China’s model village Huaxicun in Jiangsu province wobbles through economic transition

China’s model village wobbles through economic transition

Staff Reporter



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.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: