n Interview with Hu Jingpei,the Board Chairman of Wanli Stone Co., Ltd.

Under the background of globalization, what is the way out for China stone export? China Stone Sources (CSS) interviewed the board chairman of Wanli Stone Group.

CSS: Good morning, Mr Hu. What is your assessment of the current situation of China stone industry?

Thanks to China’s reform and opening up in 1978, the 30 years witnessed the rapid development of China stone industry and the great progress it has made.

First, over the three decades there have been rapid development to the China stone industry. By far, there are tens of thousands of stone enterprises in China, with three noteworthy stone industrial clusters, that is, Shuitou in Fujian province, Yunfu in Guangdong province and Laizhou in Shandong province. These clusters become the mainstay of China stone industry and bring the development of the whole industry alone. Meanwhile, the industries associated with stone sector, such as mining industry, stone processing industry, stone care industry, stone machinery & tools industry have come to being and have quickly developed.

Second, China stone industry has achieved significant growth in terms of production capacity and the output value. It was estimated that the annual production capacity of marble slab in 1978 was 397,400 square meters. While, in the year of 2007, the amount reached 23.93 million square meters. In view of the granite slab, in 1978, the yield of granite slab was 17,300 square meters, and it soared to 216 million square meters in 2007. At the same time, the added value of China stone industrial output rose from 5.91 billion yuan in 2000 to 33.7 billion yuan in 2007.

Third, due to China’s ever more involvement in international trade, China is a top country in the world for production, consumption and export of stone products. As for the total value of stone import and export, it was 1.215 billion US dollars in 2000 and rose to 4.685 billion US dollars in 2007, an increase of 286%. Stone industry becomes the largest proportion in terms of the import and export of building material industry. In addition to stone products, stone machinery and equipment sector has developed and gradually enters the international markets. The Xiamen stone fair in Xiamen and Stonetech in Shanghai are the professional leading stone fairs in the world and gaining more and more global acceptance.

CSS: China stone sector has made impressive achievement over the years, and in your opinion, what are the main reasons?

China stone industry’s rapid development is the result of the China’s opening to the outside world, but also the result of the joint efforts of the global stone industry. Thanks to global stone businessmen’s instructions and cooperation, China has made such an impressive progress. While, the objective factors consist of the following aspects: a), the significant increase in the domestic and foreign demand, b), adequate resources and low-cost operation, c), the ultra-low environment cost, d) cheap labor force cost and e) the export encouragement policy by the Chinese government.

CSS: Wanli stone was founded in 1996, while, after 12 years’ development, the company become the leader in stone industry and possesses the largest stone processing plant in China. How can you make it? 

Mr Hu: Wanli Stone has been in business since 1996 when China enjoyed the rapid development. We started as a stone trader. Later, we developed into a company integrating quarrying, fabricating and trade together. At the same time, we pay great attention to study and research on stone sector to develop nationally and internationally. The quarries and stone plants lay the foundation for the trade, in return, the trade will further the development of the quarries and stone factories. We are striving to be the best stone enterprises in the word. With the current global context, we carry out the strategy of “concentration among companies”. We can become partners even we used to be competitors for a long time. Opportunity favors the prepared mind. It is difficult for us to seize opportunity if we follow the prescribed order step-by-step. Therefore, the most effective way is to cooperate with your competitors, with those giant companies, and then achieve with mutual benefits. By far, we have established joint venture and even cooperation relationship with companies from Italy, Japan, USA, South Africa, Russia and France. It turns out to be a success.

CSS: According to the current situation, particular the international background is not positive for the export in China. In your opinion, what are the main problems facing China stone industry?

Mr Hu: Like any other manufacturing industry, China stone industry will meet more problems and challenges than before. Some favourable factors in the past may become unfavourable ones at present or in the future, that is, the factors made you succeed can also put you down.

First and foremost, there will be a decline in the internal and external demand of stone products. The first implement of the tightened monetary policy over this decade has a great impact on the China stone industry. In this situation, not only the investment in the fixed assets of China stone industry will be reduced, but also the domestic stone projects will be declined. As to the foreign demand, the subprime lending crisis in USA has affected the global economy, and the purchasing power of the foreign market has been significantly lower than before. For example, statistics show that, the stone order from USA market dropped by 30%--50% in the first quarter of this year in China stone industry.

In the second place, the government will implement more severe controls of the exploitation of quarries. Consequently, the stone resources are not sufficient and the price will not be cheap. The resource tax rate will not only rise, but also the tax will be imposed on production in place of an existing levy based on volume. At the same time, the range of imposing will be widened. All these will lead to the rise of the resource cost for stone enterprises.

Moreover, the current Chinese market and policies will affect the sector to some extent. The profit margin is becoming slighter and slighter, no matter at domestic or foreign market, and inexorably nearing the loss due to the stone competitors’ doing their best to undercut each other prices when facing the stagnant market. At the same time, the government will attach even greater importance to environment protection and security production, which will enable stone quarries enterprises to carry out the regulations to protect the environment, thus resuming the system of guarantee deposites and security assurance. In this condition, the costs for environment and security will rise.

Fourth, the labor force cost has increased. There are two reasons. The first one is that the domestic CPI is keeping rising, thus, the average salary of employees is increasing by 8%-10% annually. Second, according to the Labor Contact Law, we have to pay much more for the labor force.

Fifth, with regard the adjustment and alternation of Chinese government policy, it has been forecasted that further and stricter limits or even bans will be introduced for the export of those products characterized by “high energy consumption, high rate of pollution, extracted from non renewable natural resources” products. Consequently, the export of stone production which exploits non renewable natural resources will no longer be encouraged, and tax grant of export will be lowered or even zeroed.

Moreover, the appreciation of RMB is an important factor. Since the beginning of the 2008, the RMB has been appreciating increasingly, with the 1USD=7.8331 RMB in 2006 to the present 1USD=6.8380RMB. And most of the prices we quote are US dollar-based. Therefore, the downward of the RMB/US dollar exchange rate will lead to the decline of product price. Though the China stone sector has required to the price rise in stone products, the pace of the price rising is slower than that of RMB appreciation.

Lastly, the energy crisis and other aspects influence the stone industry directly and undirectly. In line with the soaring of the world crude oil price, the prices of diesel oil used in stone quarrying, processing and transportation is rising rapidly. The unfavourable factor combining with the insufficiency of electricity supply and price rise of electricity power causes the further rise of stone cost. The situation for us is certainly very unsatisfactory.

CSS: From the unfavourable factors you mentioned above, in your personal view, as the China stone industry, what could be done to resolve them and what countermeasures should they take to meet the current challenges and to further develop?

Mr Hu: In this current status, we must do something to change it. Some adjustments should be taken on the product development orientation and market positioning. The integration of characteristics and standardization is essential.  In the past, a lot of stone companies focused on large scale projects and export activity. While, in the future, we should take much more efforts to open and expand the house building market, as China real estate industry requires the phasing out of the rough house and promotes the fine decoration residence gradually. It is good news for stone industry.

Second, the development mode should be shifted. Facing the rising resources cost and environment cost, stone industry must adopt the strategy of sustainable development. We should improve and innovate the technology to build a resource-saving, environment-friendly stone sector. Based on the principle of developing recycling economics, stone enterprises need introduce advanced techniques and equipment to replace or eliminate the backward workshop manufacturing mode. The improvement of productive activity will further the expansion of development to the current stone industry, thus generating more profits,

Third, stone industry must change the marketing concept and marketing mode. We must carry out the brand strategy to create elements that differentiate us from our competitors.

CSS: What is your plan for future, particular, the strategy for further development?

Mr. Hu: Since the moment of the establishment of the Wanli Stone, we have positioned the company as “one of the top natural stone companies in the world”. Perhaps we will not to be the largest one, but the best one with our characteristics and strength. We are always sticking to our goal and are committed to make our goal to be a reality. We will further develop our marketing network and direct selling mode to achieve the globalization of resources, capital, manufacturing, distribution, talent and market.

About Wanli Stone Group:

As a complex of quarry owner, manufacturer and trader, Wanli Stone Group, headquartered in Xiamen, Fujian, China, is a leading company with biggest export turnover in China stone industry. Sticking to the operation policy of human center and client first, Wanli Stone Group are supplying top quality stone products and premium service to beautify living world and develop staff’s ability completely. Wanli Stone treasures all cooperation opportunities with clients, making every effort on supplying excellent products and good service for clients.