How Badan is Born?
A Result of Win-Win Cooperation
Between Newzhongyuan & Ayala Group
PRESS RELEASE | 2nd January 2020
Why build factory overseas?
Badan is the only quartz stone factory invested by Chinese enterprises overseas with a whole line, covering an area of 30 mu. It plans to build 12 production lines within 2 years, mainly producing large boards and kitchen cabinet panels, with a single line capacity of over 20,000 m2 and an investment of over 1 billion RMB. More importantly, there are four shareholders in the project. Besides Ayala group, there are XinZhongYuan Ceramic Group, Keda Tech.and Neng Xing Holdings from China.
Established in 2018, Badan Building Material Corporation was the first quartz surfaces factory funded by Mr.Fok Chichang, the President of XinZhongYuan Ceramic Group and Fernando Zobel, the CEO of Ayala Group.
Build factories overseas to avoid anti-dumpling, to win the global market share back.
But as the President and Leader of XinZhongyuan, the biggest Ceramic Group in China, he had realized building a global manufacturing network is the only way to root in the exporting industry.
For the "go global" strategy, President Fok's attitude is resolute. "China's ceramic industry must expand into the global market, and the key period is the next three to five years," he said. Meanwhile, he reclaimed, "it's not a matter of vision. It's a choice you have to make." From his perspective, the development of China's ceramic industry in mainland and abroad has encountered greater pressure and resistance, it is inevitable to go out.
In the domestic market, factors such as increasing raw material cost is squeezing the profit margins of the ceramic industry, and there is no obvious domestic growth effect in the short term. In terms of policies, the government has been increasingly strict about environmental protection in recent years. The air pollution prevention and control plan for guangdong province announced in 2017 proposed that no new ceramic factories would be built in the pearl river delta region and qingyuan city. Other producing areas, due to the process of urbanization, also once appeared "let the ceramic industry exit" voice. In addition, ceramic tiles produced in China are subject to international antidumping resistance, so the export market is severely tightened and the export price has no advantage.
In President Fok's blueprint for "global capacity distribution", there are "certainly more than two" overseas plants. According to his description, XinZhongYuan is likely to set up production bases in the Middle East in the future, and the next step may be the Middle America.
Why chose Philippine?
Philippine is the best choice for building oversea factories
Since lots of Chinese entrepreneurs have chosen Vietnam and India as their first choice, President Fok’s decision on moving his base to Philippine is very unique.
He stated his opinion in the interview with Sanary, and the advantages are summarized to six points:
01. Geographically, from the perspectives of shipping, cost, time and other dimensions, the Philippines has a good geographical advantage in both raw material procurement and global sales radius. From the perspective of market radiation, the duty-free policy can be used to reopen the market in Southeast Asia. Philippine is just 1000KM away from China and there is zero time difference with China. The location of Badan is near Subic Bay of the Philippines, which is used to be a naval base for the U.S. military until its withdrawal in 1991.
02. Historically, Philippine has ever been colonized by America. Philippine held a stable diplomacy with American government. Till now, there is still a US Air Force Base in Clark City, Pampanga, and the south-west of Philippine.
03. Politically, Compared with Africa, the Philippines is obviously more stable and has enjoyed rapid economic growth, averaging 6% over the past five years. Compared with the United States and other countries, the Philippines, especially since the inauguration of the new President Rodrigo Duterte, has given priority to the development of its national economy in reform and opening up and attracting investment, and has given greater support to overseas investment. Subic Bay lost 36, 000 jobs after the American’s withdrew. The local government urgently needs to introduce a lot of projects to boost the local economy. The project will be valued and supported.
In January of 2018, Huo Zhichang, the President of Xin ZhongYuan headed to Philippine to meet with Gloria Macapagal Arroyo, the former Philippine President. (Ex-President Arroyo is sitting in the middle of the front row with blue suit. The first person on his left is President Huo Zhichang.)
04. Economically, Philippine has an obvious advantages in human resources. The Philippines, with a population of over 100 million, has a cheap, educated, English-speaking, service-oriented workforce. Its domestic market is promising, with private consumption accounting for nearly 70% of GDP. And the average age of the population is only 23.5. It is fair to say that there is great potential for consumption growth in the Philippines. In addition, the United States and the European Union give corresponding preferential tariff treatment to Philippine export products respectively, will make the ceramic tile produced in the Philippines more advantageous to the European and American markets
05. Culturally, Philippine society holds a similar culture with China business culture, when considering the power of distance, the obsession of hierarchy and uncertainty avoidance, Philippine employees holds a similar behavior with China, which is much smoother for management and operation.
Why chose Ayala?
"This the only company which monopolized communication, finance and real estate in the Philippines", "This is also the only company cooperated with Jack Ma to build up Alipay in the Philippines."
As we all know, setting up a factory overseas is not an easy thing. The country guidelines issued by China's ministry of commerce stated that "the Philippines is basically an 'acquaintance society'". The Ayala group played a vital role in this project. A family business, Ayala has been in the Philippines for 187 years, and the eighth generation to take over is the harvard elite. Ayala's Ayala properties is one of the most integrated, largest and successful real estate development companies in the Philippines. Bank of the Philippines is the country's fourth largest bank by assets and the second largest by market capitalisation. It also owns large companies such as Philippine global telecommunications and Manila water. In addition, the Ayala group's businesses include power, infrastructure, industrial technology, health care and education.
"Ayala has a monopoly on telecommunications, finance and real estate in the Philippines. His real estate business currently has 149 malls with a total area of 50,000 to 60,000 SQM and plans to build 99 malls in three years." President Fok said.
The reason why Xinzhongyuan chose Ayala is firstly based on the cooperation between both sides for more than ten years. In the heyday before anti-dumping, Ayala purchased 200-300 million RMB of ceramic tiles from Xinzhongyuan every year. Secondly, when laying out its global strategy, Xinzhongyuan should not only go out to the Philippines, but also sell to its local market. Ayala group's large number of real estate projects are under construction, the demand for quartz stone, have brought opportunities for further cooperation.
Ayala is also Mayun, the Founder of Alibaba 's first investment partner in the Philippines. In August 2017, Philippine media reported that the senate competition commission had approved an investment by Ali's Ant Financial in Globe Telecom's Mynt unit. Mynt is billed as the Philippines' version of Alipay, and currently has more than three million users. After the cooperation, the two parties intend to use ant financials experience and technology to lead and promote the emerging electronic payment industry in the Philippines.
Jack ma with Fernando Zobel De Ayala, President and chief operating officer of Ayala
In January of 2018, Huo Zhichang went to the Philippines to meet with Fernando Zobel De Ayala, the chairman and CEO of Ayala group, and reached a cooperation agreement to build the world's largest quartz factory. (President Fernando Zobel De Ayala is sitting in the middle of the front row. The first person on his left is President Huo Zhichang.)
New Project needs a new idea, new power, a new Team.
"The next three to five years will be a critical period for the quartz industry to implement the globalization strategy. All the management of our overseas factories must be regularized, and our overseas factories must also equipped with a new team, new brand and a new strategy! “President Fok said.
And that’s how Sanary came to birth.
Despite of the existing brands of XinZhongyuan Group, Sanary is specially established by President Fok and John Yip, the former Supervisor of Exporting Department of Monalisa Ceraimc Group. In order to better utilize all the oversea manufacture base and form better cooperation relationship, Sanary is a link connected factory and targeted market and it’s also the only platform will grow and build up a professional marketing sales system in designated market.