Exclusive Interview With Deng Renjie, Vice General Manager Of China Merchants Group: China Merchants Inspection Strives To Break Through 5 Billion Revenue In Five Years And Enter The First Echelon Of China Testing And Certification

"I often say that testing and certification needs to be done with idealism. While doing a good job in enterprise management, we should do it with our ideals to enhance the competitiveness of China's testing and certification," Deng Renjie, deputy general manager of China Merchants Group, said in an exclusive interview with 21st century economic reporter.

Deng Renjie said that with China's transformation from an export-oriented economy to a new domestic and international dual cycle development pattern, China's testing and certification should adapt to this trend and enhance its voice. China Merchants Group is promoting the development of China's testing and certification industry with a sense of mission.

This also made Deng Renjie become the executive director of China Merchants inspection and certification Holding Co., Ltd. (hereinafter referred to as "China Merchants inspection") in addition to the post of deputy general manager of China Merchants Group and chairman of China Merchants port Holding Co., Ltd. (hereinafter referred to as "China Merchants port").

On November 22, the first testing meeting of Chongqing Merchants Group Co., Ltd. was held, marking the completion of the inspection of Chongqing Merchants Group Co., Ltd. China Merchants Group Testing Co., Ltd. holds 56% of Chongqing Testing Co., Ltd. by cash capital increase through non-public agreement. China Merchants Group and this officially entered the testing and certification industry.

According to qixinbao data, China Merchants Group was established on October 10 with Deng Renjie as its legal representative. The company is wholly owned by China Merchants Group Co., Ltd.

Deng Renjie told the 21st century economic reporter that through this layout, China Merchants Group will implement the strategy of "quality power", promote industry reform, industry integration and industry progress, build national inspection and testing certification brand and industry "national team". Meanwhile, with the existing business network of China Merchants Group, it will participate in the global quality competition, so as to improve China's inspection and testing recognition Global competitiveness of the industry.

Deng Renjie hopes to take this capital increase in Chongqing testing as the node, increase cooperation with other local testing institutions, and carry out merger and acquisition of appropriate subject matter. This will not only create a benchmark for China's testing and certification industry, but also be among the forefront of the global testing and certification industry.

Breaking the old pattern of China's testing and certification industry

In the past few years, with the increasing participation of market participants in China's testing and certification industry, especially the deepening of institutional integration reform, various barriers in China's testing and certification industry have been gradually broken.

With the expansion of foreign laboratories in China, local testing institutions have developed rapidly, showing a benign competition pattern of the rise of private testing institutions, the loosening of state-owned testing institutions, and the continuous improvement of market participants' participation. From 2015 to 2019, the proportion of inspection and testing institutions of public institution system in the total number of institutions in China has decreased from 40.6% to 25.16%, showing an obvious downward trend.

But on the whole, foreign testing and certification institutions in China still maintain a strong comprehensive competitiveness. According to the statistical report of the State Administration of market supervision and administration of China, foreign investment inspection and certification institutions in China accounted for 9.1% of the market with 0.8% of the institutions. In 2017, 21 of China's top 100 inspection and testing institutions were foreign-funded, accounting for 31.99% of the total revenue of the top 100 inspection and testing institutions.

In addition, the statistics show that in 2019, the average revenue of China's testing and certification institutions is 7.33 million yuan, and the average revenue of foreign-funded institutions in China is 57.41 million yuan. The per capita output value income of domestic institutions in the testing industry is also significantly lower than that of international leading institutions.

On the other hand, although China's inspection and testing institutions show a trend of intensive development, the overall pattern of weak, small and scattered industry has not fundamentally changed. In 2019, the number of inspection and testing institutions above Designated Size accounted for 13.17% of the whole industry, and the proportion of operating income was as high as 76.86%. At the same time, the number of inspection and testing institutions with less than 100 employees accounted for 96.49% of the total number of institutions.

"This pattern restricts the development of China's testing and certification industry. Many testing and certification institutions can't jump out of the local, municipal and provincial level, and are limited in one place, which is not conducive to the promotion of the industry's own competitiveness." Deng Renjie said that changing this situation is also the opportunity and mission of China Merchants Group.

It points out that the central enterprises can participate in the global market competition by taking advantage of their own advantages in the market.

Why choose to increase capital to hold Chongqing test? Deng Renjie said that, first of all, Chongqing's own strength is relatively strong, ranking in the top six of China's automobile inspection industry. Secondly, the two sides have a long history of cooperation, which makes China Merchants Group have a certain understanding of the industry. After the in-depth investigation of Chongqing testing, China Merchants Group thinks that the inspection and certification industry is worth intervening in.

The testing and certification industry is based on the relevant requirements and regulations of the society for quality (product quality), health (living health level), safety (production and life safety), environmental (social environmental protection), etc., which reflects the people's pursuit of a better life.

From a global perspective, the scale of the global third-party testing market has been steadily increasing year by year, despite the upward fluctuation of world GDP since 2000. The global testing and certification industry has maintained a growth rate of 5% - 6% in the past 20 years, with an average growth rate of 10% in the past 10 years. In 2019, the market scale of global testing and certification industry is 206.3 billion euro, and China is the largest market.

From 2013 to 2019, the scale of China's testing market increased from 139.9 billion yuan to 322.5 billion yuan, with a compound growth rate of 14.9%, far exceeding the global average growth rate of 10%.

"At present, we have a medium-term goal, which is to initially build into a leading inspection, testing and certification leading enterprise with global competitiveness in about five years, and strive to break through 5 billion yuan in revenue." Deng Renjie said that after increasing investment in Chongqing testing, China Merchants Group will also seek suitable targets for merger and acquisition, or cooperate with other testing and certification companies, so as to achieve the goal of entering the first echelon of China's testing and certification within five years and the first echelon of the world within 10 years.

Deng Renjie said that this cooperation is the first batch of central local cooperation and market-oriented reform of China's provincial testing and certification institutions, which will produce an important demonstration effect and help the group to achieve rapid development in the testing and certification industry and occupy the commanding height of industry reform and development.

"All provinces are exploring different ways of reform, and we hope that this cooperation will become a demonstration of further reform and integration of the industry," he said with a smile.

Enabling China's high quality development

"Testing and certification is an important industry category with the development of trade and industry." Deng Renjie believes that as China enters a high-quality development stage, testing and certification will play a greater role.

Deng Renjie said: "after China has entered the stage of high-quality development, testing and certification is an important infrastructure for building a strong quality country. The level of testing and certification should be adapted to high-quality development, boosting and enabling high-quality development."

China Merchants will become a catfish to stir up the market.

In July 2020, the Ministry of industry and information technology and other 15 departments jointly issued the guidance on further promoting the development of service-oriented manufacturing, pointing out that it is necessary to enhance the service capability of inspection, testing and certification, focus on the coordination and integration of manufacturing industry and inspection, inspection and certification and other service resources, actively promote participation in the international standard system of service-oriented manufacturing and service trade rules, and promote product and service standards And certification. This shows that the testing and certification industry has a long way to go to meet the needs of China's high-quality development.

Deng Renjie said that at present, the main business scope of Chongqing inspection is vehicle detection business, fire detection, building detection, gold certification business, etc., and is also starting to cultivate and carry out electronic, transportation, food and environmental detection business, and government bidding and performance acceptance business.

As of the end of 2019, Chongqing inspection & Testing Co., Ltd. has achieved an operating income of 892 million yuan and a net profit attributable to the parent company of 212 million yuan. In order to achieve the medium-term goal, China Merchants Group will also increase the existing business scope, such as the detection and certification of bulk commodities in ports and the inspection and certification of transportation infrastructure, so as to achieve better collaborative benefits in different scenarios such as ports and logistics. At the same time, the enterprise will also realize the exponential growth of operating income and profit by merging other testing and certification institutions.

In addition to the China Merchants testing and certification (Chongqing) Co., Ltd., which is registered in Chongqing, China Merchants Group has also set up China Merchants testing and Certification International Co., Ltd. in Hong Kong to coordinate the development of testing and certification business in Hong Kong and overseas.

"Relying on the advantages of professional services in Hong Kong, China, in addition to cooperating with international certification bodies, we will also carry out scientific and technological research and development in the Hong Kong investment laboratory, and make use of the advantages of the enterprises of China Merchants Group in Hong Kong to connect the testing and certification platforms of the mainland and Hong Kong." Deng Renjie said that this will promote the development of China's testing and certification, and enhance the quality trust and recognition of Chinese products by consumers all over the world.

Deng Renjie said that the inspection of China Merchants Group will cover most industries and products in combination with the group's nationwide and global business outlets and industrial categories. In addition to the current traditional inspection, testing and certification, China Merchants inspection will also increase the degree of intervention in the service of high-tech manufacturing industry and strategic emerging industries.

Deng Renjie pointed out that entering the testing and certification industry meets the requirements for innovation and transformation in the new development stage of the group, helps the group expand its investment ideas, enter the new economic field, and helps the group's "industry + technology" innovation and digital transformation.

He further explained that the testing and certification industry is an industry that needs to develop synchronously with the manufacturing industry. Only when the technology reaches a certain level can the testing and certification of high-tech products be carried out. The two complement each other. The group will also focus more on the high-tech field and help China's high-quality development after the testing and certification plate has developed to a certain strength 。

With China's entry into the new development pattern of "taking the domestic big cycle as the main body and domestic and international dual circulation promoting each other", Deng Renjie said that China's testing and certification industry will also usher in a window period of development.

Deng Renjie said: "especially after RCEP is officially signed on November 15, the trade volume in the region will increase significantly, which will promote the business demand for testing and certification. At the same time, we will also strive to improve the service level of testing and certification, and further promote the development of regional trade."

Deng Renjie said that he hoped to create a national testing and certification brand through the efforts of China Merchants Group in testing and certification, and participate in the global quality competition on behalf of China.

"We have such an ideal, and we are very confident that we can achieve it in a short time." Deng Renjie said.

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