“Belt and Road”

Mr. Zhang Hua
President of Arcplus Group PLC

H+A : Mr. Zhang, it is said that Arcplus Group has walked a long way on the road of international development. Could you please tell us more?

Zhang : Arcplus Group (hereinafter referred to as the Group) has been actively exploring and practicing the “going out” strategy since 1960s. Today, our service area has covered more than 30 countries in all parts of the world.

Among the overseas projects that we have undertaken, there are many landmark buildings, such as the headquarters of the OCA in Kuwait, Vietnam National Central Stadium, Armani Hotel Dubai in the United Arab Emirates, HAVELOCK CITY in Sri Lanka, Pune Hinjewadi Golf Integrated Project in India and the Project Cluster in Ho Chi Minh City, Vietnam. Besides traditional main business like planning and design, construction design, interior and scenery design, our service scope also covers emerging business like engineering consulting, project management and EPC. As early as 8 years ago, we had regarded internationalization as one of the Group’s development targets. The Group has been sticking to two strategies, nationalization and whole-process. The extension of nationalization is internationalization, which shares the same origin with our spatial development strategy. The Group’s responsibility and status in the industry have been urging us to play the leading role in the opening of new markets and fighting new challenges.

Let me summarize the historical stages in the Group’s international development. The first stage was the period from 1960s to 1970s, when we went to the sea by borrowing a boat. At that time, the Group responded call of the nation and actively engaged itself in foreign aid projects. With the help of influence of governmental departments (e.g., Embassy or Ministry of Commerce in the country) and the industrial association, we gained project information, completed a lot of foreign aid projects and started our international exploration. The second stage lasted from 1980s to 1990s, when we went to the sea in our own boat. After the promulgation of the reform and opening up policy, the Group began to open up the overseas market with efforts. We converted from a pure “contractor of projects” into a “market player” through throwing ourselves in the competition for projects on overseas engineering market proactively, and giving active play to our advantage in the engineering design area. Eight years ago, we established the overseas business department, which arranged responsible departments to handle the overseas market. Meanwhile, we established overseas branches and assess their achievements while working with overseas design institutions. In the third stage after 2000, we bought a boat to go to the sea. In 2014, we won the bid and successively acquired Wilson Associates, gaining talents, brand influence that had been accumulated by the enterprise over the years and all types of relationships and resources. Therefore, we opened the market in which our targeted company was located quickly. The above-said has become a part of our international acquisition business, which is involved in our global allocation of resources and accelerates our internationalization progress.

Based on the three stages, our next step is to take the opportunity of the “Belt & Road Initiative” to push the internationalization progress of Arcplus onto a new stage with the promotion of related policies. We will be not only prosperous, but stronger as well.

Interior design renderings of Zhuhai Port of the Hong Kong-Zhuhai-Macau Bridge

Interior design renderings Kuwait HAHC Medical Insurance Hospital

H+A : What problems has Arcplus encountered in its internationalization progress? Which aspects of construction has it focused on?

Zhang : Our internationalization development can be divided down into four layers roughly. First, the international business, or overseas projects; second, the international market; third, the international resource allocation and fourth, the internationalized brand and popularity.

We also have some weakness and deficiency in the process of internationalization. The first is market competitiveness. Since we used to look up to the well-known overseas design firms in the international market, and now we are going out, we shall realize the gap between us. The second lies in the mode of internationalized operation that we are learning to use and the specifications. Though the State Council has promulgated the Standardization Law that has solved the top-level problem, a great amount of work is still left to do in its implementation. The third is our brand recognition is not high in the international market, which still believes that the only advantage of Chinese design is low cost and high efficiency.

As the external economic environment is getting mature after 2010, Arcplus has accelerated its implementation of overseas strategy. Because undertaking overseas projects merely can no longer meet its strategic requirement for international development, the Group needs to transform in four aspects to complete the transformation into international development: conversion from a contractor of projects to a market player slowly; from an exporter of technical service into an exporter of integrated service; from a contractor of domestic/overseas investment projects into a proactive project bidder on the international market; and from a provider of products into an overseas acquirer and investor. We also have had many opportunities to expand our overseas market and get knowledge about overseas enterprises. Wilson Associates, the famous US interior design company that majored in design of high-end hotels and boasted global layout, had branch offices in Dallas, NY, LA and Singapore and had been occupying the third place in the industry globally. On Feb. 28, 2014, Arcplus completed the 100% equity acquisition of Wilson, realizing cross-border capital acquisition and took the first step of its in-depth “international” strategy. After that, it opened new branch offices in Dubai in the Middle-East Area and Paris in France. Having business on each continent complied with the Group’s strategic development target. High-end interior decoration was weak back in China, so the acquisition constituted a forceful complement to our resource because it had been popular internationally for many successful cases, such as designing several royal palaces for Prince of Dubai and many casino hotels.

The Group overcame many difficulties during its first acquisition of overseas enterprise and gained much experience. After its listing, the Group further acquired several companies and accumulated some experience.

Acquisition of Wilson Associates

H+A : Could you tell our readers about the story behind the acquisition?

Zhang : Compared with the acquisition of an Asian design firm, the acquisition of a US/European design firm is more difficult due to the huge cultural difference. Nevertheless, it also makes an excellent chance not only to attract talents with the US/European platform, but also for us to know about the overseas design capability. Our advantage in management and design and their outstanding design capability that complement and learn from each other have both made further progress.

There was a small incident before the acquisition. The static acquisition allowed us to go through many materials round by round, but we had not touched the personnel problem yet when we made the decision system at last. I believed that talents were of the utmost significance, and we could not make the decision without meeting the staff. Then Wilson arranged us to contact all corresponding offices immediately. Meeting the staff and making sure of their recognition of the Group are the foundation of the following work; communication about brand positioning between both parties leads to our common understanding. Therefore, both parties exchanged visits and communications frequently during the acquisition process. Both interior design companies and architecture design companies have high standards on design art and design models, especially interior design companies, which are strict about every tiny part. Upon the completion of the acquisition, we began our integration and management of Wilson systematically. We made the company management and governance scheme after the business transaction and speeded up the pace of the Group in its taking over Wilson in an all-round way, including not only enterprise strategy, manufacturing management, technical innovation, human resource, internal management, brand synergy and resource integration, but also understanding and integration of each other’s corporate cultures and values.

Training of international talents

H+A : What are the Group’s gains in the field of international business construction?

Zhang : We knew patterns and conventions of international engineering construction, design specifications and standards in various countries and regions through undertaking overseas projects. We have realized that overseas market environment and technical standard specification are the two aspects that vary from that in China the most, and the gap between Chinese and overseas standards is huge in the whole system. In our standard specification that is imprinted with mark of planned economy, there are no clear limits between standards and rules, let alone those compulsory clauses. In this light, we carried out business construction by requiring the overseas department to study on overseas basic standard specification; the collection and study based on the subject of Science and Technology Commission is a large and systematic project. In our development on overseas market, we knew its regional characteristics, cultures and communication, channels and customers while accumulating technical and management knowhow of international projects, as well as establishing a team made up of management and technical personnel with international vision preliminarily.

In the major international cooperative projects like Shanghai World EXPO, Shanghai Center and Shanghai International Tourism and Resorts Zone, we participated in the whole engineering construction life cycle consisting of analysis of investment opportunity in the early stage of the engineering project, cost control, engineering design, design general control management, construction management, digital construction and operational management. As a result, we accumulated more management experience in international engineering and cultivated a team boasting talents with higher international ability.

At the same time, the Group also gave importance to the training of international personnel. Since 2005, we have been organizing overseas training activity for 12 years consecutively. We select young designers and administrative staff every year, sending them to University of Glamorgan in UK and University of Oregon in US for overseas study and practice that last for 6 months to 1 year.

H+A : Indeed, we have been impressed by the Group’s giant investment in its international business through the interview. What are your prospects for it?

Zhang : Internationalization used to be the Group’s own business - it was us, who wanted to go out. Today, the “Belt & Road Initiative” that calls on us to go out is supported by the government. The environment is totally different by comparison. It has been four years since the “Belt & Road Initiative” was put forward; those four years have seen a boost in our overseas projects, which blazed a new road for the Group in its in-depth integration into the international market. Since 2010, the Group has been undertaking overseas projects in 54 countries and regions all over the world, of which, there are 28 countries and regions that are involved in the “Belt & Road Initiative”, accounting for 52%. Along with the promotion of the “Belt & Road Initiative”, the scale will be on a rise.

From the perspective of project distribution, we started from major developing countries and the Asian market to US local market gradually, then to the European market. Due to the fact that there are more design talents in France and UK, we decided to hold the meeting in Paris after the acquisition, which brought us the opportunity to open the European market in practice. We have planned to open the London Office in the near future. We look forward to undertaking more projects in Europe and attracting more European talents to join us.

To reach our international development goal, we must obey stipulations of related state ministries and commissions by implementing standardized management in national foreign aid projects. Such standardized management includes a round of strict bidding activities in each step, ranging from listing, registration review to final confirmation of the list project; practice is a good access to the opening of overseas market. Different from projects of the Ministry of Commerce, overseas projects require not only independent design bidding, but also the combination with investment and construction. Our two-month-long bidding for the hospital project in Kuwait had a fat chance at first, but finally turned out to be a big success. During that process, the tender once tried to break the contract; however, we followed the standardized bidding procedure, which was protected by law, so the Kuwait Government prohibited the tender from doing that. We see from that the strict procedure of international bidding plays a role in our growth. We began with some national aid projects, bid with our partners to get overseas projects one after another.

Upon the completion of projects, we had in-depth understanding of the countries, company cultures, economic levels and living standards. For example, Kuwaiti medical factory had a very high technical level. Recently, we have had many projects located in Ho Chi Minh City, Vietnam, a city not big but close to Shanghai. It took Shanghai 20 years to build Pudong into the current scale, however, Vietnam would spend about 10 years in finishing ordinary construction in that we built houses one by one at that time, they are now building houses one batch after another at a rapid speed on the whole. It is really a piece of promising land. We are going to open our branch office in Ho Chi Minh City by the end of this year, appointing special personnel to carry out local management with profundity there. The booming economy has endowed cultural confidence of big power on Chinese original design; the urbanization in China has accumulated rich, advanced technology and experience for Chinese design through practice; and the internationalization of Chinese enterprises has provided broader space for Chinese design in global allocation of resources. I believe that we should seize the present opportunity, which is best for China to go global, to go out in association by making concerted efforts, gaining progress together and improving our capability as soon as possible, and share our urbanization construction experience with the whole world.