In 2022, amid the pandemic and a bitterly cold winter, time slipped away quietly, carrying with it all our fatigue and uncertainties. People now look forward to a new year filled with fresh prospects and renewed hope, as they set new goals and rise to meet new challenges. Indeed, the past year was an exceptionally difficult one—marked by extraordinary hardship. We pressed forward under a host of uncertain conditions, advancing our work despite numerous adverse internal and external factors. We extend our heartfelt gratitude to all our partners who have walked alongside us, to the leaders who have supported and cared for us, and especially to our valued customers. Together, hand in hand, we have achieved commendable results across the board.

 

Dear customers, colleagues, shareholders, and friends from all sectors of society:

 

Hello everyone!

 

In 2022, amid the pandemic and a bitterly cold winter, time slipped away quietly, carrying with it all our fatigue and uncertainties. People now look forward to a new year filled with fresh prospects and renewed hope, as they set new goals and rise to meet new challenges. Indeed, the past year was an exceptionally difficult one—marked by extraordinary hardship. We pressed forward under a host of uncertain conditions, advancing our work despite numerous adverse internal and external factors. We extend our heartfelt gratitude to all our partners who have walked alongside us, to the leaders who have supported and cared for us, and especially to our valued customers. Together, hand in hand, we have achieved commendable results across the board.

 

Remarkable achievements and a promising future lie ahead. One thing is certain: after weathering the trials of the industry, Kuncai continues to hold its position as the world’s largest supplier of pearlescent pigments. The Zhengtai project has been completed and put into production; with performance metrics steadily improving, it is poised to become the company’s primary growth driver, thereby establishing a fully integrated industrial chain that fortifies Kuncai’s core competitiveness and creates a sustainable competitive moat in the pearlescent pigment sector. Moreover, the world’s first extraction‑based process for producing titanium dioxide and iron oxides has injected critical strategic capabilities into the company. Even as global technologies evolve rapidly and constantly, titanium dioxide, iron oxides, and pearlescent pigments alike continue to demonstrate robust vitality. While economic fluctuations may trigger short‑term quantitative shifts, they cannot undermine the market’s enduring, rigid demand. Accordingly, having summarized three definitive performance milestones achieved by Kuncai Technology in 2022, we now look ahead to a new operational landscape for 2023.

 

Seize opportunities amid crises and forge new prospects amid profound changes. As 2023 marks a pivotal year in the implementation of the 14th Five-Year Plan—bridging the past and the future—it has become even more critical to comprehensively and high‑quality achieve all work objectives for the year. The report delivered at the recently concluded 20th National Congress of the Communist Party of China outlined a new blueprint for building a modern socialist country, while the recent Central Economic Work Conference of 2023 underscored the central role and importance of private enterprises in driving development. Overall, the political environment is conducive to leading industry players and main‑board listed companies strengthening their positions and enhancing their competitiveness, encouraging them to act with greater determination and ambition on the three established pillars of their business strategies, and advancing high‑standard operations. Looking ahead, we can anticipate that, until 2025, the broader international landscape will continue to present a challenging economic environment. First, the trajectory of the Russia–Ukraine conflict remains highly uncertain; such uncertainty poses significant risks to the stability of both domestic and external conditions, as well as to the overall economic outlook. Second, shifts in the international political landscape directly constrain Chinese firms’ global expansion, subjecting them to mounting external obstacles and ushering in a relatively difficult phase of development. Third, domestically, economic growth has slowed. After more than four decades of reform and opening-up, the “three engines” traditionally driving growth—export trade, investment, and consumption—are showing signs of deceleration. Many industries, having completed their rapid‑growth phases, now face challenges in transitioning to sustainable development, while investment‑driven infrastructure projects, urbanization, and the real estate sector have all reached levels of oversaturation. Rural revitalization and water‑resource development hold considerable potential, but realizing this potential hinges on a robust economic foundation capable of addressing excess production capacity and employment imbalances.

 

Collaborative innovation, co‑creating the future. Considering both domestic and international trends, as well as Kuncai’s industry context and competitive landscape, I would like to share the following aspirations for our collective progress: 1. Innovation-driven transformation and upgrading, leading development through proactive collaboration, fostering mutual support, and achieving win‑win outcomes. Kuncai Technology will spearhead innovation in the titanium dioxide and iron oxide industries, charting new technological pathways and introducing groundbreaking products that expand possibilities in performance, functionality, and cost efficiency. This not only lays a solid foundation for the company’s transformation but also propels industry advancement and corporate growth. We must proactively unlock our full potential, deepen cooperation across the board, unite for mutual benefit, and leverage product diversification, customer overlap, and brand influence to generate synergies and create a win‑win dynamic. 2. Platform integration, resource sharing, model building, unlocking latent potential, and overcoming challenges together. Survival is the bedrock of all development; yet some enterprises, failing to fully grasp market competition and the self‑purifying nature of the marketplace, will gradually fade from view. Overconfidence, an absence of a sustainable ecosystem, lack of core competitiveness, and reliance on outdated practices to manage today’s operations—coupled with simplistic, heavy‑handed approaches to customer relationships—will ultimately lead to obsolescence. It is crucial to distinguish between the value and purpose of the platforms you serve and the individuals they impact, and to adopt a long‑term perspective when assessing the meaningful contributions your organization makes to both its mission and the lives of those it serves. Therefore, we must integrate platforms and resources effectively, leveraging Kuncai’s core competencies to highlight our unique value and significance, and develop innovative models that harness the integrated use of modern logistics, connectivity, information systems, and digital platforms. By enabling seamless online–offline interactions, reimagining traditional settlement and warehousing practices, and continuously tapping into distributors’ untapped potential and customers’ growing needs, we can address issues such as capital stagnation, liquidity constraints, and persistently high sales costs, thereby weathering these challenges together. To this end, Kuncai Technology has spent five years preparing, establishing Zhengtai Interconnect, smart warehousing solutions, advanced settlement mechanisms, and shared platforms—each of which will increasingly demonstrate its profound significance and value going forward. 3. Building core competitiveness, closing the industrial chain loop, and fostering a circular economy. Deepen our competitive moat, fortify our protective barriers, strengthen our domestic market, expand internationally, and establish a dual circulation strategy—domestic and global. Kuncai Technology will secure the primary raw material supply for Zhengtai New Materials through mining, processing, and production, while simultaneously providing key inputs for Kuncai Pearlescent Pigments to reduce procurement costs. Meanwhile, Zhengtai and Kuncai will supply titanium dioxide and pearlescent pigments to Ziniu for the manufacture of high‑solid‑content color masterbatches, creating a tightly interlinked, fully integrated industrial chain. Supported by the complete upstream–downstream industrial ecosystem of the Jiangyin Development Zone, we have established a closed-loop industrial system and a circular economic framework. By capitalizing on the technological advantages of our pioneering processes, we have built a competitive moat; by scaling up efficiently, we have reinforced our defensive barriers. Furthermore, our extensive portfolio of domestic and international intellectual property rights, along with a broad network of strategic partners, serves as both our moat and firewall, laying a robust foundation for a unified domestic market and a thriving international dual circulation.

 

Dear colleagues and esteemed distributors, the new year brings us fresh missions, new tasks, and ambitious goals. On this occasion, on behalf of Kunchai Technology, I extend our sincere commitment to serve you, explore deeper avenues for collaboration, unlock greater value and significance in our partnership, and build a higher‑level platform of mutual benefit. We sincerely hope that, in the year ahead, you will achieve even more remarkable growth.

 

Here, we wish you all a happy New Year. As the Spring Festival approaches, we extend our heartfelt wishes for your good health and family happiness. We also pray for Kuncai’s continued prosperity and peace, and for our great motherland: may it enjoy lasting peace and stability, and flourish in prosperity!

 

 

Kuncai Technology Chairman: Xie Bingkun

January 2023