Get ‘smart’ and boost bottom line

Emerging sectors and high-tech manufacturing to trigger growth

BEIJING—Innovation and smart manufacturing will help Chinese listed companies rake in hefty profits despite a broader economic slowdown.

Hangzhou Robam Appliances, which is based in eastern China’s Zhejiang province, has showed what can be achieved.

The kitchen appliance leader has closed down its low-efficiency production lines and brought in smart manufacturing powered by industrial robots, big data and the internet of things.

Its smart manufacturing plant, which was rolled out in 2015, can turn out 2.25 million electric kitchen appliances each year.

“While it required an investment of 750 million yuan ($109 million), the plant saved 35 million yuan annually in labor costs as well as improving productivity,” said Wang Gang, vicepresident of Hangzhou Robam Appliances.

Improved product quality also helped the listed company gain a bigger market share as many Chinese are willing to spend more on expensive home appliances.

Net profits of Hangzhou Robam Appliances surged 45.32 percent last year to 1.2 billion yuan compared to 2015. That was faster than its business revenue growth at 27.6 percent year-on-year to 5.8 billion yuan and reflected increased profitability amid fierce market competition.

The company’s transition is testimony to China’s move up the global value chain.

Last year, Chinese listed companies reported brisk profit growth as they ramped up spending on research with emerging sectors outperforming traditional industries.

Combinednetprofitsfrom growth enterprises listed on the Nasdaq-style tech and emerging sector-heavy ChiNext board surged 36.7 percent in 2016.

That was faster than the 4.3 percent growth from publiclytradedcompaniesonthe two main bourses in Shanghai and Shenzhen, according to data from Choice, a leading financial data provider.

Smart manufacturing and emerging sectors such as next-generation IT technology will embrace stellar growth in China during the next decade. “These sectors will all have complete supply chains that will attract massiveinvestment,”GuotaiJunan Securities said in a report.

China is moving toward an economy boosted by consumer spending, innovation and services. This in turn will reduce the country’s reliance

... the plant saved 35 million yuan annually in labor costs as well as improving productivity.” vice-president of Hangzhou Robam Appliances

Wang Gang, on investment and exports of low value-added goods as innovation will be strengthened.

Without increasing outlays on innovation and new product design, Weichai Power cannot thrive.

It was listed on the Shenzhen stock exchange in 2007 and staged a comeback last year for its parent group, Weichai Holding Group Co Ltd, with more than 74,000 employees on its payroll.

Stringent environmental protection requirements and low demand, especially weaker sales of engines for heavy-duty trucks, weighed on Weichai Power.

In 2015, profits plunged 72.2 percent. Despite cash flow constraints, the company spent 3.6 billion yuan on research last year, 9.5 percent more than in 2015.

This was spent on new energy vehicles, lowering emissions, and producing greener engines.

“As long as newly purchased equipment does not sit idle, Weichai Power has set no budget limitations on research and development,” said Tong Dehui, vice-president of the company.

On a national scale, China’s research and development expenditures jumped 9.4 percent last year to 1.55 trillion yuan compared to 2015, accounting for 2.08 percent of GDP, data from the National Bureau of Statistics revealed.

“China’s transition to slowerbutstructurallyrebalanced growth continues,” the World Bank said in a report.

To illustrate this, industrial output growth in the hightech manufacturing sector reached 13.4 percent in the first quarter of this year, outstripping the 6.8 percent registered across all industrial companies.

“Chinese entrepreneurs should focus on boosting growth through innovation,” said Song Zhiping, chairman of China National Building Material Group.