Wengfu blazes a trail with frenetic expansion and big technology emphasis
In 2007, China's Wengfu (Group) Co achieved what was then truly extraordinary - the State-owned phosphorus and chemicals manufacturer outplayed many European and US counterparts to win the bid for what was then the world's largest mineral-processing project in Saudi Arabia.
That set the tone for its frenetic global activity ever since. It launched a number of projects in northern and western Africa, as well as the Middle East.
Today, Wengfu is pressing ahead with more than 30 overseas projects in countries such as Vietnam, Indonesia, India, and Kenya, most of which make use of its technologies related to mining and processing.
That's not all. Wengfu's senior executives say the company is now set to continue its overseas expansion into economies covered by the Belt and Road Initiative, which aims to connect Asia with Africa and Europe through an infrastructure and trade grid along the ancient Silk Road route.
In the past three years, China signed around 50 government-level cooperation agreements in the Belt and Road countries and regions, according to the National Development and Reform Commission, the country's top economic planner.
Outbound investments in economies along the Belt and Road are worth more than $50 billion, and have resulted in better-than-expected achievements, says He Lifeng, minister of the NDRC.
Companies such as the Guizhou-based Wengfu can take some credit for that. The SOE is adopting diverse models of cooperation to gain a firmer foothold in foreign markets that lack the ability to mine or process natural resources like phosphorus, an essential mineral.
From Wengfu's perspective, rich ores overseas need to be exploited further. Its overseas goal is consistent with the current domestic situation. The chemical producer has been largely reliant on the domestic market so far.
It made a profit last year, but it was small as the rebound in coal prices pushed up its already-high costs. Revenue remained around 40 billion yuan ($5.79 billion; 5.38 billion euros; 4.68 billion), according to Jin Gang, assistant general manager of Wengfu and a deputy who attended the annual session of the National People's Congress in Beijing earlier this month.
By 2020, Wengfu plans to invest about $4.3 billion to spur growth, and part of the budget will be allocated to strengthening efforts in overseas markets, especially along the Belt and Road, he says. "Technology exports will remain our priority."
Founded in 1990, Wengfu started operations in 2000. Since then, it has mastered its low-cost, high-yield phosphorus mining technology, which helps extract 95 percent of the mineral from phosphate ore after removing impurities.
Jin says Wengfu's overseas strategy has evolved in the past decade from exporting raw material, like phosphate fertilizers and processed products like iodine, to transferring higher-value-added technologies.
Such a change dovetails with the government's endeavor to increase the share of high-value services in China's exports.
The group also owns national-level laboratories and research facilities for post-doctoral researchers. This initiative has resulted in more than 2,000 patents so far.
Zhang Tao, CEO of Wengfu Engineering and Contracting Co, the subsidiary in charge of overseas business, says Wengfu's business connections overseas vary with client needs, but its focus is fixed on giving full play to its technologies and professional services.
The company is in talks with some parties to finalize investment terms for building factories in Belt and Road countries and regions. It will apply its world-class technology to extract anhydrous hydrogen fluoride, or AHF, at a lower cost. AHF is a chemical product extracted from phosphorus for industrial use.
"Many markets have shown strong interest in such projects," Zhang says. "We will decide by evaluating the quality of mineral deposits, the investment environment and the market size. For other potential clients, we could tailor services to their preferences - say, we may send our consultants or provide EPC projects" - a reference to engineering, procurement and construction, a common form of contracting in the section.
Wengfu has faced its share of legal, cultural and religious challenges overseas. The only way out was to join forces, Zhang says.
"Vicious competition always drags everyone down. Chinese companies need to beef up their respective advantages," he says.
He cites Wengfu's collaboration with China Huanqiu Contracting and Engineering Corp, its one-time competitor, for the second phase of Saudi Arabia's project.
"Our partner has more experience in networking and project management in Saudi Arabia, while Wengfu, a latecomer, uses technologies to its advantage. It was a win-win for both of us."
Thus far, Wengfu has implemented projects in partnership with many Chinese machinery producers and construction firms.
Zhou Liqun, general manager of state-owned China Chengtong International Investment Co, says prudent risk management plays a key role in fulfilling the goal of overseas investment.
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