Extraordinary Genius - Chapter 728
Chapter 728 – Let the farms invest
Buy me a coffee or tip me on or .
In Feng Yu previous life, Beidacang Group was an enterpriseset up by the Bureau of State Farms and Land Reclamation. It was a pilotproject on setting up large state-owned enterprises. China was trying to copyJapan’s large corporation managing model. They felt large corporation will be morecompetitive internationally. Of course, the companies in the pilot project wereall state-funded. The companies were later restructured to be shareholdingswith the government as the biggest shareholder.
Beidacang Group was considered a group effect of all thedepartments under the Bureau of State Farms and Land Reclamation. They combinedall the farms under their jurisdiction to form this company. The branch bureausunder the Bureau of State Farms and Land Reclamation set up branch companiesunder them. This company was mainly agriculture-related products.
China had invested a significant amount into this company.The debt ratio for this company was very high. But it changed for the betterafter it was listed. This company had increased the average income of all thefarmers. It was considered a success. It was the most prominent agriculturecompany in China and had increases China’s exports.
But the formation of Beidacang Group was after 1998 andcompletely setup after 2000. In between, the company had made several mistakes.Feng Yu was quite shocked to see the formation of Beidacang Group so early.
This was a diversion from the original path. Can historystill return back to its original course?
“Who comes up with this name?” Feng Yu asked.
Zhang Ruiqiang looked at Secretary Liu. Secretary Liureplied shyly. “I am the one who came up with this name. The leaders also feltthis is a good name. I think that our Longjiang Province will be China’sbiggest granary in the future.”
Feng Yu gave him a thumbs up. “That’s right. We willsucceed.”
After that, Feng Yu looked at Zhang Ruiqiang. Zhang Ruiqiangwill never call Feng Yu back just for these questions. There must be somethingelse. Could it be that he wanted to work with Tai Hua Processed Food Company?
There are pros and cons in setting up a joint venture withthe government. Feng Yu needs to consider it carefully. Most importantly, whowill have the final say in this joint venture. A good decision-maker can helpthe company avoid unnecessary risks and increase profits. But a lousy leadercan bankrupt the company in a short time!
Zhang Ruiqiang saw Feng Yu not saying anything, and hecontinued. “We are thinking of setting up a large corporation. Like what yousaid, we want to venture in all aspects of agriculture. We also have some goodbrands like Beidacang Baijiu in our Province. It has a long history. We alsohave Bao brand Bean paste. This brand also has decades of history. There are afew other milk powder factories which have been in the market for more than 10years. For the grain products, we have Wu Chang rice. This type of rice isspecially grown for the emperor in the olden days. There are a few other brandswhich we can develop.”
Feng Yu nodded: “And then?”
“And then…… we do not have enough fund to execute thisplan.” Zhang Ruiqiang said.
Feng Yu had thought about the fund needed when ZhangRuiqiang talked about the government’s plans. If the provincial government wereto concentrate on one idea, they would have enough fund. But to implementeverything at once, 10 billion RMB might not be enough.
In Feng Yu’s precious life, how did Beidacang Group start?They let the farms invest, and the different units and bureau owned shares ofthe company. All these formed a multi-billion RMB company that had more than100 billion sales annually.
What’s the most significant assets of the state farms? Theland, farmers, and crops. That means Beidacang Group have their own rawmaterials. This was the company’s greatest asset.
Without the farms, the company might not be able to grow. 10billion RMB investment might not be enough to set up this company now. Even ifit is enough, the growth will not be the same as Feng Yu’s previous life. Therisk was too high, and Feng Yu does not want to invest.
“Did you call me over to ask me to invest in this company?You mentioned so many industries earlier. If you want to implement everythingat once, 10 billion might not be enough. You plan to use scale to increase thecompany’s competitiveness. But if you increase the scale, you will have toincrease your investment. Furthermore, you all are planning to implement allthe plans together. The risk is too high. I will not invest in this company.”Feng Yu shook his head.
Zhang Ruiqiang panicked. “You are the one who suggestedthis. How come you are saying the risk is too high now? Are you lying to uswhen you suggest this?”
Secretary Liu added: “Manager Feng, this is very importantto the leaders. You should joke about this matter.”
Feng Yu controlled his laughter. “Why are you all soanxious? I said I will not invest, but I did not say I do not have a solutionfor you all. Actually, the solution is in front of you.”
Zhang Ruiqiang exchanged looks. The solution is in front ofthem? How come they can’t see the answer?
Feng Yu stood up and walked over to the map on the wall. Hepointed to Longjiang’s map and waved to them. “Come over. What’s the differencebetween where we are and the other provinces?”
Zhang Ruiqiang asked: “Our land is more leveled and morefertile then the other provinces?”
Feng Yu shook his head and looked at Secretary Liu.Secretary Liu looked at the map and said: “Is it because of our history and wehave more farms than other provinces?”
“You are right! The biggest difference between our provinceand the others is the farms.”
“What is the use of farms? The farms are under thejurisdiction of two departments, and the majority of the profits are handedover to the higher-ups. The Provincial Government can only get a smallpercentage. It is not even considered in our province’s GDP.” Zhang Ruiqiangreplied angrily.
“You all want to set up this company up is to let theprovince keep the profits from the farms? Then I will give you a bettersolution. You all will not only keep most of the profits within the provinceand still get support from the higher-ups.” Feng Yu replied confidently.
Zhang Ruiqiang’s eyes opened wide. Was their target soobvious? But all of them had put their heads together and could not find anysolutions. Why was Feng Yu so confidence? His answer will surely work?
“What is the farm’s biggest value? Other than harvest andcrops, they do not have other value. They are only a place that produces rawmaterials. You all should know that the profits from raw materials production aremuch lower compared to processed materials. Just look at our Tai Hua Premiumoil. The main ingredient is soybeans, and the residue is made into animal feed.This greatly reduces the production cost, and our cooking oil is selling athigher prices. Our sales are doing very well compared to other brands.”
“That’s right. This is what we want to do.” Zhang Ruiqiangreplied. What does Feng Yu mean by saying all these?
“Your difficulty now is the fund. You all have the fund toset up the processing plant, but do not have enough to purchase the rawingredients? On the other hand, the farmers at the state farms have to handovera portion of their harvest to the government, and they are not willing to letyou all have the rest of their harvest on credit. They do not trust the localgovernment.”
Although Zhang Ruiqiang does not want to admit it, thosefarmers would rather accept credit terms from businessmen than the government.
“The solution is straightforward. Let those farmers investin the company!”
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