Honghua survives business chill in Russian market

Before Russia Honghua Co moved to its new headquarters in Moscow in 2014, it had been running its operations from a hotel in the suburbs of the Russian capital.

The subsidiary of Chengdu-headquartered Honghua Group, China's largest exporter of oil-drilling equipment, has experienced ups and down in Russia during the past seven years.

Liu Zhuo, executive of the group's Russian-speaking regions, together with several senior technicians, started to fight for the "Honghua dream" - that where there is oil, there will be a Honghua subsidiary - in small hotel rooms in 2008.

Yan Bin, the new general manager of the Russian subsidiary, was Liu's college classmate at Sichuan University. The two Russian majors both started in the Honghua Group as translators. Both know the difficulties of doing business with Russians.

"Some Russians were cold and very skeptical of people they didn't know well," Liu said. "But we never gave up. We kept connecting with them and now most of them are our loyal clients."

In addition to tough customers, their former shabby living conditions hold bittersweet memories for the company's Russian team. The small hotel rooms were both their work and living spaces, with three or four people normally sharing a room. They also had to accommodate colleagues from Chengdu who were in transit to oilfields. "We used to have 30 people in one room," Yan said.

However, the team overcame all those difficulties and achieved breakthroughs in business. Liu said they quickly gained market share with products that could work in extremely cold weather.

The first deal for a complete set of oilrig equipment was inked in 2009. Six years later, there are 163 oilrig equipment sets working in Russia and, since 2012, Honghua has been the largest exporter in the industry to Russia.

With new opportunities and challenges ahead, the company's loyal "comrades" are optimistic, although their time in the country has been tough.

Soon after their relocation to a new and much bigger office last year, the company was hit by the sharp depreciation of the rouble. All the company's deals are signed in dollars but payments are made in roubles. Yan said it was the company's hardest period but the staff members stuck together. The executive team also voluntarily cut its salaries to help the company weather the difficulty.

A silver lining looms - as Russia is located on the ancient Silk Road, China's Belt and Road Initiative will bring more opportunities to the company.

Many Russian buyers make it a priority to consider cost-effective China-made heavy equipment when Russian-made products cannot meet their needs, Yan said. "There are still opportunities and hope in the Russian market. The difficulties won't last forever," Yan said.

The company has also started to explore new businesses. It is now tapping into oil drilling as Russia's equipment manufacturing is becoming more advanced.

The Russian subsidiary of Honghua Group, like many entrepreneurs and business groups in Chengdu, knows it is important to keep looking for new directions, and never lose confidence or presence in a market they know well. Winters in Russia may be chilly but the company expects a warmer response.

Contact the writers through fuchao@chinadaily.com.cn