In the 1960s and 1970s, many small nitrogenous fertilizer companies in China were established with limited resources and technological capabilities. These firms often struggled from the start, lacking the financial strength and technical expertise needed for long-term growth. To survive and expand, they had to constantly seek external funding for technological upgrades, aiming to increase production capacity, improve energy efficiency, and enhance product quality. However, this path was fraught with risk. A single misstep or miscalculation could lead to overwhelming debt, pushing companies to the brink of collapse.
Many small fertilizer manufacturers found themselves trapped in a cycle of borrowing and debt, where the cost of technological transformation exceeded their ability to repay. This phenomenon, known as "technological reform leading to death," was common among these firms. But not all companies followed this path. Hebei Jinglong Fengli Chemical Co., Ltd. is one such example that managed to avoid the pitfalls of excessive debt through careful planning and disciplined financial management.
Liu Yingjiang, the company’s general manager, shared his insights on the typical debt challenges faced by small nitrogen fertilizer companies. During the planned economy era, state-funded technological upgrades were often allocated to larger state-owned enterprises, leaving smaller firms without proper support. Many plant managers spent more time seeking funds than focusing on operations, and there was little awareness of repaying borrowed money. Over time, as debts accumulated and returns failed to meet expectations, many companies found themselves unable to recover.
Ningjin County Fertilizer Plant, now part of Hebei Jinglong Fengli, experienced this firsthand. After completing a major urea project in 1995, the company made a significant leap from producing low-concentration ammonium bicarbonate to high-concentration urea. However, the project came at a steep price—investing 160 million yuan and accumulating over 250 million in total liabilities. By 2002, the debt burden became unbearable, forcing the company to halt production.
Despite the crisis, the workers and management refused to give up. They tightened their belts, raised 1.5 million yuan in just three days, and used it to restart operations. This small but critical investment allowed the company to begin a recovery process. From then on, Ninghua adopted two strict principles: first, never overextend financially, always operate within repayment capacity, and keep the debt-to-asset ratio below 80%. Second, maintain full integrity with creditors by repaying debts on time and in full.
Over the following years, the company gradually introduced new technologies, optimized energy use, expanded production, and developed new products. Each investment was carefully planned, ensuring steady progress. The company's synthetic ammonia capacity grew from 40,000 to 60,000 tons per year, urea production increased from 60,000 to 130,000 tons, and they launched a 200,000-ton compound fertilizer line, along with melamine and methanol production. Their product structure became more balanced, and their technology and product quality reached advanced levels domestically.
As a result, energy consumption and costs dropped significantly, and economic performance improved dramatically. By 2006, the company’s profits and taxes exceeded 40 million yuan. Throughout this period, the debt-to-asset ratio remained around 70%, maintaining a healthy financial cycle.
Reflecting on the company’s journey, Liu Yingjiang emphasized that business development should not be driven by short-term enthusiasm or reckless expansion. He pointed out that the old saying “no change means waiting for death, but changing may also lead to death†was only partially true. Instead, he suggested replacing the second half with “determination for death,†referring to the dangers of overreliance on borrowed money, unrealistic expectations of debt repayment, and blind investments. Such practices often led to failure. Therefore, small businesses must prioritize sustainable growth, avoiding excessive debt and ensuring operational stability to prevent falling into irreversible losses.
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