BEIJING – The integration of finance and the real economy is key to future development, according to Xu Hai, chief investment officer of Beijing United Information Technology Co Ltd (Guolian).

“We profit from the price differences, retain basic income, and share more profits with downstream customers to enhance their loyalty and engagement," Xu said while discussing Guolian's business model during his presentation at the third season CFO Salon event in Beijing recently.

Through the platform, companies can group their orders and procure raw materials at more favorable prices, reducing costs and increasing efficiency compared to traditional offline multi-dealer layers, he said.

Xu's career in finance began in investment banking. He was one of the first A-share sponsors in the domestic capital market and worked on cross-border investment banking at Goldman Sachs. In 2011, he joined Industrial and Commercial Bank of China to establish a renminbi equity investment platform. During this period, they successfully invested in numerous outstanding companies, including Midea Group, managing assets worth hundreds of billions through mezzanine investments and parent-subsidiary funds.

The financial market environment however has changed significantly in recent years, Xu admitted.

"Investment banking and investing have become more challenging, and companies face diversified and extreme capital utilization demands."

By cooperating with local governments to establish special funds, we ensure the safety and returns of funds while promoting the company's performance growth.

Xu Hai, Chief Investment Officer, Beijing United Information Technology Co Ltd (Guolian)

He said he believes that the previous simple methods of financing through secondary markets are no longer sustainable, presenting new challenges and opportunities for companies in the current market environment.

With the push from national policies, the importance of financial services supporting the real economy has become increasingly prominent.

"The integration of finance and the real economy is key to future development," Xu said citing examples of his recent projects, such as helping the Zhangjiakou municipal government establish domestic and foreign industrial investment and financing platforms and joining the listed company to promote its industrial investment and financing layout and strategic development.

Business and innovation models

Founded in 2002 and listed on the Shanghai Stock Exchange in 2019, Guolian operates three main business segments. Initially providing industrial products information services, the company gradually developed into an industrial products e-commerce procurement platform. With years of industry experience, the company has built extensive upstream and downstream relationships in various industrial product fields and provides technological support for enterprise upgrades through digital cloud factories.

Xu elaborated on how the company uses a platform-based approach to address the pain points of SMEs in procurement and sales. For instance, through centralized procurement, the company can offer better prices and more efficient logistics to downstream users, enhancing their competitiveness. At the same time, Guolian leverages its long-standing information service advantage to establish stable partnerships with upstream suppliers.

The company has launched several sub-platforms named with the suffix "DuoDuo," such as "TuDuoDuo" (coatings and chemicals industry), "WeiZhiDuoDuo" (hygiene and paper products industry), and "FeiDuoDuo" (fertilizer industry).

"These platforms' names and models are reminiscent of Pinduoduo, but we focus on the B2B sector, helping SMEs reduce costs and increase efficiency through a centralized procurement model, promoting the common development of upstream and downstream enterprises," said Xu.

Technology empowerment

To adapt to market changes, Guolian is actively engaging in technological empowerment.

"We have made arrangements in smart factory renovations, collaborating with technology companies to provide production line transformation services for our core partners, helping them improve production efficiency and reduce energy consumption," Xu said.

This business model not only resolves companies' financial difficulties but also ensures the company's continued profitability through long-term procurement contracts.

"We invest in renovation funds upfront and recover costs through technical service fees and long-term procurement agreements, achieving a virtuous cycle."

Continued Xu: "For excellent industrial software and hardware companies, we also provide enabling investments through industrial funds, offering them broader application scenarios based on validating their business. This not only guarantees our investment returns but also brings incremental business to these companies."

Since its listing in 2019, Guolian has performed exceptionally well, maintaining rapid growth each year. "Through the layout of industrial funds, we continuously attract industry partners to jointly promote industrial technology advancement," Xu said.

The company's success is also attributed to its cooperation with local governments. "Local governments highly value investment promotion, and our asset-light operation model is well-suited for implementation in various regions. We can quickly establish settlement centers or sales companies locally, contributing to local GDP and tax revenue," Xu Hai explained.

This flexible implementation method not only meets local governments' needs but also opens up new financing channels for the company.

"By cooperating with local governments to establish special funds, we ensure the safety and returns of funds while promoting the company's performance growth," Xu said.

Xu summarized the current trends in industrial investment. He noted that listed companies establishing industrial funds to meet local governments' investment promotion needs has become a common practice. The emphasis on industrial investment by local governments provides more opportunities and support for enterprises.

"We identify needs, create solutions, and integrate resources to create greater value. This is a challenging but meaningful work, and it will become a new norm in the industry," he said.