“Whatever the result, I’ll give it three years,” Ren Yuanlin gamely remarked during an interview with Zaobao.
That's the deadline Ren has given himself to try hitting another career high. And his new venture is the Singapore Exchange-listed Yangzijiang Financial Holding (YZJFH), a spin-off from Yangzijiang Shipbuilding.
When YZJFH was added to the Straits Times Index (STI) on its trading debut on 24 April, it had a lacklustre start and closed its first trading day down by 10%. It was removed from the STI just four trading days later and its current stock price has dropped by 33% since its debut.
Listing in Singapore
Headquartered in Singapore, YZJFH is the first Chinese-funded financial investment company listed in Singapore. In addition to its debt investment and lending business in China, the company plans to expand its fund and wealth management business and look for investment opportunities in the Asia Pacific and developed markets around the world.
Ren believes that the spin-off of YZJFH is a natural progression and not a sudden idea. He explained, “Our company builds ships and makes investments. Our shipbuilding business has performed well in recent years and so have our investments.”
He added that the company makes about 2 billion RMB (roughly US$298 million) per annum in profit, which increases as time goes by: “If this money is not put to good use, it will depreciate.”
The entire process from YZJFH’s spin-off in mid-December 2021 to its listing in Singapore in late April took less than six months. Ren thinks that this is all thanks to everything falling into place — not only did they receive support from the Singapore Exchange, but they also received guidance from Vincent Toe, incumbent YZJFH CEO with over 25 years of experience in fund management.
“We also don’t have the conditions to list in China now. It is not as simple anymore as there are too many enterprises in the queue, with thousands hoping to list in China.”
Yangzijiang Shipbuilding was listed in Singapore in 2007, becoming the first private Chinese shipbuilding company listed overseas. At that time, its 5.5 billion RMB initial public offering was also the largest among Chinese enterprises seeking to list in Singapore.
Fifteen years later, YZJFH chose to list in Singapore as well. Ren emphasised that this is the best choice, because “no other place is as efficient as Singapore”.
Possible listing in China
Ren said frankly, “Given the current China-US relations, it is impossible to list in the US. We also don’t have the conditions to list in China now. It is not as simple anymore as there are too many enterprises in the queue, with thousands hoping to list in China.”
But he is aware that Singapore’s stock market pool is “too small” and lacks liquidity; hence, the valuation of listed companies is not high.
As such, he is planning to take advantage of the amended measures in China for companies listed overseas — Chinese authorities announced in March that companies that have been listed on overseas stock exchanges for three years and have an average market capitalisation of more than 20 billion RMB can apply for the listing of Chinese depository receipts on the Chinese stock exchange.
With the previous experience of Yangzijiang Shipbuilding’s listing in Taiwan through the issuance of depository receipts in 2010, Ren is confident that YZJFH will be able to do the same in China, thereby opening more opportunities outside of the Singapore market.
Yangzijiang Shipbuilding became the first mainland Chinese company to list in Taiwan following the signing of the Economic Cooperation Framework Agreement between the mainland and Taiwan. However, in 2015 the company announced its plans to delist from the Taiwan stock exchange for cost effectiveness reasons.
Succession amid crisis
Reflecting on his life, Ren deems the 2019 Liu Jianguo corruption scandal as his biggest personal crisis. But it proved to be a blessing in disguise, as he successfully passed the reins of Yangzijiang Shipbuilding to his son amid the crisis.
In 2012, Ren established the Jiangsu Yuanlin Charity Foundation chaired by Liu Jianguo, former party secretary of Jingjiang city in Jiangsu province. Ren was later implicated when Liu was accused of corruption.
When news broke that Ren was under confidential investigation by the Chinese authorities, Yangzijiang Shipbuilding shares tumbled on 8 August 2019, plunging nearly 29% from S$1.30 at its lowest point.
Thinking back on the ordeal, Ren is still filled with emotions. After all, many listed companies in China ultimately collapse if their head gets in trouble. Fortunately, Yangzijiang Shipbuilding already had a strong foundation; it relied mainly on foreign orders and did not have any bank debts.
During Ren’s investigation, his son Ren Letian, who is also Yangzijiang Shipbuilding CEO, took over as alternate director.
Ren Yuanlin returned to work once the corruption case closed on 20 December 2019 when Liu was charged by the People's Procuratorate of Jiangsu province. He was pleased to discover that the company had been well managed by his son during his absence. He said, “He ran the company even better than I did, so there was no need to take back my position.”
In April 2020, Ren Yuanlin stepped down as Yangzijiang Shipbuilding executive chairman, and made way for his son to take over.
“Most fuerdai and guanerdai (官二代, lit. officials’ second generation) work in the financial industry, and spend their overtime work on the computer or over social events. But in the factories, overtime work means hammering and welding.”
A capable successor
Forty-year-old Ren Letian has a background in information technology and received his Master’s degree from London South Bank University in 2005. Ren Yuanlin praised his son as humble, pragmatic and prudent — free of the bad habits of a typical fuerdai (富二代, lit. rich second generation). Ren commented, “This is important in the manufacturing industry.”
According to Ren, his son had not worked in the financial industry before he joined Yangzijiang Shipbuilding. Ren Letian’s greatest strength was to have worked from the bottom ranks of the company. The elder Ren said, “Most fuerdai and guanerdai (官二代, lit. officials’ second generation) work in the financial industry, and spend their overtime work on the computer or over social events. But in the factories, overtime work means hammering and welding”.
With a good command of English, Ren Letian worked as a translator at the company before becoming the workshop director and project leader. He was also in the management team of the company’s various subsidiaries, before officially assuming his role as Yangzijiang Shipbuilding CEO on 1 May 2015.
Ren Yuanlin said both father and son have very different management styles — he is more traditional while his son is good with technology. For example, when the workers complained that there were not enough forklifts, Ren would first head to the workshop to personally investigate the situation while his son would use monitoring devices to track the fuel consumption and workload of individual forklifts. The younger Ren’s use of technology would later reveal that “forklifts were in fact underutilised and left to idle”.
However, the elder Ren also frankly shared that his son might not be as efficient with the financial business. Thus, he was supportive when his son proposed the spin-off of YZJFH.
“Hence, there is no such thing as the best of times or the worst of times.” — Ren referring to the shipbuilding industry.
Towards technology intelligence, automation and decarbonisation
Now, Ren Letian runs Yangzijiang Shipbuilding, and Ren Yuanlin, as honorary chairman, does not meddle in the company’s affairs. He hopes that the young innovative management team would drive the traditional ship manufacturing industry towards technology intelligence, automation and decarbonisation.
In the 2021 financial year, Yangzijiang Shipbuilding’s net profit rose 47% to 3.7 billion RMB while its revenue climbed 13% year-on-year to 16.8 billion RMB. Its core shipbuilding business contributed 13.2 billion RMB to total revenue, which is an increase of 32% year-on-year. Revenue from its shipping business also increased by 44% year-on-year to 960 million RMB.
Due to the lower prices of the existing shipping contracts, rising raw material costs and the strengthening of the RMB against the USD, the profit margin for its core shipbuilding business dropped to 12% in 2021 from 21% in 2020.
On the other hand, as a result of improved charter rates for bulk carriers, its shipping business saw a gross profit margin of 40% in 2021, significantly higher than the 24% reported in 2020.
Although shipbuilding is a traditional industry, Ren described it as an industry where “the sun would never set in the west” because there will always be a strong market demand for ships. “Hence, there is no such thing as the best of times or the worst of times,” he said.
Ren said that while shipping used to contribute only a tiny fraction of profits to the shipbuilding industry, this trend seems to be changing in recent years. He predicts that increasing raw material costs and the fluctuating exchange rate will result in a significant decline in shipbuilding profits in the current fiscal year. At the same time, its shipping business will continue its upward trend and could even reach a gross profit margin of 50%, accounting for half the profits of Yangzijiang Shipbuilding’s business.
Ren earned his first pot of gold from reselling Treasury bonds in the 1980s during the early stages of China’s reform and opening up, accumulating a net worth of tens of thousands of RMB.
First foray into fund management
Ren Yuanlin’s history with shipbuilding started when he became an apprentice at Jiangyin Shipbuilding Factory in 1972 after graduating from high school.
His childhood dream was to become a carpenter as he believed that he could make a reasonable living with woodworking skills. Of course, things did not go as planned.
While still working at the shipbuilding factory, the driven young man enrolled at the Jiangsu Radio and Television University (now renamed Jiangsu Open University) where he studied economics and management for three years. Ren later became deputy head of the workshop and was made deputy factory director in his early 30s.
Although his monthly paycheck was less than 30 RMB, business-savvy Ren found a way to make extra money.
He discovered that Treasury bonds (guokuquan, 国库券) with a 100 RMB face value could be sold for 85 RMB in Jiangyin but 87 RMB in Shanghai. He thus accumulated 10,000 RMB worth of Treasury bills and sold them in Shanghai, earning a profit of 200 RMB.
“It was too tedious, so I became a middleman instead. Rather than earning 2 RMB, I helped both sides facilitate a deal and earned 1 RMB. This is very much like managing a fund,” he recounted.
Ren earned his first pot of gold from reselling Treasury bonds in the 1980s during the early stages of China’s reform and opening up, accumulating a net worth of tens of thousands of RMB. He became one of the few “10,000 RMB households” (万元户) in China.
When Ren became the factory director in 1997, the Asian financial crisis hit and the shipbuilding factory was on the brink of collapse with few orders. It was then that Ren proposed a restructuring plan to the government to privatise the factory.
With newfound authority and decision-making power, he changed the production structure of the factory and moved away from the Asian market to the more challenging European and American markets. “Although their ships were very difficult to build, they had high production value,” he explained.
His decision and vision revived the dying shipyard. Within a decade, the shipyard’s revenue increased from 100 million RMB to 1.5 billion RMB, which “provided a good foundation for the company’s listing in Singapore”.
He is proudest of the fact that he built an enterprise that many believe is “tough and unprofitable” to become one of the top shipbuilders in the world and the top in China.
Three principles to philanthropy
While the Liu Jianguo incident is now a thing of the past, Ren prefers to maintain some distance from the Chinese authorities now. He has come to understand that one must never take credit from the Chinese government for doing good deeds.
He adheres to three principles when it comes to philanthropy and charitable work: do those that the Chinese government cannot do; those that meet the needs of the ordinary people; and those that the market approves of. Following these principles, he established a university for the elderly (元林老年大学) and funded surgeries for local cataract patients to restore their vision.
In 2014, when Ren took 500 million RMB from abroad and donated it to Jiangsu Yuanlin Charity Foundation to build the Jiangsu Yuanlin Rehabilitation Hospital, then chairman of the foundation Liu Jianguo insisted on having the foundation manage the project and “that’s how it got into trouble”.
Now, the Jiangsu Yuanlin Rehabilitation Hospital is managed by the local government. Ren quipped, “If we had donated it to the government from the start, everyone would say you did well.”
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