Ren Xiangdong of CISI Global Fund: Globalization is still a long-term trend, focusing on Chinese companies leading in application and development

Financial Associated Press, April 29 (Reporter Zhou Xiaoya) In recent years, the global competitiveness of Chinese enterprises has been continuously improved, under the new round of global technology wave, what investment opportunities for China's industrial upgrading deserve continuous attention? What are the industry challenges worth noting?

At the 2022 Buffett Shareholders' Meeting China Investor Summit hosted by the Industrial Securities Global Fund, Ren Xiangdong, deputy director of the Fund Management Department of the Industrial Securities Global Fund, believed that in recent years, China's import substitution has accelerated at both the depth and breadth levels, and in the future, maintaining the industrial competitiveness of terminal products will be the biggest challenge facing import substitution.

In the context of the wave of globalization, he said that the share of many traditional industries in China in the global market still has obvious room for growth; in the emerging hard technology fields such as new energy, smart cars, and AI, the application and development of Chinese enterprises rank among the top in the global market; in the field of soft technology, including Internet applications such as short videos, Chinese companies have very strong capital and technical barriers, walking in the forefront of the world.

With the global low-carbon, intelligent, etc., he believes that these companies will take advantage of the global wave of science and technology and low-carbon east wind to go overseas and have a greater share in overseas markets.

The Financial Associated Press selected some of Ren Xiangdong's speeches and views at the summit for the benefit of readers.

1. To a certain extent, China's development in the past few decades has also been a process of continuous import substitution. It can be seen that regardless of breadth and depth, China's import substitution has accelerated in the past few years, evolving in the direction of higher added value.

2. From the perspective of breadth, import substitution not only occurs in the fields of semiconductors, electronic components, materials, etc., but also exists widely in many parts, complete machine fields, and even in the field of brand consumption such as medical, automotive, textile and clothing.

3. After the accumulation of basic capabilities in manufacturing, AI, electrification, intelligence and other basic capabilities in the past few decades, we also have some global innovative solutions, which are themselves import substitutions for the original solutions.

4. From the perspective of depth, China's import substitution is a process of continuous extension from the downstream to the upstream, with the development of China's infrastructure construction in the past many years, we have slowly realized the localization of construction machinery, and then realized the localization of hydraulic parts upwards, and will continue to evolve to the localization of upstream materials and parts in the future.

5. I think the biggest challenge of import substitution is not the technical threshold of the product to be replaced, but that China must maintain the industrial competitiveness of the terminal product, and only when the global share of the terminal product is stable can it provide the greatest foundation and soil for the import substitution of the corresponding product.

6. We have seen some counter-currents in the wave of globalization in recent years, and we need to be vigilant about this. But from the bottom of business, globalization will remain a long-term trend. Due to the development of society and technological progress, the basic elements of business such as the flow of people, goods, information and capital have become more smooth in the circulation and allocation of the world.

The following is the transcript of Ren Xiangdong's speech:

Moderator: Mr. Ren once said that the industrial upgrading of China in the next 3 to 5 years may be our biggest characteristic of the times. From the perspective of global competitiveness, many industries in China have gradually moved from advantages to victory. Many Chinese companies are deeply involved in and even leading many global technology waves. Can you share with us the investment opportunities brought about by China's industrial upgrading?

Ren Xiangdong: In the past few years, China has undergone a lot of changes in many fields. In emerging areas such as electric smart cars, China not only has the world's most open consumers of electric smart cars, but also has the world's most radical producers of electric smart cars. Under the role of both supply and demand, we see that in the fields of electric smart cars, new energy, AI and other fields, the Chinese market and Chinese companies have become global leaders.

In addition, we see that the consumer brands represented by Shanghai Jahwa, or the LED display industry where Leyard is located, all reflect different degrees of import substitution, and import substitution, whether in breadth or depth, is accelerating in the Chinese market.

At the same time, in many traditional manufacturing areas, the global competitiveness of many high-quality companies has turned from advantages to victories, and their advantages are no longer only cost advantages and cost-effective advantages, but are converted into technical advantages and even product advantages.

Therefore, on the whole, whether it is the rise of domestic products or in many emerging scientific and technological fields, China's industrial upgrading is being carried out extensively.

Host: From the perspective of the industry and industry, how do you view the current process of domestic substitution, the opportunities and challenges it faces?

Ren Xiangdong: To a certain extent, China's development in the past few decades has also been a process of continuous substitution of imports. It can be seen that regardless of breadth and depth, China's import substitution has accelerated in the past few years, evolving in the direction of higher added value.

From the perspective of breadth, import substitution not only occurs in the fields of semiconductors, electronic components, materials, etc., but also widely exists in many parts, complete machine fields, and even in the field of brand consumption such as medical, automotive, textile and clothing.

And it is gratifying that after the accumulation of basic capabilities in manufacturing, AI, electrification, intelligence and other basic capabilities in the past few decades, we have also had some global innovative solutions, which are themselves import substitutions for the original solutions. For example, the intelligent lawn mowing robot, although it is still in the early stages of the industry, is also an innovative alternative to the traditional lawn mowing robot.

From a deep point of view, China's import substitution is a process of continuous extension from the downstream to the upstream. For example, with the development of Infrastructure construction in China over the past few years, we have slowly realized the localization of construction machinery, and then realized the localization of hydraulic parts upwards, and will continue to evolve to the localization of upstream materials and components in the future.

When it comes to the future challenges of import substitution, due to the improvement of China's basic scientific capabilities in the past few years and the accumulation and release of engineer dividends, the foundation of current import substitution is still very solid.

I think the biggest challenge of import substitution is not the technical threshold of the product to be replaced, but China to maintain the industrial competitiveness of terminal products, that is, to maintain the global share and competitiveness of consumer electronics such as mobile phones, equipment manufacturing industries such as construction machinery, new energy industries such as wind power and photovoltaics, and electric smart cars.

Host: In the future, our companies may be able to occupy more and more places in the global market, in your observation, which industries of Chinese companies are or are expected to win a global competitive advantage, which in turn will bring investors investment opportunities?

Ren Xiangdong: We have seen some counter-currents in the wave of globalization in recent years, and we need to be vigilant about this. However, from the perspective of the bottom of business, globalization will still be a long-term trend, because the development of society and technological progress have made the flow and configuration of basic elements of business such as the flow of people, goods, information and capital more smooth in the world.

From an investment perspective, in many traditional industries, even after decades of development, there is still a mismatch between China's competitiveness and the share of the global market, and there is obvious room for growth. At the same time, in the emerging hard technology fields such as new energy, intelligent vehicles, and AI, China's application and development are at the forefront of the world.

In soft technology, including Internet applications such as short videos, China is also at the forefront of the world, and from a global perspective, few countries can incubate competitive short video companies. We look at the reports of short video companies, and the research and development expenses of these companies are in the tens of billions, and there are very strong capital and technical barriers.

With the global process of low-carbonization and the embrace of emerging needs such as intelligence, I believe that these companies will also take advantage of the global wave of science and technology and the east wind of low-carbon to go overseas and have a greater share in overseas markets.

Risk Warning: The views only represent individuals, do not represent the company's position, are for reference only, not as investment advice, and the views are time-sensitive. The fund investment needs to be cautious, please choose carefully.