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Xuzhou Construction Machinery Group Co., Ltd. (XCMG), a state-owned enterprise located in Xuzhou City, Jiangsu Province, has developed into one of the Chinese largest, most influential, and most competitive enterprise groups with the longest history and most complete, innovative product varieties, achieving the largest export volume. On December 12, 2017, China General Secretary Xi Jinping inspected XCMG, pointing out that as a state-owned, modern enterprise, XCMG has created a path suitable for its own development with clear strategic thinking and definite orientation!” At present, XCMG has ranked the first in China and the sixth in the world with regard to its market shares and various indicators. To make state-owned enterprises larger and stronger in the new era, it’s necessary to learn from XCMG’s governance.

1. Keep the mission of state-owned enterprises in mind and apply their strengths to production and operation

Taking the development of the Party and the state as their duty and mission, state-owned enterprises serve as material and political bases of socialism with Chinese characteristics, supporting the party to govern and rejuvenate the country. The fundamental reason why XCMG becomes a world-class enterprise is that it takes the duty as its goal of development and the unique strengths of state-owned enterprises as its own economic power and core competition.

Never forget why we started, and work together to realize Chinese dream. What an enterprise should do determines where it will go. XCMG summarizes the duty of state-owned enterprises as “be loyal to the party and win honor for the country”, and renders it as the goal and vision of development, bringing about a great rejuvenation of Chinese dream. Since its birth, XCMG, the former Lunan No. 8 Arsenal of Eighth Route Army found in 1943, has undertook the political mission of rejuvenating our nation. The first auto hoist and road roller of the new China were produced here. XCMG was officially found in 1989 with the starting of the reform and opening up. Since then, it takes serving the country as its objective and is determined to become a world-class enterprise that Chinese people feel proud of and foreigners respect, boosting the realization of the great rejuvenation of Chinese nation. XCMG has manufactured the world first 4,000-ton crawler crane, 2,000-ton all-terrain crane, and the first 700-ton mining excavator in China. Now it’s striving to climb the peak of the Everest in the construction machinery industry.

Fully exert the key political role of the party organizations of state-owned enterprises. In the modern state-owned enterprise system with Chinese characteristics, the word “characteristics” means integrating the party’s leadership into all links of corporate governance, building the party organization of the enterprise into its governance structure, clarifying and implementing the legal status of the party organization in the corporate governance structure. XCMG ensures the party organization’s participation in making decision on major issues by revising the Articles of Association, establishing the rules of procedure of the party committee and confirming the legal status of the party organization, so as to deeply integrate the party construction and enterprise operation and correctly implementing the party’s polices and guidelines. XCMG attaches great importance to building a party organization at grass-root level and party members team, working in the principle of “party construction exists in the place where the business develops” to form a tight network, ensure each unit bears responsibilities suiting their position, and set up party organizations in workshop teams, overseas projects and outlets. XCMG Party Committee pays attention to close combination of party construction activities and production and operation, fully playing the pioneer and exemplary role of party members. As there is one party member in every three people from more than 6,000-person technical research and development team, party members become vanguard and main force in terms of technical innovation, which largely drives self-innovation. Since half of XCMG employees working overseas are party members, an international party construction is becoming a strong support for XCMG to increase team cohesion and forge ahead in overseas market.

Build a political and ideological work force, and give full play to employees as masters. All the policies of the higher government have to be communicated by the grass-roots cadres. How to better manage the increasing employees and fully play their role as masters is a subject of the times in strengthening party construction of state-owned enterprises. XCMG Party Committee implements new measures such as branch secretary assistant system, improving the proportion of political and ideological work force and quantitative assessment of grass-roots branch secretary to reinforce the construction of political and ideological work force. While completing their own work, the political and ideological work force should conduct research on issues of employees team across departments and systems to form a situation that a quality, active and powerful political and ideological work team is set up. The team should listen to employees, keep an eye on their state of mind, working and living conditions and help them solve problems, so as to promote high-quality development of production and operation. XCMG Party Committee won twice the titles of national advanced grass-roots party organization and nation excellent grass-roots party organization awarded by the organizing department of Central Committee of the Communist Party of China. XCMG insists on managing human resources under the party’s leadership and improves incentive mechanism by recruiting talents from all aspects and fostering them in a scientific way to create four excellent groups including world smart group, high-skilled craftsman, model party members and excellent entrepreneurs.

2. Stick to the general direction of reform and innovation, and achieve success as a modern state-owned enterprise

With the development of the times, the reform and innovation will not stop. Since its founding 30 years ago, XCMG has always insisted on reform and innovation no matter when it is weak, strong, in peak or valley, and finally it has become an equipment manufacturer at national level, enjoying reputation worldwide. XCMG’s history shows that only by continuous reform and innovation, can an enterprise develop with constant vitality and remain invincible.

Reform drives XCMG to develop and grow stronger. XCMG has been closely associated with reform since its founding in 1989 as an example of group reform. When the current leadership and I took over XCMG in 1999, we embarked on radical reforms including seven special governance actions, debt-to-equity swap, structural reform and asset stripping of 56 small and middle-size enterprises, three system reforms and institutional reform of headquarter. These reforms started from 1999 to 2003, through which XCMG got through the most difficult period, becoming the first enterprise with 10 billion of sales revenue in Chinese construction machinery industry. XCMG lightened the burden on the listed company, XCMG Science and Technology (renamed XCMG Machinery later) from 2004 to 2010. As the restructuring failed, XCMG rapidly turned to major assets restructuring, raising funds of 5 billion in A-share market and opening up a new way to reform and adjustment. Since 2011, XCMG has studied and practiced hard to promote “Hanfeng” plan oriented by divisional organization, headquarter operations management and control model and four platforms constructing, cross-border mergers and acquisitions, overseas factories and R&D layout, expanding its international development pattern, and becoming the only enterprise with 100 billion of revenue in Chinese construction machinery industry and a modern enterprise with world-class management structure.

Creation is the core competitiveness for XCMG’s development. From the late 1950s, XCMG began to work hard and make new technical innovation independently. Since 2000, XCMG has determined its innovative strategy of high end, technology, reliability and large ton to accelerate the upgrading of technical innovation system and established a global research and development system. XCMG ushers a new era of fully independent innovation, upgrading products from China manufacturing to China creation by breakthroughs in key technologies, core components and whole series hosts. XCMG changed its management model from response to change to seeking for change, largely promoting and supporting its development. For there was a sudden change in the industry after 2011, XCMG proposed the operation principles of “three focuses”, namely paying more attention to quality and benefit of economic growth, whether the system operates efficiently and practically, and the products and technologies are advanced and reliable. While implementing “three focuses”, XCMG explored an effective path of scientific development by carrying out “343” business model, magic cube system for operation and comprehensive budgeting.

Globalization is the strategical support for XCMG’s development. Taking the lead in going global in the industry, XCMG has undergone three stages of products, personnel, enterprise and capital going out one by one. After years of effort, XCMG has made progress in going global in the following aspects. First, create an international pioneer squad. XCMG “four-in-one” team comprised of market, product, business and service managers cultivated for many years has grown in an all-around way and undertaken responsibilities of overseas exploration. Second, successfully explore overseas market. Second, XCMG’s export revenue in Africa, South America, Middle East, Central Asia and other overseas markets has been doubled and in emerging markets such as India has been increased over twice. Third, take the lead in exploring markets along the Belt and Road. XCMG’s products cover 63 countries along the Belt and Road, 35 of which imports the most from XCMG. Fourth, lay out in the global market. XCMG has 15 large manufacturing bases and global KD factory in Germany, Brazil, America, India, Austria, and other places, employs 3,000 foreigners, exports products to 183 countries and regions, with 30% of overseas revenue. Fifth, conduct cross-border mergers and acquisitions. XCMG has merged 3 European enterprises, with the business scale of more than 600 million euros. Following the Belt and Road initiative, XCMG has developed into an international engineering machinery giant with global competitiveness from the perspective of going global.

3. Plant the Xi Jinping’s thought on socialism with Chinese characteristics for a new era into enterprise operation and insist on high-quality development

Theory guides practices. XCMG is adept to transform the theory of the CPC in each historical period of revolution, construction and reform in China into the guideline and strategy for its own development. Since the 18th National Congress of the Communist Party of China, XCMG pays more attention to learning from and implementing the spirit of General Secretary Xi Jinping’s speeches and develops around the Xi Jinping’s thought on socialism with Chinese characteristics for a new era, especially taking Xi’s instructions on visiting XCMG as its direction and impetus for development.

Accelerate high-quality, efficient, large-scale and sustainable development. On his visit to XCMG, General Secretary Xi Jinping pointed out that we need to focus on high-quality development instead of rapid growth by adhering to new principle of growth under the new normal of economy. In accordance with this instruction, XCMG insists on “six firm principles” as follows: first, firmly promote high-quality development. XCMG, taking high-quality development as the main line, pushes all works to a new level by supply-side structural reform, namely cutting overcapacity, reducing inventories, deleveraging, reducing costs, and strengthening weakness, and accelerates high-quality, efficient, large-scale and sustainable development as per the golden standard of “Advanced Technology and Long Duration”. In 2018, XCMG climbed to the 100-billion level again and maintained stable management level since its sales increased by 45.2% year on year, main business revenue by 40.9%, total profits by 90.2%, and export for earning foreign exchange by 75%. Second, firmly strengthen the equipment manufacturing industry. Breaking the traditional industrial pattern, XCMG held the largest share in the global mobile crane market. The sales revenue of excavator reached 10 billion yuan for the first time, and the first excavator over 70-ton in China was created. The sales of heavy truck ranked top ten in Chinese industry. The accumulated contracts awarded for environment-industry integration totaled 7.8 billion yuan. Large complete mining machinery entered in the world luxury club. Third, firmly implement innovation-driven strategy. On the basis of improving its R&D centers in Europe, the United State and Brazil, XCMG plans to set up a center in India to form a technical framework of “one institution and five centers”, so as to establish the most excellent research and development system in the world. When obtaining two provincial manufacturing innovation centers, the company initiated the establishment of a strategic alliance for technological innovation in high-end construction machinery and core components, striving to create a national manufacturing innovation center. Under the golden standard of “Advanced Technology and Durable Products”, XCMG rolled out the 700-ton excavator, marking that China becomes the fourth country able to develop hydraulic excavator over 700 ton after Germany, Japan, the United States; “super travelling crane innovation project” won the Chinese Industry Award. As of February 2019, XCMG has totally 6892 valid patents, including 1526 authorized invention patents and 46 PCT international patents. Forth, firmly push business management to a new level. XCMG promotes annual management upgrading project and fully implements mixed ownership reform on new business. XCMG Machinery’s private placement project is approved by China Securities Regulatory Commission. In 2018, XCMG was awarded the first prize of national enterprise management innovations for the seventh time. Fifth, firmly explore overseas market. XCMG takes actions to root in global market, and the total exports rank first in the industry. Mining machinery with total value of 200 million dollars is exported; QAY650 all-terrain crane with the maximum ton is delivered to users; XCA60E intelligent all-terrain crane enters in European market; the global layout of 5 overseas R&D centers, 15 overseas manufacturing bases and KD factories continues to be upgraded. Sixth, firmly improve party and team construction. XCMG lays emphasis on building a steel-like workers team loyal to the Party and winning honor for the country, forming a engineer team with 55% of master or doctor, and high-skilled talent group with senior workers or above accounting for 50%. XCMG has become a name card of China with the highest reputation in the global construction engineering industry. UNEP officer in Africa assessed XCMG: two Chinese brands can be seen everywhere in Africa, one is HUAWEI, the other is XCMG.

Go all out to the peak of the Mount Everest in construction machinery industry. General Secretary Xi Jinping, on his visit to XCMG, emphasized that XCMG should scientifically and accurately design how to enter the world top five and top three with a forward-looking vision. We keep these words in mind and enhance strength by innovative development, striving to achieve the goal in 2020 and 2025, respectively, and building XCMG an international, world-class construction machinery giant.

The key to achieve high-quality development in construction machinery industry is not simply to pursue scale growth, but to achieve the golden standard of “Advanced Technology and Long Duration”, digital, network-based, intelligent manufacturing, low cost, high efficiency, greater social contribution, and benefits ranking in the forefront of the industry.

Sources: Red Flag Manuscript under Qiushi Journal 

Red Flag Manuscript, sponsored by Qiushi Journal, is a semi-monthly comprehensive political periodical issued at home and aboard. As an important component of Qiushi Journal, Red Flag Manuscript functions as a platform for publicizing the thoughts and theories of the CPC.