The Birth and Transformation of the First Share of Township Enterprises Listed on the Market

Translation/Chi Hong

In the early 1990s, when many people in Jiading began to know what “stocks” were, a group of “crab-eaters” set out to study how to reorganize their enterprise. They learned from listed state-owned enterprises and finally made Jiabao Company the first listed township enterprise. Ye Zucheng, then the chairman of the company, was also among those “ crab-eaters”.

Now Ye, who has spent half of his life dealing with economic research, reads the K chart of stocks on his computer every day. In his view, buying shares will let each individual participate in a broader market economy.

Some of Ye Zucheng’s Publications

Join together, take the “Bright Road”

In the early 1970s, seizing the favorable opportunity of transferring gradually the municipal industry to suburban county, Jiading took over the electric light source asset under the Shanghai Instrumentation Bureau and founded successively. Investment has been made in Shanghai United Bulb Factory (later renamed Shanghai Union Bulb Factory), Shanghai Brightness Factory and Shanghai Nanxiang Bulb Factory, setting out on the “bright” industry.

After 1978, with the spring breeze of reform and opening up, these enterprises made remarkable achievements by paying close attention to the quality of products and actively expanding the market. In the late 1980s, Nanxiang invested in the construction of First Branch of Shanghai Nanxiang Bulb Factory (later renamed Shanghai Shenhua Bulb Factory).

Amid the boom in the electric light industry, Ye, then the head of the Jiading Institute of Economic Research saw the problem: the products produced by the Union, Nanxiang, and Shenghua factories were all light bulbs, and competed fiercely with each other in the same industry. Ye began a feasibility study on the union of the electric light industry. Within a few months, he had visited various towns and factories, and finally formed a research report in August of that year. Ye, with the coordination of the local government, united the four lamp factories into an economic entity of collective ownership, Shanghai Jiabao Lighting and Electrical Appliances Company, with integrated properties which has become the largest domestic base for electric light source production and export with Ye is being the chairman of the board.

The combination of electric light source enterprises is driven by the trend. With the frequent visit paid by Ye, the existing ideas of the factory directors are gradually broken, and the union of the four bulb factories is soon on the right track. “The name ‘Jiabao’ was offered by the Electric Light Source Association. ‘Jiabao’ means the treasure of Jiading, which determines the name of the company.”Ye said.

In the early 1990s, Jiabao company was indeed “the treasure of Jiading”: At that time, the company had more than 10, 000 employees, turning out 460 million light bulbs annually, more than 60 specifications and 1.3 billion lamp holders . It’s bulb lamp holders accounted for 15 percent and 40 percent of the domestic market share respectively, both of which occupied the first place in the country. For 9 years in a row, the lamp holder has been rated the first in the testing and evaluation of lamp holders in the industry and the brand of “Union” and “Shanghai” with light bulbs have been appraised as the high-quality products and famous brand by the Ministry of Light Industry in Shanghai. And it also won the Gold Award in the Second Beijing International Exposition and was quite influential in the industry.

Reorganization, a matter of Trial and Error

In the early 1990s, it was the beginning and budding period of Chinese capital market. After the establishment of Jiabao Company, it has also been the pioneer in exploring the capital market. Jiabao Company went public and became the first listed enterprise in the group of township enterprises to list on the stock exchange in China.

“There was not such a thing as a bell-ringing ceremony. That day, I received a call from the head of the Municipal Reform Commission telling me that Jiabao had been approved for listing.” Ye remembers that day was December 3, 1992.

In July, 1991, Jiabao Company issued 15 million yuan of corporate bonds for a period of three years, with an annual interest rate of 10 % which made it the first township enterprise to issue enterprise bonds in China. In April, 1992, the company was approved to become one of the first pilot units of the joint-stock system in the country. The company was renamed “Shanghai Jiabao Industrial Co., Ltd.” the first township enterprise to implement a joint-stock system in China.

In May, 1992, the company issued shares with a total of 106.2615 million yuan, 10 million yuan to the public, 2 million yuan was subscribed by the staff of the company. “People didn’t have much money at that time, and I subscribed about 1000 shares.” Ye said, at that time the staff were very enthusiastic about the subscription; they are full of expectations for new things.

Indeed, the benefits of listing are obvious: apart from establishing a modern enterprise system of scientific management with clear property rights, powers and responsibilities, separation of government functions from enterprise management, the company has enhanced its brand image. Most important of all, it raises the resources needed for development. Marx once appraised the function of raising funds of joint-stock company in Das Capital: “if we had to wait for an individual capital to accumulate itself to the degree that we could build railway, I am afraid there would be no railway in the world even now. But it was done in an instant with the joint-stock company.” Jiabao company raised 124 million yuan in the year of its listing and which was used for the construction of the “Ninth Five-Year Plan” project (introduction of the British crawler bubble blowing machine), supporting facility, the reconstruction and expansion of the old factory and the disposal of waste gas, water and industrial slag. Finally, both the quality and output of the light bulbs and lamp heads of Jiabao Company have been promoted.

Make a transformational deve-lopment, march towards a new stage

After the listing of Jiabao, it has attracted the attention and won the favor of the international light source community. GE has taken a keen interest in Jiabao and offered to be a partner with the company.

In December, 1993, GE and Jiabao Lighting Co., Ltd. signed an agreement founding the joint venture of a total investment of $180 million, which was one of the largest foreign-invested enterprises in Shanghai at that time.

As the saying goes, “A boat sailing against the current must forge ahead or it will be driven back.” After entering the new century, Jiabao carefully analyzed and judged the internal and external environment, gradually established the development idea of taking real estate development as the core industry, and created a series of high-quality real estate projects, such as Ziti Bay, Dream Bay, Jiading Darong City, etc. which has won the “Gold Award of Excellent Residence in Shanghai”, “Magnolia Award” (Municipal Quality Project) of Shanghai Construction Project and many other honorary titles.

Since 2015, there have been changes in the trend of the real estate market, the company was in urgent need of transformation because it became increasingly unsustainable for the business model of real estate companies simply buying land-developing-selling. In January, 2016, Jiabao completed directed addition, and China Everbright Investment Management Co., Ltd. became the strategic shareholder of the company. In 2017, the company made a satisfactory achievement: realizing revenue of 3.083 billion yuan and net profit of 545 million yuan, an increase of 30.45% and 84.4% respectively compared with the same period last year, setting the highest record in history. From 1992 to 2017 when it was first listed on the SE the company was renamed as Everbright Jiabao Co., Ltd. Jiabao has gone through a quarter of a century. In the past 25 years, the total assets of the company increased from 465 million yuan to 13.45 billion yuan, a growth of 28 times. Net assets rose 25 times from 213 million yuan to 5.439 billion yuan.

Jiabao was like a small boat in a socialist market economy in the whole country, by the end of 2017, the total market value of 3483 listed companies in the A-share market reached 57 trillion yuan. With the deepening of the reform of price and stock market, the socialist market economic system with Chinese characteristics has been established, and the world is constantly affected by the size of this second largest economy.

In 2018, Ye, who retired many years ago, remains active in the stock market. Personally, he was an ordinary participant in the market economy. But this involvement in the stock market was unimaginable 40 years ago.