Chapter 728 – Let the farms inves
In Feng Yu previous life, Beidacang Group was an enterprise set up by the Bureau of State Farms and Land Reclamation. It was a pilot project on setting up large state-owned enterprises. China was trying to copy Japan’s large corporation managing model. They felt large corporation will be more competitive internationally. Of course, the companies in the pilot project were all state-funded. The companies were later restructured to be shareholdings with the government as the biggest shareholder.
Beidacang Group was considered a group effect of all the departments under the Bureau of State Farms and Land Reclamation. They combined all the farms under their jurisdiction to form this company. The branch bureaus under the Bureau of State Farms and Land Reclamation set up branch companies under 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 better after it was listed. This company had increased the average income of all the farmers. It was considered a success. It was the most prominent agriculture company in China and had increases China’s exports.
But the formation of Beidacang Group was after 1998 and completely 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 history still return back to its original course?
“Who comes up with this name?” Feng Yu asked.
Zhang Ruiqiang looked at Secretary Liu. Secretary Liu replied shyly. “I am the one who came up with this name. The leaders also felt this is a good name. I think that our Longjiang Province will be China’s biggest granary in the future.”
Feng Yu gave him a thumbs up. “That’s right. We will succeed.”
After that, Feng Yu looked at Zhang Ruiqiang. Zhang Ruiqiang will never call Feng Yu back just for these questions. There must be something else. 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 with the government. Feng Yu needs to consider it carefully. Most importantly, who will have the final say in this joint venture. A good decision-maker can help the company avoid unnecessary risks and increase profits. But a lousy leader can bankrupt the company in a short time!
Zhang Ruiqiang saw Feng Yu not saying anything, and he continued. “We are thinking of setting up a large corporation. Like what you said, we want to venture in all aspects of agriculture. We also have some good brands like Beidacang Baijiu in our Province. It has a long history. We also have Bao brand Bean paste. This brand also has decades of history. There are a few other milk powder factories which have been in the market for more than 10 years. For the grain products, we have Wu Chang rice. This type of rice is specially grown for the emperor in the olden days. There are a few other brands which we can develop.”
Feng Yu nodded: “And then?”
“And then…… we do not have enough fund to execute this plan.” Zhang Ruiqiang said.
Feng Yu had thought about the fund needed when Zhang Ruiqiang talked about the government’s plans. If the provincial government were to concentrate on one idea, they would have enough fund. But to implement everything 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 of the company. All these formed a multi-billion RMB company that had more than 100 billion sales annually.
What’s the most significant assets of the state farms? The land, farmers, and crops. That means Beidacang Group have their own raw materials. This was the company’s greatest asset.
Without the farms, the company might not be able to grow. 10 billion RMB investment might not be enough to set up this company now. Even if it is enough, the growth will not be the same as Feng Yu’s previous life. The risk 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 everything at once, 10 billion might not be enough. You plan to use scale to increase the company’s competitiveness. But if you increase the scale, you will have to increase your investment. Furthermore, you all are planning to implement all the 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 suggested this. How come you are saying the risk is too high now? Are you lying to us when you suggest this?”
Secretary Liu added: “Manager Feng, this is very important to the leaders. You should joke about this matter.”
Feng Yu controlled his laughter. “Why are you all so anxious? I said I will not invest, but I did not say I do not have a solution for you all. Actually, the solution is in front of you.”
Zhang Ruiqiang exchanged looks. The solution is in front of them? How come they can’t see the answer?
Feng Yu stood up and walked over to the map on the wall. He pointed to Longjiang’s map and waved to them. “Come over. What’s the difference between where we are and the other provinces?”
Zhang Ruiqiang asked: “Our land is more leveled and more fertile 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 we have more farms than other provinces?”
“You are right! The biggest difference between our province and the others is the farms.”
“What is the use of farms? The farms are under the jurisdiction of two departments, and the majority of the profits are handed over to the higher-ups. The Provincial Government can only get a small percentage. It is not even considered in our province’s GDP.” Zhang Ruiqiang replied angrily.
“You all want to set up this company up is to let the province keep the profits from the farms? Then I will give you a better solution. You all will not only keep most of the profits within the province and still get support from the higher-ups.” Feng Yu replied confidently.
Zhang Ruiqiang’s eyes opened wide. Was their target so obvious? But all of them had put their heads together and could not find any solutions. Why was Feng Yu so confidence? His answer will surely work?
“What is the farm’s biggest value? Other than harvest and crops, they do not have other value. They are only a place that produces raw materials. You all should know that the profits from raw materials production are much lower compared to processed materials. Just look at our Tai Hua Premium oil. 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 at higher prices. Our sales are doing very well compared to other brands.”
“That’s right. This is what we want to do.” Zhang Ruiqiang replied. What does Feng Yu mean by saying all these?
“Your difficulty now is the fund. You all have the fund to set up the processing plant, but do not have enough to purchase the raw ingredients? On the other hand, the farmers at the state farms have to handover a portion of their harvest to the government, and they are not willing to let you all have the rest of their harvest on credit. They do not trust the local government.”
Although Zhang Ruiqiang does not want to admit it, those farmers would rather accept credit terms from businessmen than the government.
“The solution is straightforward. Let those farmers invest in the company!”