In 2017, CMEC’s trade and services segment realized a total profit of RMB230 million, 87% higher than that in 2016, exceeding RMB200 million for the first time in its history. As the most traditional business area of CMEC, the trade and services segment has reached a new level at the 40th anniversary of the founding of CMEC after five years of transformation since its profit hitting the bottom in 2013.

　　

40 years ago, CMEC became the first export-oriented Chinese company integrating production and foreign trade and made breakthroughs in trade services in China: it introduced for the first time from the countries such as the United States, Germany and Japan the manufacturing technologies of the 300/600MW coal-fired unit coal conveying & grinding system, ash & slag removal system, chemical water treatment equipment, heating & ventilation unit, and instrument and automatic control system as well as key components and parts of imported 300/600MW stream turbine generator set and relevant auxiliary equipments. For the first time, CMEC introduced from the Italian Techint Group manufacturing technologies and production line of toughened glass insulator, from German WALDRICH-COBURG CNC planer-type milling machine manufacturing technologies for cooperative cooperation, from Germany 350MN clutch screw press for one-million-level nuclear super-large blade and aerospace forgings, from the PH Company of the United States mining shovel manufacturing technologies for cooperative cooperation, from German Bison Company the chipboard manufacturing technology for cooperative production, and won a bid for the national project of renovation of 40 million smart electric meters for remote electric control in Europe, valuing USD160 million.

　　

The trade and services segment of CMEC focused on the business of single-machine trading at the earliest. Mechanical and electrical products are always core products of the import & export business. The main subsidiary of the segment originated from the business division that was established in 1988. Between 1988 and 1995, the Regional Business Division of the Head Office was transformed into the Commodity Business Division. Subsequently, as the founding of the CMEC Group, the predecessors of quite a few subsidiaries were established in Beijing, such as CMEC Engineering Machinery Import & Export Co., Ltd., CMEC International Trade Co., Ltd., Zhongshe M&E Import & Export Co., Ltd., CMEC Machinery Industrial Products Co., Ltd., CMEC Electro-technical Instruments Import & Export Co., Ltd. and CMEC General Machinery Import & Export Co., Ltd.. Subsequently, China-East Resources Import & Export Co. (CERIECO) was incorporated into CMEC, local branches were transformed into Wuxi, Suzhou, Shanghai and Henan subsidiaries, and CMEC Yinchuan Company was established, gradually forming the operating structure integrating subsidiaries in or beyond Beijing, and overseas subsidiaries. The business segment was an important contributor to the revenue and profit of CMEC for a time.

　　

As the external economic environment changed, the subsidiaries were constantly faced with operating problems and the competitiveness of some business segments were on the decline. Since the listing of CMEC, the trading business has been at a historically-lowest point of profit. In such a circumstance, the trade and services business segment tapped the potential of business segments, focused on the core businesses and markets, strictly controlled high-risk business, energetically promoted the development of innovative business including one-stop value-added services, formed core businesses covering high-end casting & forging, PV and new energy, electric & electronic, and mechanical parts under the support of the head office, created two regional centers in Southeast Asia and the Caribbean Sea region, actively promoted the development of one-stop overseas platform and the new agricultural model in Kazakhstan, achieved steady growth of total profits since 2014, and the total profit exceeded RMB200 million in 2017, the highest point in the history.

　　

I.High-end casting and forging

　　

In 2017, China Machinery Industrial Products Co., Ltd. (CMIPC), a subsidiary of CMEC with high-end castings and forgings as core products, had a registered capital of RMB125 million. It has three manufacturing plants, namely China Machinery Precision Manufacturing (Jiangsu) Co., Ltd. (CMIPC Jinggong) (with a registered capital of RMB30 million), Shanxi CMEC Huajin Casting Co., Ltd (with a registered capital of RMB250 million) and SINOMACH Metal (Jiangsu) Co., Ltd. (with a registered capital of RMB100 million), forming a relatively complete industrial structure with castings, forgings and copper parts as main products. It was approved as a new and high-tech enterprise of Beijing in 2012. With a dozen of patented technologies, it has cooperated with the CRRC Qingdao Sifang Rolling Stock Research Institute and developed the high-speed rail brake disc, realizing localization in the entire process ranging from raw materials to finished products, and successfully breaking the monopoly of overseas enterprises over high-speed rail brake disc.

　　

The predecessor of CMEC Equipment Manufacturing Co., Ltd is CMEC Machinery Industrial Products Co., Ltd., which was founded in 2002. At its early stage, the company only had a registered capital of RMB5 million and seven employees. In the year of its founding, the company got sales revenue of over RMB20 million and lost RMB2.14 million. Under the circumstances that the customers were increasingly linked with manufacturing plants and the trading business has been marginalized, the company extended its product chain upstream from pure trading business to product quality control, and transformed from a pure trading company to the model of “trade + manufacturing”. The company was renamed CMIPC in 2014, made investment in CMEC Huajin in 2015, thereby realizing transformation, and made investments successively in the three major manufacturing plants.

　　

　　CMIPC Jinggong

　　

At present, the customers of CMIPC include top-notch complete machine companies in Global Top 500 in the fields of mining and construction machinery, such as Caterpillar, Liebherr and Krupp, etc. Moreover, it is making a plan on the establishment of the Casting & Forging Research and Development Center so as to form a complete chain of R&D + manufacturing + foreign trade. Through the R&D center, it is expected to realize the production of the complete system of four-wheel-one-belt system in the future. At present, there has not yet been in China a factory offering complete “four-wheel & one belt” excavation system for large-scale mines, less than five after-sales service providers in the world are capable of offering some complete systems for large-scale mines, and only five well-known OEM manufacturers can offer original “four-wheel & one belt” products for large-scale mines. In the future, CMIPC will develop more customers and more high-end casting and forging products, shift from a single-product provider to a provider of serial, systematic and integrated products, and eventually grow into a top-notch product and service provider in the world.

　　

II.Southeast Asia regional center

　　

In 2018, a Thailand-based natural rubber plant, which is the first overseas factory of CMEC, was officially put into operation. China-East Resources Import & Export Co. Ltd. (CERIECO), a company controlled by CMEC, has established the Southeast Asia regional center with Thailand and Laos at the core and having an influence on the neighboring area, and completed and developed a number of projects and services. In 2010, the Lao NN2 230KV/500KV power transmission line was completed in accordance with the quality standard and a power transmission & distribution project using government concessional loan (buyer’s credit) was carried out in northern Laos. In 2011, CERIECO signed the agreement on the Lao 200KM power transmission & distribution project, the first project with the contract amount exceeding USD100 million. In 2013, the Thai fertilizer factory construction project of CERIECO was completed and put into production, and a project for supplying raw materials of fertilizer was also developed, generating an operating revenue of RMB145 million in the year and creating the combined profiting model of “EPC + trade” for the trade and services business segment. In 2015, the Lao NSM project was successfully carried out and completed in 2017. At present, the supporting 500kV high-voltage power transmission line project for the Lao Xayaburi Hydropower Station was underway.

　　

　　The power transmission & distribution project in Thailand

 

CERIECO has made great achievements in the Southeast Asia regional center and its trading business has distinctive characteristics. For example, when trading steel products, business personnel of CERIECO found that the aluminum absorption rate in the production process of steel mill is relatively low, so they successfully developed moss aluminum together with relevant aluminum alloy manufacturers and steel mills. As a result, CERIECO significantly increased the aluminum absorption rate in the process of steel making and made itself the exclusive supplier of moss aluminum. In order to prevent the risk of trading business and relieve the pressure of tie-up of funds, CERIECO adopts a model by which it takes the risk of collection and bears the pressure of cash flow together with manufacturers and suppliers, so as to ensure sustained goods supply. In accordance with the needs of manufacturers, CERIECO adopts a trading model by which it can provide the manufacturers with raw materials at an appropriate time, and actively introduces credit assurance companies to control risks by means of underwriting as well as mortgage of land, equipment and factory building, etc.

　　

In 2017, CERIECO made a total profit of RMB60 million and successfully entered the market of developed countries in North America. Its EPC housing construction project in Canada has been successfully implemented. It is expected to gain more market shares in the United States in the future and reach its goal of being a diversified and comprehensive trading company.

　　

III. EPC PV projects

　　

In recent years, CMEC Machinery Engineering Wuxi Co., Ltd. (CMEC Wuxi Company) has driven the EPC projects by means of investment, that is, it has invested in CMEC Guolian via CMEC. CMEC Guolian, as the investor of the PV power station, has driven the EPC business of the PV power station of CMEC Wuxi Company and successfully developed the EPC engineering service capabilities of PV power stations. Now it has completed an installed capacity of 100MW.

　　

　　Jiangxi 40MW PV power station

　　

Overseas, on September 25, 2017, CMEC Dutch Caribbean Company was officially established in Curacao as an important branch of CMEC International Trade Company in Caribbean area for local operations. Subsequently, Aruba and Jamaica regional centers were also established. Currently, the 2MWp school rooftop solar energy EPC project of its subsidiary Curacao Electric Power Company is at the preliminary stage of contract execution, and a number of PV EPC projects were under way. After years of business operations, CMEC International Trade Company has developed its own design capability and is now striding toward its goal of being a one-stop PV service provider on the basis of the Caribbean area.

　　

IV. New “Internet +” model

　　

Under the general trend of “Internet +”, the competitiveness of traditional import & export trade was on the decline. In order to transform and make a breakthrough in the traditional trading model, the “Internet +” model of CMEC for import and export were born successively.

　　

In terms of import business, in July 2015, the “CMEC” e-commerce brand was born. In August 2015, the “CMEC Lifestyle Museum” e-commerce platform was officially launched. In December 2015, “CMEC Industrial Museum” was launched. In a short time of about two years, CMEC, with CMEC General Machinery at the core, has achieved operating revenue of tens of millions of dollars in terms of e-ecommerce export business. Its e-commerce platform is now selling hundreds types of products, and has partnered with China’s largest e-commerce platforms including the Tmall of Alibaba. By using the platform in Hong Kong, its business scale is constantly expanding.

　　

In terms of export business, CMEC Suzhou Company explored the all-new “Internet+” export model of overseas warehouses + physical demonstration + overseas logistics + online & offline promotion, shifted forward sales by means of stocking in overseas warehouses, skipped over overseas importers, and provided overseas customers directly with goods by online and offline means, thereby making its traditional products and models take on a new look. Under the support of the new model, in 2017, CMEC Suzhou Company registered operating revenue that is 50% higher than that in 2016. Now, the company is expected to reach a new level and hit a historical high in operating performance.

　　

CMEC has also made fruitful results in other aspects including trade, service and cooperation with local governments. In 2016, CMEC Yinchuan Comprehensive Bonded Zone Co., Ltd, a new member of the segment, was established. In 2017, CMEC Yinchuan Silk Road Cooperation Park Project (the first phase, covering an area of 18,000 square meters), a project jointly undertaken by CMEC and the municipal government of Yinchuan, was completed. The completed areas cover special refrigeration storage, general bonded warehouse, e-commerce trading warehouse, bonded processing plant and comprehensive office building. By relying on the advantages of the Yinchuan Comprehensive Bonded Zone, CMEC will carry out trading in cold chain logistics and accept customers’ materials for processing. CMEC’s tender business and amount grow continuously. In 2016, After CMEC successfully completed the centralized bidding work of investors of Qinghai 500MW PV power station, the Tendering Business Division, on the basis of the new situation of China’s national new energy industrial development, CMEC strengthened its liaison and communications with national and local competent departments of energy and industrial and technical support organizations, and made active plans for restarting its bidding work related to new energy. In recent years, CMEC Petrochemical-General Machinery Co., Ltd. has run smoothly in bulk cargo business. Its oil service business has promising business prospects. If an oil service platform is established in the future, it will make the operating scale of CMEC Petrochemical reach a higher level, and facilitate the coordinated cooperation of design consultation and subsidiaries under SINOMACH. CMEC Engineering Machinery Import & Export Co., Ltd. started its business of spinning machine parts with export of work blank, which has now become one of core businesses of the segment, offering added value of the whole industry covering development, precision machining, assembly and logistics of mold tooling.

In 2017, Chinese Premier Li Keqiang proposed “applying a new vision of development and developing new momentum to drive development”. It is suitable for the trading segment. Peter F Drucker, a management master, had ever said “either big enterprises or small firms shall take innovation as a basic function”. The trading business carries forward the more-than-40-years history of CMEC and makes innovations and explorations constantly in the competition environment of the new era, so as to realize sustained development and make contributions to the development of the head office of CMEC.