Hunan is located in the central part of China, serving as a transition zone between the eastern coastal region and the central and western regions, as well as the junction of the Yangtze River Economic Belt and the Coastal Economic Belt. In 2015, Hunan’s GDP total and growth rate both entered the top ten, indicating a strong performance. However, the 7.6% growth in the first half of this year falls short of the 8.5% target, clearly showing that Hunan’s supply-side structural reform still harbors many difficulties and pain points.
Hunan is actively laying out a new 3D printing industry. Are you interested in sharing a piece of the pie?
In the first half of 2016, investment in high-tech industries in Hunan grew by 23.9%, and investment in strategic emerging industries increased by 20.1%, accelerating by 8.0 and 5.6 percentage points respectively compared to the same period last year; the added value of high-tech industries in the province grew by 15.8%, accounting for 19.1% of GDP, an increase of 1 percentage point year-on-year.
What new momentum will the new industry bring to Hunan?
At Xiangya Hospital in Hunan,a routine total hip replacement surgery is underway, but the prosthesis used in the surgery is quite different from those in the past.
Director of Orthopedics at Xiangya Hospital, Hu Yihe:We just print a physical object, and I can measure exactly how much is needed, making it more accurate and precise.
President of Xiangya Hospital, Sun Hong:So it is personalized; we talk about personalized medicine, precision medicine, and this is the direction we are heading.
These 3D printed products used at Xiangya Hospital all come from a 3D printing company in Hunan, Huashu Gaoke. At Huashu Gaoke’s technology park, reporters saw that through three-dimensional forming and laser sintering technology, 3D objects are layered and sintered one after another.
Reporter:This is a denture just printed, commonly known as a false tooth. After some post-processing, these dentures can be directly used in the human body. We took 2 hours to print these 33 teeth, while it would take at least 16 to 17 hours if done manually. Additionally, the success rate is very high; the objects made with 3D printing equipment are more precise in both size and fit with the human body.
From its inception to becoming the third company in the world to possess high-end 3D printing technology, Huashu Gaoke has only taken three to four years to reach the forefront of the industry, but it almost faced bankruptcy due to a lack of funds initially. Thanks to the support of Hunan Province for high-tech industries, the company ultimately received 50 million in funding and a series of supporting policy support.
CEO of Huashu Gaoke, Hou Peilin:A significant portion of the government support funds was invested in the development of our metal machines, especially in the last two to three years, this metal machine has seen explosive growth. For example, in terms of our metal machines, our sales have already exceeded 100 million this year.
In addition to medical applications, 3D printed products can also be widely used in automotive manufacturing, aerospace, and other fields. However, compared to foreign countries, 3D printing in China is still in its early application stage and faces many practical challenges. The most critical issue is the lack of a unified national quality certification standard, which means that 3D printed products need to spend extra effort to prove their quality to gain recognition from buyers, leading to significantly increased costs. Currently, both Huashu Gaoke and upstream raw material suppliers are facing this awkward situation.
Founder of Huashu Gaoke, Xu Xiaoshu:The disconnect is that people do not know how to prove that the products we make are qualified products; this is the biggest problem.
Head of 3D printing raw material supply company, Dai Yu:The market is indeed expanding slowly. Some products are only available for free trials.
Vice President of Central South University, Zhou Kechao:I believe there should be three parties involved: first, government guidance and support; second, the enterprises’ awareness and emphasis on their core competitiveness; and third, universities and research institutions. Only through the coordinated development of these three aspects—raw materials, equipment, and market—can Hunan Province truly become a strong manufacturing province.
Industry pressure forces Hunan’s engineering machinery to break through in multiple ways
Engineering machinery has always been a hallmark of Hunan, once occupying one-third of the national market share, with Changsha being known as the capital of engineering machinery. However, as a cyclical industry closely related to the national economy, what impacts has the sluggish environment brought to this industry? What is the current state of engineering machinery in Hunan?
The reporter visited the SANY pump truck production workshop, where the production line stretches for four to five hundred meters, and there are hardly any workers to be seen. During peak industry periods, there would be two to three hundred workers here, meaning there would be a worker every one or two meters. Today, however, the production panel shows that both the planned quantity and completed quantity are displayed as zero because the workshop is on a high-temperature break, which is the first time in eight years since the workshop was built.
Aside from some necessary maintenance and repair positions, there are no workers left in other positions. The workshop manager told reporters that compared to the peak period when 30 to 40 engineering vehicles were produced daily, now only 40 to 50 vehicles are produced in a month, and reduced operations have become the norm.
Workshop Director of SANY Pumping Division, Shu Haojun:At the peak, we had over 9,000 workers in the manufacturing department.
Reporter:And now?
Workshop Director of SANY Pumping Division, Shu Haojun:Now there are only over 1,700 workers left. The market has been continuously declining, so we are constantly adjusting our workforce.
After experiencing explosive growth a few years ago, today the entire engineering machinery industry is facing enormous capacity and inventory pressure. Finding a way out has become a consensus among many enterprises.
In the summer of Changsha, an unusual auction is taking place. Unlike the usual auction items like cultural relics and paintings, this time the items up for bid are large equipment such as excavators and cranes produced by SANY and Zoomlion, with thousands of domestic and foreign customers bidding simultaneously.
Malaysian customer Jack Tan:What we are mainly concerned about is the price; the prices here are very cheap.
President of Li Brothers Asia Pacific, Hall Mu:We help customers connect with demanders, effectively linking demand and supply.
Ultimately, this global auction of Hunan engineering machinery had a “debut” transaction amount exceeding 29 million yuan, with half of the equipment being purchased by foreign buyers. As domestic demand continues to be sluggish, Hunan engineering machinery companies are turning their attention to overseas markets. Many companies are setting up factories in countries along the Belt and Road, engaging in capacity cooperation.
Assistant President of SANY Heavy Industry, Chen Jing:Currently, our international market sales are stable at over 10 billion annually, accounting for more than 40% of SANY Heavy Industry’s total sales.
In addition to capacity output, transferring existing capacity to new business areas is also a direction many enterprises are striving for.At noon, a long line formed at the cafeteria entrance of Zoomlion’s environmental machinery factory. In just over ten minutes, a cafeteria with about 200 seats was filled with workers.
Side dish server:Now we are busy until 2 PM; previously, I would finish serving by 1:30 PM, hoping to let them eat sooner.
Due to the influx of new employees, the cafeteria cannot be expanded in time, forcing employees to eat in batches. Currently, new businesses such as sanitation machinery already account for 40% of Zoomlion’s business. Adapting to the market and actively adjusting has brought many Hunan engineering machinery companies encouraging changes, but the engineering machinery industry, characterized by large scale and strong cyclicality, will not see an overall improvement overnight given the massive existing capacity.
Data shows that in 2011, the growth rate of Hunan’s engineering machinery industry was nearly 30%; however, by the first half of this year, the industry’s growth rate has dropped to 1%. After nearly two years of continuous efforts, the path to capacity reduction in Hunan’s engineering machinery industry remains a long way to go.
Secretary of the Board of Zoomlion, Shen Ke:I think the bottoming out period may last one to two years.
Chairman of Hunan Machinery Engineering Society, He Qinghua:There is still too much inventory; we need a process to digest the inventory.
Is Hunan’s engineering machinery industry failing?
Vice Governor responds seriously: The prospects are still good!
For Hunan’s economy, traditional industries that once served as pillars are facing adjustment and transformation, while rapidly developing emerging industries are currently unable to replace the support of traditional industries for the economy. In this supply-side structural reform, how can Hunan revitalize old industries and find new momentum? CCTV Finance reporter interviewed Hunan’s Executive Vice Governor, Chen Xiangqun.
Reporter:When people think of Hunan’s economy, they might have the deepest impression of engineering machinery. However, I noticed a change in this number: in five years, the growth rate of Hunan’s engineering machinery has dropped sharply from 20% to only 1%. Does this mean that the industry is failing?
Executive Vice Governor of Hunan, Chen Xiangqun: Engineering machinery cannot develop at the same high speed as in previous years; it has entered a stage of normal development, just like the overall economic situation of our country. In recent years, we have been actively promoting the transition of products from low-end to high-end, and we need to take core technologies and core components into our own hands to break through technical bottlenecks. Secondly, in the context of international capacity cooperation, we need to transfer quality capacity abroad and accelerate development. Our engineering machinery industry will continue to be a major pillar industry in Hunan, and it still has a good development prospect.
Reporter:I found an interesting phenomenon: there is a listed company in Hunan called Hualing Steel, which has been suspended since March and just resumed trading this week, with three consecutive days of limit-up. Why is Hualing showing such a relatively optimistic state in the steel industry, which is generally sluggish or under pressure?
Executive Vice Governor of Hunan, Chen Xiangqun: Hualing is not optimistic about the steel market but about the prospects of Hualing’s restructuring. Hualing Group’s parent company, Hualing Holdings, is injecting funds into Hualing Group, which will then inject these funds into the listed company, while also injecting high-quality assets from Hualing Group into the listed company and replacing all steel assets in the listed company. Through this asset replacement, the listed company is revitalized.
Reporter:After this asset replacement, the listed company has indeed restored its vitality. However, what about the assets we have stripped out, especially the main steel assets? How will they be disposed of?
Executive Vice Governor of Hunan, Chen Xiangqun: Hualing plans to eliminate 1.5 million tons of capacity this year, almost all of which belongs to two zombie enterprises with high debt and poor performance. This time, we will resolutely eliminate these capacities and deal with the zombie enterprises.
Reporter:Can the model of Hualing Steel be replicated as a template?
Executive Vice Governor of Hunan, Chen Xiangqun: This depends on the specific situation of each enterprise, including its internal asset situation and operations, as well as its internal reforms. However, one common point is that reform is essential to promote the rebirth of enterprises. We cannot follow the old path.
Reporter:What criteria does the government use to determine which backward production capacity to eliminate and which to retain?
Executive Vice Governor of Hunan, Chen Xiangqun:The biggest criterion is market choice. Whether it can survive in the market, whether the market can accept it, and whether it can adapt to the market are the main considerations.
Reporter:I have obtained economic operation data for Hunan Province in the first half of this year, showing that investment in strategic emerging industries has grown by 20.1%, especially in new energy vehicles, where production has increased dramatically by 7.7 times. When these numbers are placed together, do you think this indicates that the economic structure of Hunan is undergoing a change?
Executive Vice Governor of Hunan, Chen Xiangqun: Yes, this is also our commitment to structural adjustment, increasing our support for emerging strategic industries and new high-tech industries. In high-end equipment manufacturing, for example, we are focusing on aircraft engine manufacturing as a future direction, and we are also focusing on high-end product manufacturing in engineering machinery. Secondly, we need to vigorously develop information security because Hunan has a significant advantage with the National University of Defense Technology located here. Although these totals are still insufficient to fill the gap left by the decline of traditional industries, they give us hope and serve as a new growth point for Hunan’s future economic development.
Reporter:I have spent 11 days in Hunan and interviewed many high-tech enterprises, most of which are private enterprises. These enterprises seem to be somewhat confused; for example, when technology advances, national standards seem to lag behind. When technology is ready, there seems to be some difficulty in connecting with the market. What can the government do in this regard?
Executive Vice Governor of Hunan, Chen Xiangqun: As I mentioned earlier, private enterprises in Hunan are still a shortcoming. As you said, they indeed need various conditions and environments during their development process. We should say that we have not provided enough support in this regard, so we are now increasing our efforts. On one hand, we need to streamline administration and delegate power, while on the other hand, we need to actively support enterprises in financing and in providing a supportive environment for their development, including inspection, standard formulation, and market access. We must create a very good environment for private enterprises, as they will be the main force in Hunan’s future economic development and an important force in the structural adjustment of Hunan’s economy.
Reporter’s Note
Hunan people are famous for their spicy food, and they are also straightforward and candid in facing various difficulties during reform. What surprised me the most was when I asked about the achievements of supply-side reform, Executive Vice Governor Chen Xiangqun said, “It is still too early to talk about achievements.”
Helping traditional industries break through and guiding the development of emerging industries, Hunan’s pace of reform is not slower than that of other regions. Using financial means to promote capacity reduction also requires courage and imagination. However, supply-side structural reform is a complex system project, and both central and local governments have expectations for its advancement. By anticipating more difficulties, preparations can be more sufficient, and thus the steps to success may be quicker. I believe this is the hope I felt for the future of supply-side structural reform in Hunan.
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Source: CCTV Finance (ID: cctvyscj) Reporters: Hou Kaidi, Xin Yong, Zhang Jiyu, Zhang Hanxiao, Yao Peng, Lou Chao, Hunan Station
This article was edited by: Zhang Ning, Li Tianlu
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