In today's global economy, it is widely recognized that China's growth is driven by two key forces: manufacturing and urbanization. These sectors have long been the backbone of China's economic development. However, as the landscape evolves, both industries are facing significant challenges. Manufacturing is now dependent on transformation, while urbanization requires structural reform. Experts estimate that 50 to 60% of China’s traditional manufacturing sector may not survive in the long run. The advantages that once gave China a competitive edge—labor cost, scale, and policy support—are now becoming barriers.
Hubei has taken a proactive approach with its "competing and upgrading, improving efficiency" strategy. This industrial policy encourages the industry to move quickly, transferring some operations, digesting outdated models, integrating new technologies, eliminating inefficiencies, and upgrading products. In short, adapting to market demands is essential. For enterprises, the only path forward is reform. Reform means empowering businesses, and for companies, the essence of reform is innovation. Innovation is the key to sustainable growth and capturing higher value. We believe there is no alternative but to follow this path.
Today, I would like to share some insights on Yuli’s transformation and upgrading journey with all leaders, experts, and colleagues. May these reflections serve as a source of inspiration. If anything is inaccurate, please feel free to correct me.
Li Guilin, General Manager of Hubei Yuli Company
**From Low-Value to High-Value Products**
In the first two decades, Yuli primarily produced low-value abrasive products such as sandpaper and sand cloth. Profit margins were extremely thin, often just a few cents per unit. By the late 1990s, Yuli realized that relying solely on basic sandpaper was not enough for long-term growth. Taking a bold step, the company introduced China's first domestic base fabric processing line and belt manufacturing line. This shift significantly increased product value, allowing prices to rise from a few yuan to several dozen yuan per square meter. This strategic upgrade laid the foundation for Yuli’s current success.
However, the company soon faced new challenges. As more players entered the market, the added value of standard abrasive belts declined, and competition intensified. Many customers required higher precision, which many domestic products could not meet. At that time, 40% of the high-end abrasive belt market was still dominated by foreign brands. To address this, Yuli invested in European technology in 2002, producing mid-range belts that met market needs. The value of their products continued to rise, with a single car shipment increasing from tens of thousands to hundreds of thousands of yuan.
Yuli then focused on developing high-end abrasive products such as superabrasive belts. They also redesigned an ultra-wide belt production line with advanced AI, energy efficiency, and environmental protection features. Though risky and without precedent in China, Yuli chose to push forward, believing in the long-term value of innovation.
**From Labor-Intensive to Technology-Intensive**
For many years, Yuli was a major employer in Tongcheng, providing jobs for over 3,000 people at its peak. The company was deeply respected by the local community for its contributions beyond taxation. However, as labor costs rose and social progress continued, Yuli recognized the need to shift toward technology-driven production.
The company invested heavily in automation, replacing manual labor with mechanical systems wherever possible. For example, an automatic packaging line costing over 4 million yuan saved nearly 20 workers. Another project, an automatic quality binding line with a planned investment of over 10 million yuan, could save 200 employees if successful. Over the past decade, Yuli has reduced its workforce from over 3,000 to around 1,000, while increasing annual output. The working year has also decreased from 365 days to over 200 days.
**From High Energy Consumption to Low Pollution**
Previously, Yuli used steam for drying, consuming over 10,000 tons of coal annually. This method was inefficient, with much of the heat wasted. To improve sustainability, the company switched to natural gas, achieving over 94% efficiency. This change significantly reduced pollution and improved the environment around the factory, earning praise from the local government and residents.
In addition, Yuli invested over 6 million yuan in a gasoline recovery system for water-resistant sandpaper, recovering over 800 tons of gasoline annually, worth more than 5 million yuan. The company also installed formaldehyde hydrolysis purification equipment, meeting national emission standards and greatly improving workshop conditions.
**From OEM to OBM**
While many Chinese companies rely on OEM (Original Equipment Manufacturer) production, Yuli took a different approach. It prioritized building its own brand, “Sharp Card,†emphasizing quality and innovation. Today, over 95% of Yuli’s products are sold under its own brand, with only a small portion exported as OEM.
**From Cost Strategy to Differentiation**
Faced with intense competition in the coated abrasive industry, Yuli opted for a differentiated strategy. Instead of competing on price, the company focused on product innovation. When one product was crowded out, they developed a new one—blended fabric belts, full polyester belts, and even stacked abrasive belts. When the sandpaper market became saturated, they introduced diamond sandpaper. Rather than engaging in destructive price wars, Yuli targeted international markets, maintaining profitability and protecting its peers.
**Diversification Beyond Core Business**
Over the past three decades, Yuli has explored various industries, including aquaculture, hospitality, fashion, and wine. While these ventures did not yield significant profits, they contributed to the local economy and provided valuable experience. Moving forward, Yuli plans to expand into real estate and natural gas through joint ventures. The company has already invested 120 million yuan in a real estate venture and holds a 49% stake in a local natural gas company.
Additionally, Yuli is investing 10 million yuan to build a state-of-the-art laboratory for coated abrasives in Fan Brand New City, and 50 million yuan to establish a research base in Wuhan or Xianning. These initiatives aim to foster future innovation and prepare for industrial transformation.
In conclusion, Yuli’s journey reflects a commitment to continuous improvement, innovation, and long-term vision. The path ahead is challenging, but with determination and adaptability, we are confident in our ability to lead the way.
Fluorine Lined Valve,Lined Butterfly Valve,Electric Rubber Lined Butterfly Valve,Fluorine Lined Ball Valve
CEPAI Group Co., Ltd. , https://www.jscepai.com