Hong Kong, “the promised land” for HengAn development

                                             Interview HengAn CEO, Mr. Xu Lian Jie

                                             Reporter from Fujian Daily / Ruan Xi Gui

 On July 1, 2007, Hong Kong was celebrating its 10th return anniversary. With Hong Kong returned to China ten years ago, HengAn was listed in Hong Kong.
During past ten years, HengAn has performed amazingly in capital market: its stock increased dramatically from RMB2.8/stock and RMB2.8billion to RMB29/stock and RMB30.0billion, a 11 times growth.

Depending on market list, HengAn has realized its high-speed growth: a loss-making enterprise when founded in 1985 possessed about RMB800,000 net assets, but RMB2.8billion net assets after listed in 2006, a 3500 times growth up in 21 years.

On the occasion of Hong Kong's 10th return anniversary, HengAn CEO, Mr. Xu Lian Jie, expressed his sentiment: listing in Hong Kong changed HengAn; Hong Kong is “the promised land” for HengAn development.

Listing in Hong Kong created many “No. 1”

In 1997, HengAn decision-makers encountered an urgent issue: starting with USD200, 000$ as initial capital, till 1997, HengAn realized more than ten billions of business volume to complete rapid growth history. Nevertheless, HengAn encountered a bottleneck, i.e. HengAn's ability was not equal to its ambition when facing so huge business scale; to expand itself continuously or make no headway。

However, HengAn decision-makers realized that it was hard to expand and be strong if HengAn continued old management mode and thinking model. To grow into a modern enterprise, it must adopt standardized, transparent and high-efficiency management control.

To change such situation, it must take advantage of external force and mechanism to promote such change – to list.

Mr. Xu Lian Jie said: “to build up standardized management system, we must depend on technology, equipment and talents; among these elements, talents play key role. However, system innovation will guarantee our sustainable development. HengAn is a big family where there are many systemic defects. In order to develop our enterprise further, we must focus on our system. Therefore, HengAn decide to list in Hong Kong.” 

In 1997, HengAn's all shareholders had common understanding on listing in security market. On Dec 8, 1998, “HengAn International” was officially listed in Hong Kong market by 10 times market profit rate. “HengAn International” was subscribed publicly in 36 times over quota in the same year to create a miracle, i.e. highest market profit rate and highest subscription amount. It was rated as “Best Listing Project” and “Best Pool Resources Project in Hong Kong” by Asian Currency and International Capital Review. 

HengAn was a first private mainland enterprise listed in Hong Kong. Why did HengAn select Hong Kong to be listed? Mr. Xu Lian Jie said Hong Kong had highly capitalized market, perfect financial system and high efficiency. 

He said, in those days, the enterprises listed in domestic market were state- owned enterprises, but HengAn was a private enterprise; it would be hard and took long time to be listed. However, Hong Kong was a mature capital market and had standardized stock issue system; furthermore, as a financial center in Asia, Hong Kong could rapidly improve and upgrade HengAn's image in international capital market, but also act as a high-class window on which HengAn depended to develop overseas market.

When talking of impression on listing in Hong Kong, Mr. Xu Lian Jie said he strongly impressed on high-efficiency and standardized operation of Hong Kong market. He said, the enterprises listed in Hong Kong just pay attention to their business performances, no other things are needed to be considered. Since HengAn was listed ten years ago, he never has known who the chairman of the stock exchange is.

Nowadays, Hong Kong has become “bridgehead” from which HengAn will go ahead to international market and establish international brand ——

In 1998, HengAn bought two apartments in Hong Kong, which were used as windows HengAn exchanged and communicated with external world.

In 2003, HengAn acquired “Hong Kong Weixin Pharmaceutical”. This expanded HengAn's diversified operation mode, but also created a channel through which HengAn entered into international market. By means of Hong Kong as a window, HengAn's export increased dramatically; this year, its export growth rate is expected to reach over 60%.

Mr. Xu Lian Jie said, because HengAn's net profit was RMB0.3billon per year then, plus less investment, its listing was to promote internal reform, thus building up lifetime HengAn, instead of financing in financial market.

Since listed in Hong Kong, HengAn has standardized enterprise operation constantly and enhance enterprise management to make it develop in positive cycle.

Mr. Xu Lian Jie recalled, since listed in Hong Kong, HengAn had settled capital operation issue; nevertheless, its operation mechanism standardization and management structure adjustment were still a Gordian knot. In Hong Kong, standardized control and surveillance system and strict financial information disclosure system drive each enterprise to develop and upgrade constantly to return outstanding performance to HK individual and institution investors. Otherwise, the listed enterprise might be kicked out of the capital market; particularly Hong Kong just experiencing a financial crisis. 

For this purpose, HengAn invited strategic investor morgansdany to promote reform and upgrade management quality. However, he recommended a famous management consulting company in USA, Thomas Group, to HengAn. Thomas Group initiated a “TCT (Total Cycle Time) Action” which was rarely implemented among Chinese enterprises. HengAn paid US $10million for this “TCT” action.

“HengAn TCT” is an extremely effective management tool. “TCT” means to give attention to two targets (i.e. shortening cycle and improving one pass rate) within total cycle time. It is an approach used to improve allover operation, product service quality and competition. It includes 4 basic principles (basic theories): 1. without existing resources increased, “Time” is used to drive completion of all tasks at Max speed; 2. train and set up trans-department working team and remove impediment team; 3. identify current target according to history data; 4. select, sequence and eliminate obstacles.

By means of “foreign management”, HengAn managements at all levels completed brainwashing-type thinking mode revolution meanwhile HengAn completed nirvana-type evolution. 

Likewise, HengAn created whole set of self-perfecting and system correcting system. As Mr. Xu said, HengAn was willing to spend money on “idea”.

HengAn's independent directors include experts in all fields, such as securities, law and operation management etc. They played important role in HengAn's development. In each BOD regular meeting, these independent directors threw stones at HengAn's executive directors; Mr. Xu said frankly, these “stones” were really tough and hard to make us be uncomforting; when we cooled down to think about them, they were really important, really worth a thousand taels of gold.

Any company to be listed is strictly required to perfect financial system. For this purpose, HengAn paid attention to financial system reform to enhance internal control. HengAn invited financial experts or institutions to carry out regular and irregular financial check, for instance, Canada Rosenmay Independent Financial Consulting Company offered more than 200 advices aiming at HengAn's problems. HengAn's high level turned over to think and recognize them.

As a CEO in a listed company with RMB5.0billion annual sales volume, Mr. Xu said frankly, he works breezily now, “5 working days per week and 1hr working time per day to most extent; if no business trip is needed, have two playing-golf days per week,” in his opinion, standardized management saved time and energy after listed.

In past ten years, HengAn has realized transition from “family business” to “modern enterprise” to establish modern business system; hence laying a solid foundation for lifetime HengAn. 

Mr. Xu said, as a largest-scale manufacturer making sanitary towel and napkin, HengAn's market network has been accessible to 14 provinces and regions throughout the country. Its main products, such as ANLE, ANERLR, ANERLE BABY NAPKIN and MIND UPON MIND, have positioned No. 1 in market share in many years. HengAn's target is to be a manufacturer of Top-Level household goods in China. It believes this target will be realized definitely.  

Quoted from Fujian Daily on 2 July