China's GDP was up 7.7 percent year on year in 2013, lower than 8 percent for the 2nd consecutive year. China's economy is entering a new stage of transformation and upgrading.

The Communique of the 3rd Session of the 18th CPC Committee expressly noted that efforts should be stepped up to accelerate the transformation of the mode of economic development, build an innovation-oriented country and promote the more efficient, equal and sustainable development of the economy.

How will China's economy develop in 2014? What changes are taking place in China's auto industry in the context of transformation? How will enterprises deal with the transformation?

Regarding these questions, we interviewed Yan Ping, an NPC deputy and chairman of Yuchai Group.

Brilliant results, non-negligible worry

A: As far as you know, how was China's auto industry last year? What about Yuchai's market performance?

Yan: 2013 is a year mixing happiness with sadness for China's auto industry. According to data released by the China Association of Automobile Manufacturers, China's auto industry registered encouraging sales of 18 million units in 2013, up over 15 percent year on year, almost three times sales in 2008. However, there is a great worry behind the industry's rapid development. In 2013, China's auto exports fell nearly 10 percent to 596,300 units, accounting for 3.3 percent of the total output only. Most were exported to tier-2 markets like Algeria, Russia and Chile. Comparatively, data released by Bernstein Research show Korea's Hyundai and KIA sold a total of 2.2 million units in developing countries.

On the other hand, the research results of Boston Consulting Group show the annual growth rate of auto R & D expenditures was 8 percent over the four years, eight times that from 2001 to 2012.

This shows automakers in the world are intensifying independent R & D, which is likely to further widen the gap between Chinese automakers and advanced foreign automakers to impose heavier pressure on China's auto export. Thus, despite the brilliant results of China's auto industry in recent years, we are also supposed to see China is facing the danger of weakening of independent brands' core competitiveness and it is very difficult to advance the process of internationalization.

Last year is also a year of opportunities and challenges specific to the engine sector Yuchai belongs to. Last year, China's commercial vehicle output and sales came back from the fall in the previous year, registering 4.0316 million units and 4.0552 million units respectively, up 7.6 percent and 6.4 percent year on year, creating a good market opportunity for us. However, pressure is similarly heavy: the concentration of the auto market was further enhanced, the top 10 business groups by auto sales contributed 88.4 percent of the total auto sales last year, up 1.4 percent from the previous year, and most of these business groups have their own engine manufacturers, giving prominence to the competitive disadvantage of Yuchai surviving in the cracks as an independent engine manufacturer. Besides, the switch to the national V gas and national IV diesel engine emission standards also poses a severe challenge to the emission control level, product quality, market development and after-sales service of Yuchai engines.

Facing the mounting pressure from market competition, Yuchai's engine manufacturers maintained healthy and steady development, with cumulative annual engine sales of 688,000 units, up 6.28 percent year on year. All its subsidiaries showed strong momentum. Particularly, Yuchai Machinery Co., Ltd. (Yuchai Machinery) was the first multi-cylinder diesel engine manufacturer to bring its annual sales back to 500,000 units in the industry. Last year, Yuchai achieved the best business performance and financial indicators ever. Besides, we have achieved breakthrough in cost control, quality control and system construction.

Reform is imperative

A: How to deal with pressure and challenges?

Yan: Actually, difficulty does not merely exist in the auto industry. The whole country is facing the severe challenge of transforming into a middle-income country. The 3rd Session of the 18th CPC Central Committee pointed a scientific development path for national economic development, noting that in the face of the new situation, efforts must be made to comprehensively deepen reforms at the new historical starting point in order to build a moderately prosperous society in an all-round manner, build a prosperous, democratic, civilized and harmonious modern socialist country and fulfill the dream of great rejuvenation of the Chinese nation.

Reform is similarly imperative to enterprises intending to address problems and come to a new level. The judgment is mainly based on the following two points:

First, the need of national development. Now China must resolve two problems: overcapacity and enterprises' high debt ratio in order to maintain stable growth. The 3rd Session of the 18th CPC Central Committee noted efforts should be made to give play to the decisive role of the "market" in resource allocation, which means making the market resolve these problems. To this end, state-owned enterprise reform must be deepened constantly. Last year, the State Council divided the responsibilities of the former Ministry of Railways, transferred administrative responsibility to the Ministry of Transport, partly separated railway operations and established China Railway Corporation. This should be the idea of next-step state-owned enterprise reform--state-owned enterprise reform should separate government functions from enterprise management, put the part concerning the national economy and the people's livelihood under coordinated national management, thoroughly loosen the enterprises capable of participating in market competition, and make them conduct shareholding reforms and fully participate in market competition. Only in this way, will an array of competitive enterprises be built and will the national economy be healthier.

Second, need of enterprise development. Current international competition requires that we must enhance our competitiveness in high-value-added industries, which can be accomplished through top-down policy measures and top-down business measures. With the constant growth of Chinese enterprises, they must reform themselves in order to better participate in international competition and achieve breakthrough.

The core of reform is transformation and upgrading

A: What do you think of state-owned enterprise reform advancement as the chairman of Yuchai?

Yan: To advance reform, we should uphold the basic concept that "top 500 enterprises outweigh 500 large-sized enterprises and 500 years outweigh top 500 enterprises" and firmly establish the modern business concept of "sustained and healthy operation". And the core of reform is transformation and upgrading.

Concretely, attention should be paid to three key points: First, it is most important to increase the value of state-owned assets and avoid losses of state-owned assets. Second, efforts must be made to advance institutional construction, activate the vitality of state-owned enterprises and promote enterprise transformation and upgrading, new technologies are emerging endlessly currently, the wave of the third industrial revolution has swept across the world, the cost of human resources is rising, it has been unrealistic to advance industrial development in old ways, efforts must be made to accomplish industrial transformation, extend from products to services, advance from traditional manufacturing to high-end manufacturing, pay more attention to manufacturing and applying intelligent products, and master core technologies in order to fully participate in international competition. Third, paying attention to the time window of reform. Foreign countries have started early in the new technical revolution, in order to gain greater development in the future, we must catch up, irrevocably advance reform with the support of Party and national policies, and gain the discourse power of China's industry in future competition.

A: What plans does Yuchai have to advance reform?

Yan: Thanks to the industry's fast development and the government's support, Yuchai has made great strides. In 2013, Yuchai made a strong comeback with cumulative sales revenues of 42.5 billion yuan, up 2.15 percent year on year; its core subsidiary Yuchai Machinery Co., Ltd. secured the sales lead in the industry, first brought its annual sales back to 500,000 units in the industry and extended the lead with its market share up 1 percent in 2013.

In this process, we were also thinking that Yuchai's development should enter a new stage and come to a new level with the development of the industry and enterprise. Based on this, Yuchai proposed "second startup", which is a self revolution coming as Yuchai has encountered a bottleneck with its sales revenues around 43 billion yuan for three consecutive years, will map out a blueprint and strategic plan for Yuchai's long prosperity in a scientific manner.

Yuchai launched the development strategy of "second startup" in late 2013. Yuchai Industrial New City under planning is the carrier and platform of the "second startup", as well as a major move of the CPC Yulin Municipal Committee and the Yulin Municipal People's Government in its strategy of "invigorating Yuchai and prospering Yulin". The city will focus on high-end manufacturing development and is oriented on industrial support for Yuchai, is expected to be built up by 2018, and will strive to achieve an annual output value of over 100 billion yuan in three to five years. The city will become a complex new industrial city effectively linking high-end manufacturing and modern service industries, a leading zone driving Guangxi's strategic emerging industries, a national cyclic economy demonstration park, a major platform for promoting enterprises' scientific development and a strategic pivot for promoting Yulin and Guangxi to step up new industrialization and make a leap.

A: How will Yuchai fight the tough battle of "second startup"?

Yan: The core of "second startup" is transformation and upgrading. Its guideline is being guided by culture, being oriented on market, being driven by reform, centering on people, being based on projects, renovating systems, enhancing management, integrating resources and optimizing structures. Thus, the "second startup" differs from any of our previous reforms and is unprecedented in terms of breadth and depth. To ensure the success of the "second startup", Yuchai must make efforts in the following four aspects:

First, work well on the top-level design of the "second startup". Yuchai will conduct scientific planning, systematic argumentation and specialized design, formulate the outline of the "second startup", and ensure sufficient space for Yuchai's business development; adjust its strategic plan realistically, turning the pattern of six industrial sectors featuring "two product chains and several industrial clusters" into a new pattern of "two industrial chains and two service platforms", reposition its development mode, pool strength and resources, extend to the engine industry chain and the petrochemical industry chain, vigorously develop its logistics service platform and financial service platform, build a highland for value, and become an integrated economic entity with prominent advantage in primary business and service.

Second, renovate group systems and mechanisms. We will step up efforts to advance group restructuring, make all-out efforts to build a green value system and create value for interested parties with limited investment; will optimize the group's management function and department setup, moderately manage and control subsidiaries, implement mechanisms flexibly and stimulate vitality; will renovate subsidiaries' systems from the perspective of specialized development, and promote industrial upgrading through system upgrading.

Third, vigorously construct the talent support system of the "second startup". The group must work out and implement a forward talent strategy to guide professional team building; must make great efforts in talent reserve, training and construction; must cultivate and select a group of talents with corporate cultural traits; must vigorously recruit talents from across the world, especially outstanding and leading talents in such aspects as law, finance, human resources and management, and introduce high-end professionals from Fortune Global 500; must renovate the talent incentive mechanism and build a talent highland; and must give full play to the role of talents to create a favorable environment for them to allow full rein to their talents.

Fourth, build entrepreneurial culture. Entrepreneurial culture is the foundation of the group's "second startup" as well as the spiritual pillar for promoting the sustainable development of the enterprise. Entrepreneurial culture is reconstruction of corporate culture, further enrichment of Yuchai's cultural connotation and the upgrade of Yuchai culture. Culture comes first in transformation and upgrading. We should implement the strategy of cultural orientation to make "everything for the second startup" the consensus and conscious activity of all Yuchai people.

(Li Chunmei/Song Yonggeng/People's Daily Overseas)