Five years ago, Feng Zhaozheng took Foshan Plastics Group Co. Ltd. public, to steer the then-state-owned firm - one of China's larger plastics processors - toward international competitiveness.
It's an ambitious mission for Feng, chairman of the packaging company that recorded sales last year of 2.77 billion renminbi ($335 million). It has led Foshan to seek out technology and foreign ventures, from a PET film manufacturing partnership with DuPont Co. to projects with foreign companies in PVC and biaxially oriented polypropylene films.
Foshan has one clear advantage: It has a strong position in a Chinese plastics market that's growing 10 percent a year, a business environment that would be the envy of North American and European competitors in more settled markets.
The firm wants to translate that into a larger spot in world markets, expanding exports and becoming regionally competitive with companies such as Taiwanese film maker Nan Ya Plastics Corp. within five years, and becoming a world-scale firm by 2020.
A year and a half ago, the company opened its first sales office in the United States. Feng said the company has continued to pursue new technology and management reforms since it went public on China's Shenzhen market, going from 100 percent government-owned to just 36 percent.
Feng sat down for two hours recently in an interview in his office in Foshan, a city of 3.5 million near Guangzhou, in China's heavily industrialized Pearl River Delta. He spoke through an interpreter provided by the company.
Foshan is China's largest domestic plastic packager - No. 1 in PET and BOPP films and the country's only manufacturer of oriented nylon film, with factories in seven provinces and a nationwide distribution network. The company has grown quickly, doubling its sales since going public.
Feng said he wants the company to foster what he calls an ``enterprise culture,'' in which employees have the impetus to take mature products and find new markets, such as selling Foshan's polyethylene/PP woven laminate for agricultural film to fish farmers as a pond filter.
But challenges remain to Foshan's becoming a larger presence on the world stage.
Feng said the firm spends about 2 percent of its sales on research and development, roughly half the amount spent by Chinese firms such as appliance giant Haier Group, which recently put in a bid for Maytag Corp. and is aggressively trying to build itself into a worldwide brand. He said Foshan plans to increase R&D spending gradually, and runs an R&D campus with about 20 engineers.
``The process of allocating that percentage of sales revenue is a difficult one,'' Feng said. ``We clearly understand the necessity of continuously researching and developing new products.''
Foshan is facing a more difficult business environment as well: Sales rose 21 percent in 2004, but profit dropped more than 40 percent, to RMB67 million ($8.1 million), because of higher oil prices and interest rates and more competition, the firm said in financial statements.
Foshan buys good technology, Feng said, using equipment from Bruckner GmbH & Co., DMT SA and Mitsubishi Heavy Industries Ltd. for major purchases. It also retrofits creatively, such as hiring a Beijing software company to develop automation controls for a 30-year-old Bruckner line, and seeks technology through joint ventures. Foshan owns 49 percent of the DuPont venture, known as DuPont HongJi Films Foshan Co. Ltd., a $70 million operation that is China's largest PET film producer.
The company is diversifying with a 10 percent stake in a new, $128 million spandex plant with materials supplier Invista in Guangdong, and it is part of 14 foreign ventures in areas ranging from PVC film, sheet, synthetic leather, BOPP film, photoelectric film and plastic laminated woven products.
Forming joint ventures makes it easier for Foshan to enter foreign markets. Company officials said that's particularly helpful now, when China's rising trade deficit with the United States is attracting attention, and Washington recently slapped punitive tariffs on plastic shopping bags. The company uses DuPont's network to distribute film from the joint venture.
``Our products that we produce here reach the U.S. market without ruffling any feathers,'' said Zhang Fupei, general manager of DuPont HongJi.
It's a very different era than when Feng joined the company in the late 1980s, after careers as a farmer, teacher and government official. He worked for the firm about five years before becoming chairman in 1993.
Then, China was just starting to open its economy, and the local market had rampant shortages, but now, there are many more competitors.
``The situation is completely different than at the beginning of reform and opening up,'' Feng said. ``The Chinese market is a very competitive market. ... The key point is to keep the competitiveness of the group.''
Part of that involves boosting exports, although Feng said he does not want to repeat mistakes of domestic competitors that neglected their markets in China.
Right now, about 12 percent of the company's products are exported, but it hopes to increase that to 18-20 percent in five years, according to Yang Runtang, general manager of Foshan's export division.
Foshan is pursuing packaging business with food manufacturers in the United States, for example. Feng noted that the company sells its film to a candy manufacturer in California, which in turn packages chocolates exported to Asia.
Feng describes himself as a management pragmatist, interested in empowering employees. He said he's intensely focused, and always analyzing outside events for how they will affect the company. When the company built a new office tower across the street, he declined to move, preferring to keep his office on a lower floor of Foshan's former headquarters building for reasons related to feng shui, the Chinese practice of harmonizing living and working space with nature.
It's a demeanor that probably serves him well as he negotiates China's complex economy.
Some Chinese companies reportedly face pressure from government officials to buy and prop up underperforming businesses in unrelated fields. A recent story in Newsweek said Haier, for example, was forced to buy a pharmaceutical company and resisted pressure to buy a bicycle factory.
Feng said that's not the case at Foshan. The government is like any other investor, and does not take part in detailed planning.
About 26 percent of the firm is owned by institutional investors, and 38 percent by individuals.
Government investors may propose ideas, but those must pass the same reviews as any others, Feng said, adding that he has to be able to explain his decisions to a board of directors.
The key for Foshan is to have profitable, sustainable investments, he said: ``We have to be able to grow big, fast and make money, which is the most important thing.''
Plastics News staff reporter Nina Ying Sun contributed to this report.
