you;

(ii) Partners should make determination in promoting cooperation successfully and solve problems in case of difficulties with accepted and suitable methods. Although it will be very difficult when cooperating, we cannot give up and have to make our minds to cooperate. I am reassured because all of you have determined to cooperate sincerely during operation.

However, I think successful cooperation should be properly matched, which is often neglected. For example, college graduates cannot be successful in cooperating with Bill Gates in its core business, but it’s possible in other businesses like photography, which is because they are unmatched in Bill’s core businesses. When China cooperates with the Association of Southeast Asian Nations (ASEAN), the economy of both parties is moving forwards at a similar rate. If they develop at various speeds, whether the cooperation should be suspended for a while?

Following are Jiuding Capital’s points of view about China’s future economy.

We think China will have a 20-year golden age of economic growth. It will increase by 6-8% in the next 10 years and 3%-6% in the next 20 years. China has a huge economic growth space. Although its GDP is tremendous, the per capital income of Mainland China is only ranked 100th, lower than 50,000 US Dollars of the most rich countries, 13,000 US Dollars of the global average value and 14,000 US Dollars of Malaysia. However, Chinese people are driven by the desire and determination to improve their living standards. Enterprises and organizations seek for high economic benefits and returns. What’s more, we hope to improve the whole social system. When I was a junior school student, my mother told me to become a civil servant because the job was not tired. However, I found that my civil servant classmates worked hard and overtime, too. Hence, I think all individuals, enterprise and organizations are striving to seek for economic benefits and improve their living standards.

China’s economic growth can be ensured by following elements: 1. China has a huge development space in spite of higher GDP. 2. Most of China’s industries are scattered and a huge growth space will be produced in the scattered to centralized process. 3. China has strong risk-resistant ability for its huge economic gross and completed systems. 4. The economic adjustment ability of Chinese government is higher than other governments, including the USA. The most important is that China enjoys a stable economic policy, providing guarantee for economic development. However, there are still problems. Centered on finance, any problems will be reflected to economy. There are two contradictions among China’s financial firms: unmatched direct investment and indirect investment, and most financial resources are controlled by banks. Although there are various banks in the markets, there is only one investment bank now. The financial service system is centered on the bank system, which cannot be controlled in case of dangers.

Private enterprises are the most dynamic system among the state economic systems, which are lack of capital. Hence, PE required more direct financing like PE investment. What’s PE? PE refers to enterprises directly invest before listing. The direct financing is highly adopted in developed countries, and US’s direct investment has exceeded indirect one, which is upside down totally. For example, PE can help banks direct financing. We can achieve industrial upgrade and provide capital for enterprises. In addition, a good investment channel should be provided for other capital holders. PE’s mission is to help enterprises find suitable companies, which will cause the industrial upgrade.

Following elements should be achieved when accomplishing above missions:

1. Make enterprises more standardized though listing. Non-standard enterprises will be defeated;

2. Help enterprises by fund-raising together with governmental preferential policies. Although we are a large-sized early-starting PE firm, the assets under our management are only 100 million US Dollars, lower than the peers. We have to set out towards our goals and visions and contribute to industrial upgrade as well as the ASEAN and international cooperation.

If there is anything wrong that I said above or need to discuss, please contact me later. Thank you!