CITIC ushered in a new "industrial" leader, with total assets of more than 10 trillion yuan, and has frequently deployed in the steel industry in recent years
Looking at Beijing from the eastern part of Xiangshan, the headquarters of CITIC Group is located in the city skyline. Source: Visual China
Author | Wen Shijun
Edit | Chen Fuye
Produced by | Prism Tencent Xiaoman Studio
On December 6, CITIC Group held a cadre meeting, at which it was announced that the Central Committee had decided to appoint Xi Guohua as Secretary of the Party Committee.
Previously, on November 24, Xi Guohua's predecessor Zhu Hexin became a member of the Party Committee of the People's Bank of China and secretary of the Party Group of the State Administration of Foreign Exchange, and was later officially appointed deputy governor of the central bank and director of the State Administration of Foreign Exchange, becoming the gatekeeper of the $3.38 trillion national reserves.
On December 14, CITIC issued an announcement: according to the decision of the State Council, Zhu Hexin will no longer serve as chairman.
At this point, the matter of CITIC's "change of leadership" has basically settled.
According to the usual practice, after completing the relevant procedures, Xi Guohua will become the chairman of the board of directors and become the leader of this giant state-owned enterprise directly under the central government. After 44 years of history, CITIC is about to usher in the seventh chairman after Rong Yiren (1979-1993), Wei Mingyi (1993-1995), Wang Jun (1995-2006), Kong Dan (2006-2010), Chang Zhenmin (2010-2020), and Zhu Hexin (2020-2023).
The use of foreign funds for investment and construction is the origin of CITIC, which gives CITIC its own strong financial DNA. In the following 40 years, CITIC has become one of the largest conglomerates in China.
However, unlike his predecessor Zhu Hexin's strong background in the financial industry, Xi Guohua's resume is concentrated in industrial central enterprises such as CRRC and FAW. CITIC, a 10 trillion-level central enterprise, ushered in such a technical and industrial head at this time, which has attracted much attention.
With assets of more than 10 trillion yuan, the background color is finance
At the end of 2022, the consolidated total assets were 10.6 trillion yuan. For reference, the combined GDP of the three first-tier cities of Beijing, Shanghai, and Guangzhou in 2022 will be 11.51 trillion yuan.
How many employees does CITIC have? There are 310,000 employees worldwide. Taking JD.com, which promises to "pay five insurances and one housing fund for brothers", as an example, at the end of 2021 before the acquisition and merger of Debang Logistics, JD Logistics had just over 300,000 front-line employees. According to the "2021 Wage Distribution Information" of state-owned enterprises released by CITIC Group in December 2022, the average salary of the 149,600 employees involved in the disclosure was 306,400 yuan.
For the whole year of 2022, the net profit will be 94.612 billion yuan, equivalent to a net profit of 259 million yuan per day. If we compare this net profit scale with A-share listed companies, it can rank 11th among 5,321 listed companies.
In fact, CITIC has been listed in the Fortune Global 500 for 15 consecutive years and ranked 100th in the world in 2023.
However, it is such a "giant", and the background color of CITIC is still finance.
Back in January 1979, in the Fujian Hall of the Great Hall of the People, Rong Yiren and other "five elders" in the industrial and commercial circles were received and talked with by the then central leaders. It was a winter day in Beijing, and at lunchtime, the staff also set up two tables in a corner of the Fujian Hall, and everyone ate shabu mutton together. It was after this conversation that Rong Yiren received a task: to take full responsibility for presiding over a unit and using foreign funds and technology to "do a good job in the cause of socialist construction."
At this time, Rong Yiren, the richest man in the Republic of China, the "Rong family Xiaokai" in Shanghai, the former deputy mayor of Shanghai, the vice minister of the Ministry of Textile Industry, and the "Rong Boss" by the central leaders, was 63 years old.
Ten days later, Rong Yiren submitted "Some Preliminary Opinions on the Proposal to Establish an International Investment Trust Company" transcribed by his wife Yang Qingqing, which was quickly approved by the State Council. In October of this year, China International Trust and Investment Corporation (the predecessor of CITIC Group) held its first board of directors, and Rong Yiren was appointed as the first chairman and general manager.
Rong Yiren and his wife Yang 𨰹 Qing. Source: Visual China
Over the past 40 years, CITIC has started from the rented office of the Peace Hotel in Goldfish Hutong in Beijing, to the completion and settlement of the CITIC Tower, the tallest landmark building in Beijing, from the issuance of "samurai bonds" in Japan in 1982 to complete the first overseas fundraising of a Chinese enterprise, to the backdoor listing of CITIC Group in Hong Kong in 2014, and from the 10 million yuan borrowed by Rong Yiren "out of his own pocket" to advance 10 trillion yuan in total assets in the second quarter of 2022.
With the help of the leverage of capital, riding the tide of the country and the times, CITIC's industrial tentacles are very wide-ranging. In the strategic framework officially announced by CITIC, its business has been distributed in five major sectors: financial services, advanced intelligent manufacturing, advanced materials, new consumption, and new urbanization.
From the perspective of revenue, CITIC's business volume is mainly concentrated in two major sectors. Among the annual revenue of 677.847 billion yuan in 2022, "financial services" accounted for 38.92% of the highest, followed by "advanced materials" (mainly minerals and metals), accounting for 36.82% - the two together contributed 75.74% of CITIC's overall revenue, more than three-quarters.
As of December 2023, CITIC Group's main business segments and major subsidiaries. Source: Drawn by the author
However, from the perspective of profits, the overwhelming advantage of the financial sector is very obvious: in 2022, the "financial services" sector contributed 83.26% of CITIC's profits, an increase of 2.98 percentage points compared with the previous year.
The new "number one" with an industrial background
Under the regulatory system of China's financial industry, CITIC is one of the few financial aircraft carriers with a "full license":
Including banks (CITIC Bank, CITIC Bank International, CITIC Baixin Bank, Kazakhstan Altyn Bank, Lin'an CITIC Village Bank), Trust (CITIC Trust), Insurance (CITIC Prudential Life Insurance), Securities/Investment Banking (CITIC Securities, CITIC Securities International, CITIC Construction Investment, CNCBI Investment), Public Funds (China Asset Management, CITIC Prudential Fund), Investment Asset Management/Private Equity Funds (CNCBI Wealth Management, CITIC Capital, CITIC Securities Investment, CITIC Goldstone, CITIC Asset Management, CITIC Juxin, CITIC Xinhui), Futures (CITIC Futures), Consumer Finance (CITIC Consumer Finance), Financial Leasing (CITIC Financial Leasing) and other licensed financial institutions and their subsidiaries and grandchildren.
In recent years, the most popular attraction was the acquisition of McDonald's franchise rights in mainland China and Hong Kong for the next 20 years by CITIC Capital and The Carlyle Group for US$2.08 billion.
Subsequently, McDonald's China changed its name, the "Golden Arches" was born, and Zhang Yichen, chairman and CEO of CITIC Capital, became the chairman of the board of directors.
In fact, in terms of asset size, as of the end of 2002, the "financial services" sector accounted for 94.2% of CITIC's total assets. In other words, a large number of companies and industries outside the financial industry account for only 5.8% of CITIC Assets. CITIC's main business is undoubtedly finance. Of course, there is also a common feature of enterprises in the financial industry - high debt ratio, as of the end of 2022, the consolidated asset-liability ratio was 87.48%.
Therefore, when the state began to promote the pilot project of "financial holding companies" in September 2020, requiring companies that hold or actually control two or more different types of financial institutions to apply for the establishment of financial holding companies, CITIC became the first batch of institutions to apply and be approved.
So far, the central bank has only accepted five, but only three have been approved to get licenses - "Everbright Group" and "Wanxiang Holdings" have accepted applications, but they have not yet been approved.
Up to now, the list of financial holding companies that have obtained administrative licenses from the People's Bank of China. Source: Drawn by the author
Under the current policy guidelines for finance to return to its roots and serve the real economy, it is not difficult to understand Xi Guohua's succession.
Xi Guohua, 60, has been working in the field of railway vehicles since graduating from the Shanghai Railway Institute (later merged into Tongji University) in 1985. In June 2008, Xi Guohua was appointed as Executive Director, President and Member of the Standing Committee of the Party Committee of CNR. Xi Guohua led the merger of CSR and CNR, and later became the general manager, vice chairman and deputy secretary of the Party Committee of CRRC Group.
In October 2017, Xi Guohua was transferred to the chairman and secretary of the party committee of Xinxing Jihua Group Co., Ltd., a central enterprise, and became the head of the central enterprise, and a few months later, in June 2018, he was again transferred to the deputy secretary of the party committee, director and general manager of FAW Group. After working in FAW for two years, he was transferred to CITIC Group in June 2020 as Deputy Secretary of the Party Committee, and in August of that year, he was appointed as Vice Chairman and General Manager.
In July 2022, CITIC Financial Holdings was established after the approval of the central bank, and Xi Guohua served as the first chairman, and the signs of "succession" were already obvious until this personnel change.
In a previous report, Phoenix.com quoted a former employee of CRRC as summarizing Xi Guohua: "Tianxin Town has made traditional scientific research institutes fission all over the world, and the Beijing-Shanghai line has refreshed the surface speed, led high-end equipment to the North American powerhouse (Boston) for the first time, and was ordered to go out of the customs to let the king of the liberation of the Red Flag return, and China will continue to write the peak story." ”
minerals and metals, or become physical power points
CITIC Group is not under the jurisdiction of the State-owned Assets Supervision and Administration Commission of the State Council, nor is it included in the list of 97 "central enterprises" of the State-owned Assets Supervision and Administration Commission. However, as one of the 26 "central financial enterprises", the Ministry of Finance performs the duties of an investor on behalf of the State Council and enjoys the rights and interests of the investor.
Compared with the more "pure" financial institutions such as banks, insurance companies, and AMCs (non-performing asset management companies) in the list of "central financial enterprises", CITIC has its own special feature - the integration of industry and capital.
At the mid-term work conference held by CITIC in July 2023, Zhu Hexin, then chairman of the board of directors, emphasized "serving the real economy" three times in his short speech.
Not long ago, on November 2, the Party Committee of CITIC Group held a meeting to convey the spirit of the Central Financial Work Conference on learning Xi and implementation, and once again emphasized: "We must always adhere to the fundamental purpose of financial services for the real economy and give full play to the advantages of CITIC Financial's full license...... More financial resources will be used for scientific and technological innovation, advanced manufacturing, green development and small, medium and micro enterprises, and do a good job in science and technology finance. ”
Earlier this year, Xi Guohua, then vice chairman and chairman of CITIC Financial Holdings, wrote an article in the People's Daily, clearly saying: "CITIC Financial Holdings is based on serving the real economy and serving people's lives, and strives to identify the focus and focus of financial services for the real economy. ”
For CITIC, the financial sector is large and strong, but the "advanced materials" with minerals and metals as the main business in the five major sectors will undoubtedly become the driving force.
On the morning of April 10, 2023, among the ten companies in the first batch of listed companies under the registration system, there was the name of CITIC Metal. CITIC Metal's main business is metal and mineral trading, which is a typical investment-driven entity model. Especially in the field of bulk trade of resources and minerals, the advantage of capital often determines the ability to go through the price cycle, and even participate in procurement pricing and ensure stable supply (offtake).
In addition to upstream metal minerals, in terms of metal smelting, CITIC also laid out very early——
In 1987, CITIC Hong Kong was established. In 1991, CITIC Hong Kong was listed on the backdoor of "Pacific Development" and changed its name to "CITIC Pacific", becoming the first "red chip" of a mainland enterprise listed in Hong Kong, and soon became one of the 33 constituent stocks of the Hang Seng Index. The use of the Hong Kong platform to raise funds and invest at home and abroad has made CITIC Pacific the largest non-financial industrial business platform under CITIC.
In 2014, CITIC Group went public as a whole, raising HK$145.5 billion, which also made use of the shell of the Hong Kong stock "CITIC Pacific".
In 1993, CITIC Pacific began to lay out the metallurgical industry and acquired Jiangyin Xingcheng Iron and Steel Plant; in 2004, CITIC Pacific acquired Huangshi Dongfang Iron and Steel Plant, renamed Hubei Xinyegang Co., Ltd., and then controlled Daye Special Steel, an A-share listed company through Hubei Xinyegang; in 2006, CITIC Pacific acquired part of the equity of Shijiazhuang Iron and Steel Co., Ltd.; in 2008, CITIC Pacific Special Steel Group was established in Shanghai.
At that time, CITIC Pacific was helmed by Rong Zhijian, the son of Rong Yiren, and the mergers and acquisitions in metal smelting also focused on the very vertical field of special steel (special steel).
Rong Zhijian has publicly stated that the main customers of special steel are distributed in auto parts manufacturing, power generation equipment production and industrial machinery manufacturing and other industries. "The industry is expected to grow significantly over the next 10 years, so the Group is confident in the prospects for special steel production. At that time, there was a market view that if CITIC Pacific could complete the efficient integration of its three special steel production enterprises, "it would basically monopolize the domestic special steel production industry."
However, it is a blessing and a curse.
During the 2008 financial crisis, CITIC Pacific, led by Rong Zhijian, invested in Australian dollar foreign exchange derivatives with a huge loss of HK$15.6 billion. At that time, the media generally believed that Rong Mingfang, the daughter of Rong Zhijian, who was the financial director, had the first responsibility. In April 2009, Rong Zhijian resigned as Chairman of the Board of Directors of CITIC Pacific. Legal Daily commented on this: A generation of "red-top businessmen" has come to an end.
On March 25, 2009, Hong Kong, CITIC Pacific Chairman Rong Zhijian resigned more than 10 days later at the 08 annual results conference. Source: Visual China
"Cut off" Shagang and took over Nangang
As a result of these events, CITIC Pacific's investment in the steel industry stalled slightly, and in 2010 it sold a 65% stake in Shijiazhuang Iron and Steel. However, Rong Zhijian has no problem with the market judgment of special steel, and the matching of the real economic attributes of steel itself and policy guidelines has begun to lay out CITIC Pacific again.
In 2017, CITIC Pacific acquired Qingdao Special Steel, and in 2018, CITIC Pacific acquired Jiangsu Jingjiang Special Steel, taking a controlling stake in Jinan Pacific Special Steel Suspension Company, a downstream company. In 2019, CITIC Pacific's special steel sector was restructured and listed through its listed company, Daye Special Steel, and was renamed "CITIC Special Steel" - the overall listing plan was launched in January, the approval of the China Securities Regulatory Commission was obtained in August, and the restructuring and overall name change were completed in October.
Such a speed is rare in China's capital market.
As a result, CITIC Special Steel has become the largest special steel group in China, which mainly includes Jiangyin Xingcheng Special Steel (bars and plates) in the early Rong Zhijian period, Hubei Huangshi Daye Special Steel (seamless steel pipes, bars and forgings), Qingdao Special Steel (wire rods, plates) and Jingjiang Special Steel (seamless steel pipes) acquired in recent years, as well as several supporting upstream and downstream enterprises.
The "appetite" is not small, and the pace is still non-stop. In January 2021, it invested 400 million yuan to participate in Tianjin Steel Pipe, and in January 2023, it took a controlling stake in Tianjin Steel Pipe.
In the subsequent layout, CITIC Special Steel fell into a dispute related to Fosun and Shagang.
In 2022, Fosun, which was caught in a liquidity turmoil, began to sell its assets frequently. In October of that year, Fosun announced that it planned to transfer its 60% controlling stake in Nanjing Iron and Steel Co., Ltd. to Shagang, a private capital giant. At that time, the remaining 40% of the equity was held by Nanjing Iron and Steel Group, and after penetration, Nanjing State-owned Assets and Nanjing Iron and Steel executives held shares.
On March 15, 2023, Nanjing Iron and Steel Co., Ltd. announced that Fosun had signed an agreement with Shagang for a consideration of 13.58 billion yuan, and Shagang had paid 8 billion yuan of sincerity, but the company's shareholders had the right of first refusal under the same conditions.
There have been rumors in the market that Nanjing Iron and Steel Group has been in contact with CITIC Taifu. On April 2, Hubei Xinyegang, a wholly-owned subsidiary of CITIC Pacific, invested 13.58 billion yuan to increase the capital of Nanjing Iron and Steel Group (which was the purchase price of Shagang before) and became the new controlling shareholder of Nanjing Iron and Steel Group. On the same day, Nanjing Iron and Steel Group issued a notice to exercise the right of first refusal to purchase 60% of the shares of Nanjing Iron and Steel from the shareholders of Fosun.
In the face of this change, Shagang was naturally dissatisfied, and then filed a lawsuit against Fosun. Fosun replied strongly, saying that Shagang "disregarded the basic facts and basic legal relationship and abused the right to sue".
On October 13, Nanjing Iron and Steel Group received the "Civil Mediation Letter" from the Jiangsu Provincial High People's Court, and Nanjing Iron and Steel Group paid compensation to Shagang, and Shagang voluntarily withdrew from the transaction. On December 6, Nanjing Iron and Steel announced that the relevant delivery was completed, and the actual controller was changed from Guo Guangchang to CITIC Group.
For a listed enterprise group like CITIC Special Steel, which started with capital operation, it is the meaning of the topic to support the stock price and market value through the continuous injection of high-quality assets. In this line of thinking, CITIC Special Steel's "truncation" of Nangang is not surprising.
Or if we trace the history of the Rong family for a hundred years, it started in Qianzhuang and started in industry. Before the liberation, the Rong family set up a factory, which was the leverage model: "Build a factory and mortgage it, and then set up a factory after obtaining a mortgage, and so on, and the Rong family will become bigger and bigger." Rong Esheng, a member of the Rong family, once recalled Rong Yiren's fathers, Rong Desheng and Rong Zongjing: "After experiencing three or four great turmoil, they were able to survive because of the help of the silver and money industry." Rong Yiren's father, Rong Desheng, wrote his "Prosperity Sutra" in 1913: "Only when you owe people and earn money can you have a prosperous day." ”
Finance is the living water of industry, which is very clear to the founder of CITIC, Rong Yiren. But the living water needs to gather energy, or the wind and waves held up by the times.
Back in February 1978, Rong Yiren had just come out of the mountain again and was elected vice chairman of the Fifth National Committee of the Chinese People's Political Consultative Conference. He was thrilled and wrote a few lines of poetry:
"The past has passed by, and the characters of the present are heroes. Unwilling to add bricks and tiles, thousands of miles of rivers and mountains are red from generation to generation. ”