A growth strategy for a Chinese state-owned enterprise: An interview with ChemChina’s president Ren Jianxin explains how domestic acquisitions helped prepare the way for overseas ones. Tomas Koch and Oliver Ramsbottom j u l y 2 0 0 8 BlueStar, China’s first industrial-cleaning company, was transformed into the nation’s largest chemical conglomerate—ChemChina, with $17.4 billion (121.8 billion renminbi) in revenue— through more than 100 acquisitions of state-owned companies. ChemChina has expanded aggressively overseas by purchasing Adisseo, Qenos, and other companies to obtain technology, management expertise, capital, and access to markets. In an interview, Ren Jianxin, ChemChina’s president and the former president of BlueStar, discusses the expectations of the private-equity firm Blackstone, which invested $600 million in the company in 2007; the global challenges it faces; and its daunting dual role of creating both shareholder value and jobs. c o r p o r a t e f i n a n c e Article at a glance 1 Ren Jianxin worked as a farmer in Dunhuang County, Gansu Province, during China’s Cultural Revolution. The hard life there, Ren explains, taught him “how to persistently pursue my goals,” along with other important lessons that have carried over into his business career. In 1984, Ren borrowed money from his employer by using personal assets as collateral and, with seven colleagues, founded China BlueStar Chemical Cleaning, China’s first industrial-cleaning company. It started modestly by cleaning teapots and boilers but grew quickly and undertook increasingly difficult jobs. On the way to capturing 90 percent of the domestic industrial-cleaning market, BlueStar pushed its Japanese and German competitors out of China. Today, it claims to be the world’s biggest industrial-cleaning company. Since 1990, Ren has acquired more than 100 state-owned enterprises. Above all, he brokered the 2004 merger between BlueStar and other companies affiliated with the former Ministry of Chemical Industry—a merger that created the China National Chemical Corporation (ChemChina), the nation’s largest chemical conglomerate, of which he is now president. In 2006, Ren began a global-expansion program, buying assets in France and Australia. A year later, BlueStar came under the international business spotlight when it received a $600 million investment from the prominent private-equity firm Blackstone. Organic growth, domestic consolidation, and international acquisitions have pushed ChemChina’s assets and annual revenue up to $17.4 billion (121.8 billion renminbi) each. During a recent interview in Beijing with Tomas Koch and Oliver Ramsbottom, a McKinsey director and associate principal, respectively, Ren discussed his state-owned company’s approach to M&A, its global ambitions, and his dual role of creating both shareholder value and jobs. Ren Jianxin: In 1984, I found out by accident that eight million tons of coal a year were wasted b.

1. A growth strategy for a
Chinese state-owned
enterprise: An interview with
ChemChina’s president
Ren Jianxin explains how domestic acquisitions helped prepare
the way for
overseas ones.
Tomas Koch and Oliver Ramsbottom
j u l y 2 0 0 8
BlueStar, China’s first industrial-cleaning company, was
transformed into the nation’s largest
chemical conglomerate—ChemChina, with $17.4 billion (121.8
billion renminbi) in revenue—
through more than 100 acquisitions of state-owned companies.
ChemChina has expanded aggressively overseas by purchasing
Adisseo, Qenos, and other
companies to obtain technology, management expertise, capital,
and access to markets.
In an interview, Ren Jianxin, ChemChina’s president and the
former president of BlueStar,
discusses the expectations of the private-equity firm
Blackstone, which invested $600
million in the company in 2007; the global challenges it faces;
and its daunting dual role of
creating both shareholder value and jobs.
c o r p o r a t e f i n a n c e

2. Article
at a
glance
1
Ren Jianxin worked as a farmer in Dunhuang County, Gansu
Province, during
China’s Cultural Revolution. The hard life there, Ren explains,
taught him “how to
persistently pursue my goals,” along with other important
lessons that have carried
over into his business career.
In 1984, Ren borrowed money from his employer by using
personal assets as
collateral and, with seven colleagues, founded China BlueStar
Chemical Cleaning,
China’s first industrial-cleaning company. It started modestly
by cleaning teapots
and boilers but grew quickly and undertook increasingly
difficult jobs. On the way
to capturing 90 percent of the domestic industrial-cleaning
market, BlueStar pushed
its Japanese and German competitors out of China. Today, it
claims to be the
world’s biggest industrial-cleaning company.
Since 1990, Ren has acquired more than 100 state-owned
enterprises. Above all, he
brokered the 2004 merger between BlueStar and other
companies affiliated with the
former Ministry of Chemical Industry—a merger that created

3. the China National
Chemical Corporation (ChemChina), the nation’s largest
chemical conglomerate,
of which he is now president. In 2006, Ren began a global-
expansion program,
buying assets in France and Australia. A year later, BlueStar
came under the
international business spotlight when it received a $600 million
investment from the
prominent private-equity firm Blackstone.
Organic growth, domestic consolidation, and international
acquisitions have
pushed ChemChina’s assets and annual revenue up to $17.4
billion (121.8 billion
renminbi) each. During a recent interview in Beijing with
Tomas Koch and Oliver
Ramsbottom, a McKinsey director and associate principal,
respectively, Ren
discussed his state-owned company’s approach to M&A, its
global ambitions, and
his dual role of creating both shareholder value and jobs.
Ren Jianxin: In 1984, I found out by accident that eight million
tons of coal a year
were wasted because of boiler incrustation. This reminded me of
a study by my
employer, the Chemical Engineering Institute of the Ministry of
Chemical Industry,
dealing with a particular acid cleaning agent. That seemed to be
the right solution to
the boiler problem, but the study was left on the shelves without
being put to
practical use. So I borrowed 10,000 renminbi from my employer
and, together with
seven colleagues, founded China’s first industrial-cleaning

4. company—and that was
the origin of today’s BlueStar.
Using this cleaning technology, we extended BlueStar’s
business from household
teapots to commercial pipes to the petroleum pipelines between
Qinghai and
Golmud to the launching facility for China’s first spaceship.
BlueStar also got almost
all of the cleaning jobs at China’s ethylene and large chemical-
fertilizer plants.
2
Ren Jianxin
Vital Statistics
Born January 9, 1958, in Lanzhou, Gansu Province
Education
Graduated with MA in economics in 1984 from Lanzhou
University
Career highlights
China National Chemical Corporation (2004–present)
President
China National BlueStar (2001–04)
President

5. China BlueStar Chemical Cleaning (1984–2001)
President (1989–2001)
General manager (1984–89)
Fast Facts
Received CCTV “Magnificent Ten of the Chinese Economy”
award (2007)
Won China Entrepreneur Association’s “Most Influential
Businessman” medal (2006)
Earned China’s National Model Worker award (1993)
Won “Outstanding Young Entrepreneur of China” medal
(1988)
In the following ten years, BlueStar expanded quickly by
acquiring 107 state-owned
enterprises located in a dozen provinces, with total assets of 15
billion renminbi and
30,000 employees. Most of these companies were in financial
difficulty, and we
helped improve their competitiveness. As a result, BlueStar
made itself one of
China’s leading players in new chemical materials, industrial
cleaning, and the
membrane and water-treatment fields.

6. The Quarterly: How did you build the company?
Ren Jianxin: In 1984, I found out by accident that eight million
tons of coal a year
were wasted because of boiler incrustation. This reminded me of
a study by my
employer, the Chemical Engineering Institute of the Ministry of
Chemical Industry,
dealing with a particular acid cleaning agent. That seemed to be
the right solution to
3
the boiler problem, but the study was left on the shelves without
being put to
practical use. So I borrowed 10,000 renminbi from my employer
and, together with
seven colleagues, founded China’s first industrial-cleaning
company—and that was
the origin of today’s BlueStar.
Using this cleaning technology, we extended BlueStar’s
business from household
teapots to commercial pipes to the petroleum pipelines between
Qinghai and
Golmud to the launching facility for China’s first spaceship.
BlueStar also got almost
all of the cleaning jobs at China’s ethylene and large chemical-
fertilizer plants.
In the following ten years, BlueStar expanded quickly by
acquiring 107 state-owned
enterprises located in a dozen provinces, with total assets of 15
billion renminbi and

7. 30,000 employees. Most of these companies were in financial
difficulty, and we
helped improve their competitiveness. As a result, BlueStar
made itself one of
China’s leading players in new chemical materials, industrial
cleaning, and the
membrane and water-treatment fields.
The Quarterly: What were the drivers behind your global
strategy?
Ren Jianxin: Our thinking was driven by the need to find new
avenues of growth for
our company, as well as by China’s increasing demand for
chemicals. China’s
chemical industry has long been bottlenecked by a lack of
technology, insufficient
funding, and a low industrial level. For example, China has a
huge market for
methionine, an animal-feed additive, but did not have
sufficiently mature technology
to produce enough to meet the demand.
On the other hand, global manufacturing has been shifting to
emerging markets,
and the Asia-Pacific region, including China, has become the
hot spot for investment
in the chemical industry. By some estimates, Asia will account
for 38 percent of world
demand for chemicals and more than 20 percent of production
by 2010.
Our M&A strategy aims to capture the opportunities from the
global chemical
industry’s shift to China by obtaining advanced technology,
management expertise,

8. capital, and access to markets and by maximizing the synergies
with our domestic
companies. We position ourselves as a latecomer and follower
in the international
chemical industry while viewing global M&A as a shortcut for
us to catch up with
the world leaders.
4
E X H I B I T
China National Chemical Corporation (ChemChina)
The Quarterly: What prompted the acquisitions of Adisseo,
Qenos, and Rhodia’s
silicone business?
Ren Jianxin: We tried to be selective. The guideline we used
was that any acquisition
should have synergies for both parties—adding value and
maintaining a competitive
edge. We don’t do M&A simply for the sake of scale. We have
leveraged China’s
competitive edge in labor and some raw materials to reduce
costs at the acquired
companies overseas and to increase their profit margins as well.
We first contacted the French company Adisseo in 2003, with
the intention of
buying its technology in order to rebuild a big plant in Tianjin
so that it could

9. produce methionine, the main additive for animal feed. Our
request was rejected. In
addition, BlueStar had close ties with Rhodia, a French
chemical manufacturer, as a
joint-venture partner. For years, we closely monitored the
growth of these
companies and gained a good understanding of their capacity,
technology, markets,
potential, and corporate culture and history.
In January 2006, BlueStar acquired 100 percent of Adisseo.
This transaction was
China’s largest direct investment in France to date. Later that
year, BlueStar bought
Rhodia’s silicones business. With these two purchases, BlueStar
enabled China to
produce large quantities of methionine for the first time, making
the country a
world-class manufacturing base in this specialty, while China
raised its silicon
monomer production capacity to 250,000 tons a year, which
made it the
5
third-biggest producer in the world. BlueStar also obtained
hundreds of patented
technologies from Adisseo and Rhodia, enabling us to solve a
series of technical
problems in the methionine and organosilicon fields.
The Quarterly: How did you respond to the challenges of
postmerger integration?

10. Ren Jianxin: Managing a company well means managing people
well. Even during
our negotiations with the original owners, we paid a lot of
attention to selecting the
management team. We knew that it had to share our values. Just
as important, we
didn’t want to be viewed as conquerors—we knew we had to be
sensitive to the
employees of the acquired companies. With this kind of mind-
set, you can better
understand their concerns and worries and be in a better
position to help them.
Our purpose was to learn more about international business
practices through the
acquired companies and to gain experience. We know that we
have to learn the rules
of today’s market economy and that those rules are not defined
by China. Learning
from and respecting the cultures of acquired companies and
their countries are
critical elements of post-merger integration. BlueStar allows the
locals to run the
business and does not replace the local management with a
Chinese team. That was
the case for Adisseo—BlueStar clearly stated in the acquisition
contract that all of
Adisseo’s employees could stay if they chose.
Since the deals were completed, the acquired companies have
functioned well, and
their revenues and profits have grown to record highs. For
example, it has been less
than three years since the acquisition of Qenos, the biggest
polyethylene
manufacturer in Australia, and we have already recovered 80

11. percent of our
investment.
The Quarterly: How did you handle the surprises that came up
during the
integration of these companies?
Ren Jianxin: Global acquisitions are a new adventure for us.
Before we did our deals,
other Chinese state-owned companies led the way in going
global. Unfortunately, we
read more negative reports than good ones about their
experiences. As a result,
regulators, banks, and our own employees understandably
expressed deep
concerns about our globalization efforts.
So when we did well, people wondered why. It was far more
than just good luck.
What I can tell you is that M&A is not new to us. Over the last
ten years or so, all the
domestic mergers and acquisitions we did were successful,
except one. When we
acquired state-owned companies, there was something special—
almost all the
targets were insolvent. Reviving them was as challenging as
reviving a dying person.
How could such domestic acquisitions not help sharpen
BlueStar’s skills? Of course,
6
global M&A is different, but it has some things in common with
domestic M&A:

12. making judgments about assets, talent, products, and market
potential. My
domestic M&A transactions gave me a lot of experience and
confidence in handling
global cases.
The Quarterly: Can you give us some details about how those
deals prepared you for
global M&A?
Ren Jianxin: Let me describe my failure. In 1990, BlueStar
acquired the Membrane
Science and Technology Institute, our first attempt at M&A.
The organization had
received a lot of public funding and was expected to make
technological
breakthroughs, but the output was extremely disappointing to
the government.
BlueStar did not handle the cultural integration well. My
decision to remove the
director of the institute met with strong opposition from the
government, the former
management team, and the employees, who rallied to protest the
integration effort.
BlueStar finally had to get out of the mess, and we backed out
of the acquisition. The
biggest lesson for me from this experience was the importance
of common values
and cultural integration in a successful acquisition.
The Quarterly: Has the fact that you are a Chinese state-owned
company created any
problems when you try to buy a company?
Ren Jianxin: Not yet. However, we have paid close attention to

13. this issue. For
instance, we thought of buying into a foreign restaurant chain to
help boost our
own Malan Noodle chain, a subsidiary. Given the realities of
the situation, we had to
give up the plan.
The Quarterly: Why does BlueStar, a chemical company, own a
restaurant chain?
Ren Jianxin: I believe a business executive does two basic
things: create value for the
shareholders and create jobs for society. Ten years ago, China’s
chemical industry
had 30 times as many employees per unit of revenues as its
counterparts overseas
did. There are still 10 times more today. That was the context of
most of my M&A
transactions. Given that, laying off redundant workers was
inevitable.
On the other hand, as a responsible entrepreneur I have to try as
hard as I can to
create jobs for the unfortunate. Creating a service business like
Malan Noodle was
one of the solutions I came up with. Malan has become the
number-one fast-food
chain in the country, with more than 500 outlets nationwide. It
has taken on more
than 10,000 workers who used to be employees of our acquired
chemical
companies.
The Quarterly: How do you balance organic and inorganic
growth?

14. 7
Ren Jianxin: We are investing a lot in organic growth, although
the deal making has
gotten a lot of attention. Since ChemChina was founded, we
have bought new
equipment to expand production capacity, upgraded technology
at existing plants,
and invested to minimize pollution. Our annual investments to
enhance
manufacturing capacity and minimize damage to the
environment have averaged 8
billion renminbi in the last few years. These investments will
help our business grow
strongly.
The Quarterly: Why did you open the door to the investment
stake from Blackstone?
Ren Jianxin: Blackstone’s participation turned BlueStar,
formerly a 100 percent
state-owned entity, into a joint venture. We sincerely hope that
with Blackstone’s
experience behind us, the change in ownership structure will
help us transform our
corporate governance, our management systems, and our
incentives. The
joint-venture arrangement offers an opportunity for the
company to design a
long-term and more effective incentive system for the
management team. What’s
more, Blackstone’s involvement seems to be helping our
decision-making process—I
notice that our management seems to be more attentive to the

15. input from other
shareholders.
Another reason, of course, is that we got fresh capital. But
money is not the most
important consideration. A company cannot rely on external
investment to stay
afloat—I don’t believe in a free ride. Also, the investment of
$600 million from
Blackstone represented a recognition by the international
business community of
BlueStar’s value.
Finally, Blackstone has great experience and expertise in the
chemical industry
worldwide, and this could be very valuable to the execution of
our global strategy.
For instance, if BlueStar tried to make overseas acquisitions in
some parts of the
world, it might cause unnecessary misunderstandings and
adversely affect the
transaction. But with Blackstone’s participation, the path could
be smoother.
The Quarterly: What are your plans for the future?
Ren Jianxin: We are currently evaluating our portfolio. We may
focus our core
business on the areas where we enjoy a competitive edge.
ChemChina has six major
units, while most big global chemical companies focus on three
or four businesses. In
the next three to five years, we will try to adjust our business
and product structure.
We may quit some areas and reinforce our competitiveness in
others.

16. About the Authors
Tomas Koch is a director in McKinsey’s Seoul office, and
Oliver Ramsbottom is an associate principal in the
Shanghai office.
8
Related Articles on mckinseyquarterly.com
“Global chemicals: China remakes an industry”
“Helping China’s companies master global M&A”
“How Chinese companies can succeed abroad”
“Selling China’s cars to the world: An interview with Chery’s
CEO”
“A pioneer in Chinese globalization: An interview with CIMC’s
president”
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