China’s model village Huaxicun in Jiangsu province wobbles through economic transition
March 24, 2014 Leave a comment
China’s model village wobbles through economic transition
Staff Reporter
2014-03-17
An aerial view of the Huaxi, Oct. 2011. (Photo/Xinhua)
The village of Huaxi in eastern China’s Jiangsu province is losing its luster as the hallmark of the country’s rural economy. Huaxicun Co, a listed firm which runs Huaxi’s commercial operations, has announced pay cuts of up to 15% for its management, including directors, supervisors, and high-level managers, with the exception of independent directors, according to Shanghai’s China Business News.
As result, the annual pay of Li Manliang, president, will drop to 210,000 yuan (US$34,000), down from 230,000 yuan (US$37,000) in 2013. Bian Wubiao, vice president, and Wu Wentong, chief financial supervisor, will see their pay drop to 170,000 yuan (US$27,500), 15% lower than 200,000 yuan (US$32,500) last year.
The pay cut underscores the plight of the village’s economy, as its traditional businesses are on the wane while new ones have yet to mature. Due to the decline of its mainstay chemical fiber business, Huaxicun suffered a 60% drop in net profits last year, relying on sales of financial assets to remain in the black, despite strides in the transition to mining and harbor operations.
Huaxicun published its 2013 business report on March 11, showing net profits of 44.8 million yuan (US$7.3 million) from sales of 2.2 billion yuan (US$355 million), down 67.64% and 16.5%, respectively. The main culprit is falling prices of chemical fiber products, which dragged company operations into the red.
Affected by addition of increased capacity and a slowdown in the increase of downstream demand, China’s chemical-fiber industry started to slacken in 2012 before certain pickup in 2013 but the overall situation remains languid.
Huaxicun sold securities in its possession to make up the profit gap, achieving an investment yield of 22.44 million yuan (US$3.6 million) in 2013, which was added to profits of 39.8 million yuan (US$6.5 million) contributed by a chemical product dock under the auspices of Huaxicun. The dock plays an important role in Huaxicun’s operations now, as it helps cut costs for imported chemical-fiber materials.
Huaxicun reported that it will expand and upgrade its existing warehousing business by establishing a modern warehousing/logistics system.
To diversify its business, Huaxicun entered a joint venture last September for engaging in the mining and trade of marble products, with a plan to set up a marble factory in Yunnan province in China’s southwest.
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