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2010 Annual Report

Date: 2011.03.08    Publisher: vanke
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To Stockholders

With respect to the past and future, the opportunity and dream, and even the question and dispute of China’s housing industry, we have repeatedly discussed in the past reports. In this industry hard to be calm and the age hard to be ordinary, it is not surprised that the numerous and varied history is continued in 2010 or beyond the prediction

For those caring about Vanke, however, they may still remember the year of 2010 for the number-a hundred billion.

It is true that the amount of sales of Vanke exceeded a hundred billion in 2010.The number consisting of 1 and 0 has a kind of mysterious-like symbolic characteristic. But it is only because the decimal system is chosen. After such disenchantment, its landmark significance as the starting point of order of magnitude does not need to specially go into.

Yet it is worth paying attention to another interpretation of the number of a hundred billion. Because this is not only the historic peak of the annual sales of world housing enterprises, but also the highest elevation line reached by China’s non-state enterprises so far.

The age hard to be ordinary has not gone to the end; the industry hard to be calm will continued to be restless. Facing this unprecedented height, maybe Vanke shall place more stress on turning back to look at itself and going back to the logic starting point of the enterprise.

Reason for Being 

Jostling and joyous, the whole world comes after profit; Racing and rioting, after profit the whole world goes!-The sentence summarizes the situations and preferences of many people, but not all. What is the real meaning of life? The problem still lingers in many thinkers’ mind all their life. For enterprises, however, the similar problem is: what is the reason for the being of an enterprise

The starting point and fortune of each person is different. Someone is wealth for inheritance while someone is successful for good luck. Therefore, possession is not the only way of being. It is especially true for an enterprise. Having a scarce natural resource or getting the protection of exclusive institutional arrangement is enough for the long being and the excess earnings of an enterprise. But from the point of society, is there any difference for the being of such enterprise or not or the change into any other enterprise?

From this point of view, the being of an enterprise shall be helpful for the increase of the social wealth. And the increase of the social wealth refers to the better satisfaction of the needs of more people. Therefore, it is a great enterprise that can meet people's needs which cannot be satisfied in the past through revolutionary innovation. It is a successful enterprise that can meet more people’s needs with the consumption of the same social resource through the improvement in production and operation, the increase of output rate or the decrease of transaction costs.

The birth of an enterprise is determined by stockholders. The stockholders give their wealth to the enterprise for the increasing value of the wealth. To the stockholders, investing in an enterprise means the abandon of the opportunity to gain profit from other investment. From this point of view, it is a qualified enterprise that can help the stockholders to obtain the rewards which will not be under the social average level. It is a good enterprise that can help the stockholders to obtain the rewards which will be higher than the social average level. It is an excellent enterprise that can help the stockholders to obtain the rewards which will be higher than the social average level and achieve sustainable increase.

In addition, an enterprise is not a machine made of a pile of screws, but a team consisting of numerous individuals with thoughts and feelings. Most in the team devote part of best years in life to this place. During the period, the time they spend with colleagues is even more than with their family. What they pay is not only time and skill, but also youth and passion; what they want is not only salary, but also career experience. Their dignity needs to be protected; their ideal needs to have sustenance and their talent needs to be displayed. The reservoir of everyone’s happiness is the happiness of society as a whole. As a unit of society, to make contribution for promoting the happiness sense of the members is naturally a dimensionality of the reason for an enterprise’s being.

We do not deny that even if some enterprises which have not taken these problems into consideration may get the chance for survival even achieve momentary resplendence while we still firmly believe that those enterprises which have found their reason for being have more possibility to open the non-stopping way for themselves without relying on external favor.

Growth Quality

Pursuing the expansion of scale seems to be the instinctive impulse of enterprise operators. The scale of an enterprise is closely bound up with the sense of achievement, controlling resource quantity even the social status of the operator

But just as the being of an enterprise shall have a reason, the growth of an enterprise shall have reasonable basis. If the growth of enterprise's scale brings about the rise of social transaction costs and the decline of the social resource efficiency, such growth is actually a kind of waste to society. If the growth of scale results in the decline of stockholders’ yield rate, such growth is actually a loss to stockholders. If the price of the growth of scale is the loss of health or the sense of happiness of team members, such growth is actually the abuse of humanity.

Based on this logic, Vanke began to explicitly put forward that what the enterprise pursued was qualitative growth and the rise of operational efficiency from 2004.And simple scale number shall not be the object of Vanke but shall only be the natural consequence of the rise of operational efficiency.

Qualitative growth shall take the stockholder return as the core. To make rewards for stockholders is the bounden duty of a professional manager. To stockholders, the scale growth breaking away from rate of return has not any meaning. No economic profit created (return over social average level) equals no value created for stockholders. Return on asset is the primary financial index to measure whether the operation is successful or not and also the determinant of economic profit.

Qualitative growth shall represent scale effect and operational efficiency and “diseconomies of scale” is a waste to social resource. Fast turn around is the consistent basic operation strategy of Vanke and the inevitable choice to ensure operation security and save social resource as well.

Product quality is the base line of operational quality and the survival lifeline of an enterprise. It shall not have any carelessness on production safety, home security and quality conformance.

Finally, growth needs to show sustainability. Financial index reflects current operational quality while sustainability determines future operational quality.

A century-old shop built to last must have well internally piloting and risk management ability, must provide the staff with happy career experience, must become popular partner, and must respect society and nature and bear social responsibility.

Scale growth will create advantageous condition for playing scale effect and inevitably bring about the increase of management complexity at the same time. On one hand, controlling internal transaction costs will become more difficult; on the other hand, any minor mistake will be exponentially magnified. Therefore, to Vanke, a hundred billion is not the core index to summarize the past success, but the significant symbol for the coming of brand new challenge. The brand new challenge is not two hundred billion, three hundred billion or any number of course, but how to achieve sustainable growth through sticking to the requirement of qualitative growth standard on the unprecedented scale basis of this industry.

Eternal Faith

Vanke has only 26 years hold from establishment and Vanke’s career is actually just getting start. In the past 26 years, the most important wealth accumulated by Vanke is not two hundred billion total assets, but some faith always insisted for 26 years. Facing future long road, these faiths are the source of courage and power to Vanke as well.

These faiths include:

Pursuit of excellence refers to being the leader continuously and daring to be the first. We aspire to become world class outstanding enterprise and industry benchmark, then take it as eternal tireless ideal and pursuit and are brave in and happy to welcome the future and face a brand new challenge. We comply with the change of living mode and synchronously develop with cities; look forward the industry trend, continuously innovate and explore, be the first to provide solutions and take the responsibility of leading the industry progress. We respect the nature and environment and focus on the future of human and becoming excellent green enterprise is our staunch target.

Pursuit of excellence refers to being the leader continuously and daring to be the first. We aspire to become world class outstanding enterprise and industry benchmark, then take it as eternal tireless ideal and pursuit and are brave in and happy to welcome the future and face a brand new challenge. We comply with the change of living mode and synchronously develop with cities; look forward the industry trend, continuously innovate and explore, be the first to provide solutions and take the responsibility of leading the industry progress. We respect the nature and environment and focus on the future of human and becoming excellent green enterprise is our staunch target.

Serving stockholders refer to creating excellent returns. We shall take the stockholder return as the final scale to measure operational performance. As an enterprise which is operated by professional managers, we will double the self-discipline and diligence, devote to being the most popular and trustful enterprise by investors and realize a win-win situation of stockholders’ interest and managers’ career and the pursuit of ideal.

Growth together refers to respecting staff and partners. The success of Vanke is from the endeavor of staff; the development of Vanke is the corporate cause of team. We believe that human nature has a noble side, believe in the power of understanding and trust, believe that simper interpersonal relationship and more equal organization culture will be in favor of promoting team validity and attract more people having a common goal to join us. We regard mutual respect as basic communication ethics and believe that opener mind can win more allies. We especially cherish the partners close to the ideal and pursuit of Vanke, seek for synchronous development and progress in cooperation and regard the promotion of respective competitive power as the symbol of win-win situation.

Giving priority to efficiency refers to cherishing resource, fast turn around and rely on professional ability to get fair return. We cherish talents, capital, lands, raw material and other various valuable social resources and hope to play its value to the largest extent and decrease waste. We insist on basic operational strategy of fast turn around and try our best to increase the correctness of investment to strive for using as less lands and capital as possible to create more returns for stockholders. We insist on continuous reform, push forward the progress of industry production way and operation management, promote knowledge sharing and standardization, play scale effect and enhance organization and individual working performance. We endeavor to rely on professional ability to enhance product cost performance and try our best to achieve better customer's experience with as less resource consumption as possible.

Sustainable development refers to steady operation and harmoniously getting along with society and the nature. Under any circumstance, we shall ensure the security of enterprise operation at first. Product quality, abiding law and honesty and financial security are the base line which we can not exceed. We think that the risk management ability and internal piloting work quality of our enterprise shall be ahead of scale growth. We believe that equally good ability advantage and steady operational style can help the enterprise to face more complex operational environment. We believe that our enterprise can obtain social identity and harmoniously get along with the nature by making more efforts and bearing more responsibilities.

Based on these faiths, Vanke will define the subject term of 2011 as “situation depends on heart and knowledge has no boundary"

That situation depends on heart means that culture, value and idea decide the height which an organization can reach. Being ambitious, respecting various relevant subjects, acquiring qualitative growth and sustainable development are always the pursuit and ideas of Vanke, which will never change. It is the power that supports Vanke to have achieved current success and the foundation of Vanke to move on in the future.

That knowledge has no boundary means that only if has known the impossibility to do and learnt to give up and be self-discipline, an individual or organization can get infinite space for development. The understanding of enterprise boundary is the definition of the reason for enterprise’s being. The reason for enterprise’s being is to create value for society while the enterprise boundary lies in the compliance to the needs of society. Only insisting on customer orientation, serving stockholders, respecting society and other disciplines of acceptance or rejection and self-discipline can Vanke obtain space for sustainable development and realize the ideals of the pursuit of excellence.

The new year has begun. These ideas are the promises of Vanke to the future and the words form the bottom of our heart hoping to state to stockholders.

Attachment

2010 Annual Report.pdf (971KB, 2011年03月08日)

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