Emerging China: Enable High-Quality Development With "One Strengthening Three Transformation"

The Party Committee of Xinxing Jihua Group (hereinafter referred to as Xinxing Jihua) has thoroughly implemented the major deployment of the three-year action of state-owned enterprise reform, and strengthened the leadership of the Party to lead the reform breakthrough. The main leaders personally deployed the reform work, personally supervised major issues, and personally coordinated key links, so as to continuously advance the reform in depth.

Xinxing Jihua focuses on business, promotes the transformation from decentralized to intensive, establishes the "531" industrial layout of five main businesses, three specialized fields and one industrial investment platform, and sets up three functional companies, including science and technology companies, capital holding companies, and financial companies, to support the development of the Group's main businesses from three perspectives: improving the ability of scientific and technological innovation, capital operation, and financial planning; Focusing on products, we will promote the transformation from a production type to a scientific and technological innovation type, deeply implement the innovation driven development strategy, take products as the carrier, strengthen technology empowerment, quality empowerment, and service empowerment, speed up the complement of scientific and technological weaknesses, and form a systematic layout of scientific and technological forces; Focus on the market, promote the transformation from low added value to high added value, closely focus on the important mission of "protecting the military, emergency, and serving the people", and strengthen the "market as the king".

In the past three years, Xinxing Jihua has effectively solved a number of problems that have not been solved for a long time. The Group continues to add new momentum to its development. On the basis of industrial structure adjustment and optimization, it has put the improvement of enterprise efficiency and core competitiveness as the top priority, and achieved the goal of "getting out of trouble in one year" in the 14th Five Year Plan of the Group, Accelerate to the strategic goal of "tamping the foundation in three years and creating brilliance in five years".

Focus on governance mechanism reform to form a more mature modern enterprise system with Chinese characteristics

First, integrate the leadership of the Party into all aspects of corporate governance as the premise of improving corporate governance, and achieve institutionalization, standardization and proceduralization. We printed and distributed the List of Corporate Governance Rights and Responsibilities of Xinxing Jihua Group Co., Ltd., revised and improved the "Three Importances and One Large" decision-making management measures. It has clarified 56 decisions of the Party Committee, 94 decisions of the Board of Directors after the Party Committee's pre research and discussion, and 144 decisions of "Three Importances and One Large". Important subsidiaries have all established a list of major issues for pre research and discussion by the Party Committee with reference to the Group's "list of rights and responsibilities". Through the list of rights and responsibilities, professional and differentiated management and control were fully covered by secondary companies. The authorized and delegated items increased by 10% year on year, and the general management items decreased by 18%.

Second, strengthen the construction of the board of directors and implement the functions and powers of the board of directors as the core of improving corporate governance. The board of directors should be fully built, with external directors accounting for the majority, and the board system has basically formed. We revised and improved the Rules of Procedure of the Board of Directors and the working rules of the special committees of the Board of Directors, formulated the Work Plan of the Group Company on Strengthening the Construction of the Board of Directors of Subsidiary Enterprises and Implementing the Functions and Powers of the Board of Directors of Subsidiary Enterprises, established a team of full-time external directors, strengthened training to improve their ability to perform their duties, determined that 31 enterprises within the Group should build a board of directors, and 100% of the board of directors have been established, 11 important subsidiaries fully implemented the functions and powers of the Board of Directors.

The third is to ensure the effective exercise of authority and performance of managers as the basis for improving corporate governance. Establish a management system for the authorization of the board of directors at all levels to the management level, clarify the authorization principle, management mechanism, scope of matters and authority conditions of the board of directors to the management level, strictly implement the working mechanism of the general manager responsible for the board of directors and reporting to the board of directors, and strengthen the supervision of the work of the management level.

Focusing on industrial transformation and upgrading, highlighting new responsibilities in promoting layout optimization and structural adjustment

First, do a good job in addition. Since 2006, a structural adjustment has been carried out with the greatest strength, the widest scope, the largest number of asset related personnel and the most far-reaching impact. On the one hand, it focuses on solving the prominent problems of overlapping functions and businesses of secondary companies due to historical reasons, based on the principle of "focusing on the main business, collecting resources and classifying industries". Since 2021, the Group has adjusted 107 enterprises (accounting for 44% of the number of group enterprises) in various ways, such as property right transfer, custody and asset disposal. The line of industrial structure is clear, and the professional operation and management of secondary companies are realized for the first time. Asset management, Xinxing Heavy Industry and Zhongxinlian focus on land revitalization, asset disposal and trade business respectively. Three functional companies, including technology companies, capital holding companies and finance companies, support the development of the Group's main business from three perspectives: improving the Group's technological innovation ability, capital operation ability and financial planning ability. On the other hand, strengthen M&A and reorganization to strengthen the chain, supplement the chain and expand the chain.

Second, do a good job of subtraction. In combination with the special action of SASAC to reduce the number of legal persons and levels. By improving the group's authorization system, it is clear that the authority of new legal persons will be received from the group headquarters. In principle, it is not allowed to establish new companies below Level 5, effectively control new legal persons, and take a lean and efficient professional development path. At the end of 2021, the number of consolidated accounts in the financial statements was 241. On the premise that the merger and acquisition of Hainan Haiyao absorbed 29 consolidated enterprises in 2020, the total number of accounts at the end of 2021 was 15 less than that in 2016.

Third, do a good job of division. The "two non" clearance work was carried out in a down-to-earth manner. Establish a leading group with the main leader of the group company as the group leader and the leader in charge as the deputy group leader, covering the functional departments and the main heads of enterprises at all levels. Include the special work of "two non" divestiture into the annual assessment of tier two companies. By the end of September 2022, the overall completion rate will be 100%, of which 7 will be fully completed and 4 will be basically completed. The quality of the Group's assets has improved significantly.

Focusing on reshaping the R&D system, we have achieved fruitful results in realizing the transformation from a production oriented to a scientific and technological innovation oriented

We will unswervingly put the improvement of scientific and technological innovation ability at the top of the Group's development, reshape the scientific and technological innovation system, and greatly make up for the shortcomings of the Group's innovation and development ability for many years. The group headquarters set up a science and technology department to complete the integration of the group's science and technology resources (6 corporate enterprises). We strengthened the construction of scientific and technological innovation mechanism, formulated 15 systems of scientific and technological management and incentive for scientific and technological talents, comprehensively implemented the system of scientific research project unveiling, chief engineer, project person responsibility, excess profit sharing, and explored the implementation of project follow-up. Realize the centralized management, centralized dispatching and centralized utilization of scientific research resources at the group level. The Science and Technology Innovation Committee was established, bringing together nearly 300 experts, including 8 academicians and 7 Changjiang scholars. It has built a scientific and technological innovation system dominated by the Group's strategy, focused on key common technologies at the second level, and focused on process research and experimental verification at the third level.

The R&D investment has increased by 20% annually in the past three years, and will exceed 2.4 billion yuan in 2022. In 2022, the first batch of "leaders" in the enterprise standards of central enterprises was released recently, and a total of 12 standards of 7 central enterprises became "leaders". Among them, the emerging cast pipe "Ductile Iron Pipes and Accessories for Water and Gas" was successfully selected, becoming one of the five standards shortlisted by the steel industry. Jihua Co., Ltd. completed the research and development of new generation military uniforms and participated in the research, development and production of Shenzhou series manned space engineering shoes and boots. The LCI-20 cochlear implant products of Shanghai Lishengte, which have completely independent intellectual property rights, have been replaced domestically. The emergency industry company tethered UAV high-rise fire-fighting equipment to fill the domestic gap, and was recognized by the Emergency Management Department.

Focus on promoting reform by mixing, and make new breakthroughs in actively and steadily promoting the reform of mixed ownership

The Group adheres to the principle of "three reasons, three advisability and three non conformities", takes "mixed ownership" as an important means, and takes "reform" as a key support to carry out mixed ownership reform in a safe and orderly manner.

First, adhere to the "two unswerving" principle, formulate a work plan for the enterprises affiliated to Xinxing International China to promote the mixed ownership reform, carry out a thorough and special evaluation of the mixed ownership reform enterprises, formulate a work plan, make dynamic adjustments, and steadily and prudently advance. Compile the Compilation of the Mixed Ownership Reform System, guide the affiliated enterprises to fully grasp the policies of the mixed ownership reform, ensure that there is no deviation in the implementation process, and resolutely implement the procedures in accordance with the policies and systems.

Second, take "mixing" as an important means to promote implementation by classification and layering. Starting from the characteristics and needs of enterprises at all levels, and taking synergy and complementarity as the principle of long-term strategic cooperation, we are looking for strategic partners with high matching, high recognition and high synergy. According to the changes of internal and external environment, Jihuazhongsheng promoted the optimization and adjustment of equity, introduced three private shareholders to replace the original German shareholders, and realized the benign development of the enterprise. Wu'an Coking has cooperated with local private enterprises to improve the equipment level of the company through capacity replacement. The Group implements differentiated authorization and delegation of power. For listed companies such as Cast Iron Pipe Co., Ltd. and Jihua Co., Ltd., appropriate authorization is given to increase the amount of investment projects that can be independently decided.

Third, take "reform" as the key support to promote governance optimization and management marketization. In implementing the functions and powers of the board of directors, contractual tenure system, market-oriented selection, withdrawal from incompetence, and implementation of medium - and long-term incentives, hybrid enterprises have strengthened reform efforts, re mixing and re reforming, and significantly improved corporate governance and production and operation results. Cast Iron Pipe Co., Ltd. implemented equity incentive, and the incentive objects covered 452 core talents in key positions. Jihua Co., Ltd. and Jihua 3502 cooperated with private enterprises to set up e-commerce platforms, explore new business models, implement investment of key employees, and constantly improve the market-oriented operation mechanism.

Fourth, take the leadership of the Party as the foundation to provide a strong political guarantee for reform. All affiliated holding mixed ownership enterprises have achieved the incorporation of party building into the Articles of Association, and all have established a list of major issues for pre research of the party organization.

Focus on building a "reform model" and make substantive progress in the special project of deepening reform

First, we carried out in-depth benchmarking and world-class management improvement actions. A benchmarking index system was established, and 8 benchmarking indicators (12 benchmarking lists) at the group level, 22 benchmarking indicators for headquarters departments and offices, and 8+22+3+N (generality and individuality) benchmarking indicators for secondary companies were determined. Jihua Co., Ltd. comprehensively carried out the quality management improvement action, summarized the quality experience of its affiliated enterprises since 2000, formed a warning record, fed back production, and established a technical standards archive including national standards, national military standards, and relevant industrial standards. By 2022, the factory acceptance rate of new clothing will reach 100%. The emergency industry has promoted the "three unifications" reform of unified research, unified marketing and unified procurement, established the "12+1" business management and control mode of horizontal penetration, and gradually explored the management integration mode of secondary and tertiary enterprises.

The second is to focus on deepening the comprehensive reform of "double hundred" and "science and technology reform" enterprises. The Notice on Doing Well in the "Double Hundred Action" and the "Science and Technology Reform Demonstration Action" was issued. The group leaders went deep into the front-line on-site supervision of the demonstration enterprises, found gaps against the indicators, and quickly formulated improvement measures. "Double Hundred Enterprises" Cast Pipe Co., Ltd. has improved the annual evaluation system and adopted measures such as "unveiling the list and taking the lead". The proportion of managers competing for posts reached 81.1%. 3521 Environmental Protection Technology will introduce strategic investors, promote equity diversification and further improve the mechanism.

Third, further improve the quality of listed companies. Formulate the Work Plan for the Group Company to Improve the Quality of Listed Companies, guide listed companies to formulate specific implementation plans for one enterprise, one policy, and reasonably plan the strategic positioning of listed companies.

Focus on the reform of "three capabilities" mechanism, and stimulate new vitality in improving market-oriented operation mechanism

First, we should pay attention to the tenure system and contractual management of managers. 144 subsidiaries implemented the tenure system and contractual management of managers to achieve 100% full coverage, strengthen the application of assessment results and rigid cash. Establish a comprehensive performance responsibility statement with "economic benefit indicators (80% weight)+key tasks (20% weight)+special work", and the members of the management level will achieve differentiated assessment according to the division of labor. Always adhere to the "rigid assessment". In 2021, the annual salary gap of the main heads of secondary companies will reach more than 4.5 times, with a year-on-year growth of up to 30% and a decline of more than 20%.

The second is to control the "wind vane" of good selection and employment. Second tier companies such as Jihua Shares and Xinxing Cast Iron Pipes publicly select and employ the general manager. The "selection announcement" is a "task list" that highlights the indicators, puts out responsibilities and selects talents. All secondary companies have increased their efforts to select and employ employees for their affiliated enterprises, and all the middle managers of the headquarters of China International Investment and Emerging Development have stood up to compete for jobs.

Third, make good use of the "toolbox" of medium and long-term incentives. Actively practice encouraging exploratory reform, and fully stimulate the vitality of all kinds of entities through innovative reform measures such as excess profit sharing, employee stock ownership, virtual equity, and risk collateral. Jihua 3521 achieved substantial growth in its performance for two consecutive years, reached the group's goal of "Little Giant Action" to share excess profits, and realized 7.05 million yuan. Jihua 3502 Interlining Branch carried out project follow-up investment and simulated corporate accounting in the factory. Cast Pipe implemented equity incentive for listed companies, and 452 key employees actively participated. Establish a flexible and market-oriented performance oriented dynamic adjustment mechanism for total wages of "Double Hundred Enterprises" cast pipe shares, and pay is linked to contribution.

The fourth is to play a good combination of three levels of control. Consolidate and deepen the rectification effect of "headquarters institutionalization", and reshape the three-level management and control orientation. The headquarters focused on "capital management" and continued to carry out de organization. The Capital Operation Department was established to strengthen strategic planning, resource allocation, capital operation and risk prevention and control, and transform from a small headquarters to a strong headquarters and a value creating headquarters. The secondary companies focus on "management", transform from management subject to operation subject, unify research and development, marketing and production, strengthen incentives and constraints, compact business responsibilities, and build industry leaders. Level 3 enterprises focus on "cost control", promote process change, improve product quality, reduce costs and enhance profitability through benchmarking and fine control.

Focus on the internal supervision mechanism, and continue to improve the system and mechanism for improving accountability

Xinxing Jihua Group solidly carried out the construction of the working system and working mechanism for investigating the responsibility for illegal operation and investment. First, establish a full coverage accountability system. Comprehensively formulate and record the Management System for Accountability of Illegal Operation and Investment, establish a leading group for accountability of illegal operation and investment, define the responsible department, and refine the scope of accountability and loss standards based on the actual situation of the enterprise.

The second is to improve the accountability system in an all-round way. The Measures for the Investigation and Treatment of Clues of Illegal Operation and Investment Problems of Group Companies, the Interim Measures for the Supervision and Management of Clues of Illegal Operation and Investment Problems of Group Companies, and the Working Rules for the Interview of State owned Assets Supervision Responsibilities of Group Companies were issued to build a working mechanism with clear responsibilities, clear processes, and standardized order, and constantly enhance the risk resistance ability of the state-owned economy.

The third is to promote the accountability mechanism throughout the process. The Group Company has formulated the Detailed Rules for Accountability Report of Illegal Operation and Investment (for trial implementation) and the Standing Book Module for Management of Violation Clues of the Group's Supervision and Accountability Information System, effectively applied the supervision and accountability information system, promptly investigated and dealt with violations, strengthened the compliance and responsibility awareness of business managers at all levels, and effectively promoted the steady operation and sustainable development of enterprises.

Focus on building the "root" and "soul" to reach a new level in comprehensively promoting the Party building

The first is to unify the thinking and understanding for reform and development through the thematic activity of "Creating Great Cause". In combination with the learning and education of the Party history, we organized and carried out the special activities of "learning the Party history, recalling the journey, seeing the gains and losses, strengthening confidence, and creating great achievements" to guide the broad masses of cadres and workers to unify their thoughts and clarify the strategic direction.

The second is to pool development power for reform and development through the "three self" theme activities. Under the leadership of the Party's political construction, the Party Committee of the Group focuses on strengthening the ideological construction and team building, organizes and carries out the activities of "I am proud of being a party member, I am responsible for my job, and I am responsible for my job", calls on party members and cadres to "pioneer first", leads the staff to "make contributions to their positions", and organically integrates the "three self" activities with key tasks, Effectively promote the integration of party building and business, and strive to break the "two skins".

The third is to provide institutional guarantee for reform and development through the "Operation Compliance Management Year". The number of business control systems was reduced from 242 to 168, achieving full coverage of compliance management, and a set of effective and exportable management system with emerging international characteristics was initially established. The level of legal rights protection and case handling has been continuously improved to effectively resolve major risks.