1988: Back to the human world for a few years

Chapter 590 Core Competitiveness and Two Conditions
Many people may have a misunderstanding and completely separate policy-based lending from commercial lending, thinking that these are two distinct business lines.

On the surface, this view seems to be correct, and there is indeed not much intersection between these two business lines.

But the problem is that in China, banks, and even the entire financial sector, are a three-dimensional unified whole, influencing each other. A decline in the real estate market can also affect the A-share market, and an increase in imports and exports can also affect commercial lending rates. So how is it possible to really view the business of each sector separately?

Therefore, the separation and pilot experimentation of policy-based financing and lending are several levels more difficult than simple commercial financial business reforms.

There is no other reason. The reform of commercial finance is currently pursuing the commercial revenue-generating ability and the social circulation rate of M1 and M2 currencies. Therefore, at present, we only need to find breakthroughs in the directions of clear property rights, clear rights and responsibilities, and separation of government and enterprises, and explore a set of leverage and risk control methods according to various regions, time periods, and various business segments (the pursuit of the social circulation rate of M3 currency, including various financial derivatives, will come later).

However, the ecological positioning of policy banks determines that policy-based lending business cannot pursue short-term and medium-term interests. It needs to consider issues from a more macro level and undertake some soft regulatory functions.
For example, if commercial banks pursue the social circulation rate of M1 and M2 currencies, then policy banks need to use some non-administrative means to regulate the transmission efficiency and conversion rate between M1, M2 currencies and M0 currencies in relevant regions... The difference is just a few words, but the difficulty increases exponentially.

Therefore, this is another important reason why few people are currently entering the track of policy-based financing and lending business divestiture and pilot experiments... This track is too difficult. It not only requires the participants to have an extremely broad macro perspective, but also requires the participants to have strong top-level design capabilities. After all, no matter what system it is, no matter how strong a person's ability is, it is limited, and it relies more on rules to drive and operate.

Since we are talking about top-level design, the “Islamic banking model” just mentioned by Yang Mo is quite interesting.

This is a model that is completely different from European and American banks. Not only is it completely different from European and American commercial banks, it is also very different from European and American policy banks... It can even be said that although they both have the word "bank" in their names, in terms of the underlying logic, they are like two different worlds.

"Islamic banking", as the name suggests, refers to banks that mainly exist in the Islamic world, but in fact it did begin to emerge in the Middle East in the 1950s and 1960s.

According to the Quran and Sharia law, interest is illegal income and must be prohibited. Therefore, such banks do not charge interest on loans or deposits; their funding sources mainly come from customer deposits and official interest-free loans.

This brings up a very interesting point. Islamic banks’ financial credit activities generally take four forms:
1. Participate in the shareholding system.

When a bank provides a loan to a borrower’s development project, it invests in the form of shares, and the two parties share the profits as per the agreement.

2. Profit and loss sharing system.

Banks enter into partnerships with their customers (i.e. depositors and borrowers), and both parties share operating losses or participate in the distribution of profits in accordance with the agreement.

3. Price increase system.

When banks finance trade, they earn income from marking up prices. When a customer applies for a loan to purchase a certain good, the two parties reach an agreement that the bank will fund the purchase. When the loan is due for repayment, the bank charges a price higher than the original price of the item, and the difference is the bank's profit.

4. Handling fee system.

For remittances, letters of credit, medium- and long-term loans, and foreign trade loans, the bank charges a handling fee of 2-4% based on the amount and term, which is used to pay for the bank's management fees and inflation differences. In order to encourage the expansion of deposits, depositors can participate in profit sharing, receive deposit bonuses and currency preservation funds according to the bank's operating conditions and the amount of deposits, and are given preferential treatment in applying for loans and using checks.

Ok……

I wonder if after reading this, you teachers will have a very familiar feeling, as if the underlying rules implied here have a very mysterious confirmation with what China once pursued?
Although the Western world has strongly criticized this Islamic banking model, many people scoff at it, believing that it is ignorant and backward for banks not to charge interest due to religious doctrines.

But in fact, if you really understand the Middle Eastern countries in later generations and review the development process of the Middle Eastern countries in the past few decades, you will find that although interest cannot be eliminated, not allowing banks to earn interest will instead promote a healthier financial industry.

If banks are not allowed to earn interest, then how do they make money?
The answer is...earn service fees!
You may think that this is just a change of name but the substance remains the same, meant to fool the Middle Eastern authorities, but in fact, this is not the case.

Let us look at it dialectically.
There is interest income. Although banks will also conduct risk investigations when lending, they will not be so in-depth. After all, interest is protected by law. If the company loses money in the end, the bank will always have a way, such as accepting collateral, applying for court enforcement, etc.

Moreover, because there is interest income, financial thieves make a big fuss about debt bonds and so on, using all kinds of leverage that are hard to guard against, dazzling and confusing.

The result is that a large amount of funds never enter the real economy, but circulate among financial institutions. As the money circulates back and forth, financial thieves celebrate and count their money until their hands are tired, while the real economy is struggling to find funds.

This situation occurred in large numbers in Europe, America and island countries in the 1970s and 1980s, and even in South America in the 1990s. It was also common in China in later generations. It is not that everyone is unaware of this problem, but there is no way. The top-level design at the beginning has already determined that this path dependence is inevitable. Such a huge system is already in operation. How can it be easy to change it?
But under the Islamic banking model, banks can only earn service fees.

This means that when a bank lends money to an enterprise, it actually becomes a business partner with the enterprise. The bank can only earn service fees if the project ultimately makes money. If the project does not make money, the bank will lose money along with the enterprise - if it loses money, why do you charge service fees?

Loan interest?

No! Allah says that interest is evil.

In this way, the bank actually becomes a strict supervisor of the enterprise. On the other hand, the bank can also take advantage of its familiarity with many industry experiences to support various enterprises in the industry, especially those small and medium-sized enterprises that lack experience and resources... This is true support, not a formality, because everyone's interests are tied together.

Moreover, without interest, financial institutions don’t have to think hard about inventing various leverage operations - there is basically no leverage point. Unless you break the rules, what can you use as leverage? But once you dare to break the rules, you will be punished with thunder and lightning!

Therefore, the only thing financial institutions can do is to cooperate honestly with real businesses and focus on development; isn’t this the “original intention” of financial institutions?

Therefore, under this financial mechanism framework, the development speed may not be that fast - banks should not grow so crazily and far faster than the growth rate of industry, but there will never be an American-style financial crisis.

If you don’t believe it, think about it. Over the years, have you ever heard of a financial crisis involving Islamic banks?

More importantly, any teacher who has worked in the real industry, especially in small and medium-sized enterprises, should be able to see that this is a relatively ideal model for allocating social resources. Many times, businesses that are still in their infancy lack far more than just capital. Social resources, industry experience, knowledge and information in trend prediction are what they really lack most. Under the Matthew effect, allocating these resources to large enterprises that are not so short of these things is a complete waste.

Therefore, in Yang Mo's opinion, the Islamic banks in the Middle East are more like a complex of "bank + consulting firm + investment bank" rather than being called banks, and they are the disinfected ones. This model does not have many obvious shortcomings except that it has a slower outbreak speed and more requirements for industries and enterprises.

However, this is relative to ordinary countries and ordinary banks of general scale and size. If this model is applied to Hua Xia, which has a huge potential size, and to Hua Xia's policy banks, it would be a different matter.

After all, facts have proved that the policy banks that later emerged in my country and the financing and loans provided by local governments to enterprises also use the method of interest bundling, joint operation and strict supervision, which is actually the same as the practices of Islamic banks... As for the overall effect, everyone has seen it.

………………

"Old Yang... can the Islamic banking system really work here?"

Liu Jiong showed a lack of confidence and explained immediately: "Since Saudi Arabia came here more than ten years ago, our country has always had a close relationship with the Middle East. Therefore, I have also been to the Middle East for inspection and study. I know a little about the Islamic banking model. "

"But the problem is that this model can work in the Middle East because they don't have the habit of charging interest. Moreover, Islamic banks don't charge interest because the Middle East is rich in oil resources. With this foundation as support, they dare to lend money and lose money... Can it work in China?"

The Middle East has clear regulations that the interest rate for Muslims cannot exceed 2%. This interest rate is unimaginable in China, and it is even more unimaginable in this era of rapid economic development.

But this is not the point.

The point is that Liu Jiong was implicitly reminding Yang Mo that although the track he chose was the policy-based financing and lending business divestiture track, from the starting point he could indeed learn from the "low-interest loans + common growth" model of Islamic banks, but everyone on earth knows that the policy-based financing and lending business is similar to the primary capital market, and there is also a secondary market underneath. Once the interest rate gap between the two markets is too large, it is very likely to give rise to a funnel market and broker market that is not worth mentioning.

Yang Mo smiled upon hearing this: "Old Liu, have you forgotten... this is Texas!"

Liu Jiong was stunned and looked at Yang Mo in confusion.

Yang Mo laughed: "There are no perfect rules in this world, and there are no undetectable loopholes. The only difference is whether you have the ability to implement this set of rules and whether you have the ability to keep a close eye on those major loopholes that may exist so that this set of rules will not be deformed... And this is actually your real core competitiveness, Lao Liu. After all, anyone can copy the model, but whether it can run smoothly depends on each person's ability."

What is my core competitiveness?
Because this is Texas?

Liu Jiong suddenly came to his senses: "Old Yang, what do you mean...?"

Yang Mo laughed: "Given the situation in our country, no matter who wants to learn from the Islamic banking model and bring it over for experimentation, the biggest difficulties are ultimately only two points:"

“First, do the people in the pilot business unit that is about to be established have the ability to help the companies that need to be incubated coordinate resources, interpret policies, predict industry development trends, and provide business guidance?”

"Secondly, does the pilot business unit that is about to be established have the ability to conduct relatively comprehensive and strict supervision of the incubated enterprises?"

"As long as these two points are basically in place, the entire model will naturally start to operate smoothly. Even if some unplanned problems arise in the middle, they are basically minor problems... At least they will not affect the normal operation of the entire system, nor will they cause the collapse of the entire model."

"To be frank, as long as you can achieve 80 points on these two points, Lao Liu... No, you don't even need to achieve 80 points, you only need to achieve 70 points, and you will stand out... Don't underestimate these two points. When you really implement them in your actual work, you will know how difficult they are to achieve."

At this point, Yang Mo took a deep puff of his cigarette: "In fact, whether it is you, Lao Liu, or your colleagues in other regions, as long as they are not mediocre, I believe that they will not do a bad job in social resource coordination and policy interpretation at the city and county levels... After all, you are the God of Wealth. If you can't do this in a capital-intensive area like a city, then it's time to step down and let others do the work." "But I bet that among your colleagues, at least 80% of them can't organize a group of talents who can make relatively accurate predictions about the development of the industry, especially the development of non-staple food agricultural and sideline products industries;"

"As for business guidance, there are even fewer people who can organize such a team... Conservatively speaking, at least 90% of your colleagues cannot do this, even if it is just to provide relatively macro-oriented business guidance under the market economy mechanism!"

Yang Mo smiled lightly, his smile seemed a little sarcastic: "As for the comprehensive supervision of those companies, this is beyond the capabilities of your colleagues."

"Your system is far from agriculture and rural areas, and modern agriculture is a highly technical high-tech industry. If you don't understand technology, you can be easily fooled... Moreover, many high-tech agricultural companies in the future will need to develop pre-research businesses. If you don't have a systematic and dynamic information access capability for this kind of business, you won't even know whether their projects have application scenarios, and whether the first and second phase funds and work have actually been put into practice. How can you talk about supervision?"

“You know, for most projects, the key to risk control and supervision lies in the first and second phases. Once this time node is crossed, things will often go wrong again and again due to the huge sunk costs that have been formed, and eventually become a powerful powder keg!”

At this point, Yang Mo stared at Liu Jiong with an extremely oppressive look: "But this situation is not so easy to happen in Texas now!"

"Today, the four-level value circulation system of DZ city, county, and village has been basically fully rolled out. Coupled with the large number of investment projects of Momo Baitou and Dahua Company, as well as the radiation of Xialiu Sales Agency and the more than 100 villages that have been supported in the past two years, it can be said that a dynamic information access network has been formed... As long as we are willing, we can even give you a clear picture of what any company has eaten for lunch today, not to mention whether the funds are used effectively!"

Liu Jiong was suddenly startled, and broke out in a cold sweat in excitement.

He didn't doubt that there was some truth in Yang Mo's words. Dahua Company had been following the mass line for the past two years, from the initial Hundred Villages Support Plan to the subsequent sinking of the manufacturing links, as well as the later light and heavy industrial products exchange plan and the Strong Village Company Incubation Plan. It can be said that its tentacles have already extended into all aspects of the grassroots in rural areas. Coupled with a series of public welfare/semi-public welfare projects such as Hope Primary Schools and chain drug stores, their intimacy and favorability in rural areas are almost maxed out. Other areas are fine, but for most projects related to the words "rural" and "agriculture" in the region, any movement will not be hidden from their eyes.

and so……

That’s why Yang Mo deliberately emphasized that Texas is different and emphasized the words “core competitiveness”.

Of course, he knew very well that this core competitiveness essentially belonged to Yang Mo. Yang Mo had never been a generous person. If he wanted to "borrow" this power, it would definitely be impossible without conditions and costs.

As expected, Yang Mo did not wait for Liu Jiong to speak, and continued: "Of course, Lao Liu, personal friendship is personal friendship, and work is work. Although the Urban Property Fund Company does have the responsibility to promote industrial upgrading in Dezhou, it is absolutely unreasonable to help for free. Besides, this is not something that can be done overnight... So, I need a real reason!"

coming!

Liu Jiong took a deep breath and said in a deep voice: "Old Yang, tell me what conditions you have as soon as possible."

Yang Mo smiled faintly: "Two conditions."

"First, I need a justifiable reason. So once your application is approved, I need you to take the initiative to apply for cooperation with Dezhou Urban Development Fund and set up a project consulting and guidance department and a project inspection department in the business unit under the guidance fund framework. The heads and backbones of these two new departments must all be appointed by us;"

"The former is used to provide business guidance services to various enterprises; the latter is used to supervise whether various enterprises have implemented various guiding opinions and earmarked funds for their intended purposes... Dezhou Urban Property Fund Company has rich experience in this area. It is reasonable for you who lack experience in implementing agricultural projects to seek help from us."

Liu Jiong's heart tightened, hesitating for a moment, and finally nodded: "No problem, Dahua Company and Urban Property Fund Company have always been famous for their pioneering experience, and since the guidance fund is used as the experimental framework, there is no legal problem in seeking and introducing foreign aid... This is very reasonable."

After saying that, he turned his head and looked at Song Wenxuan beside him and laughed: "If I'm not mistaken, Lao Yang, since you brought Director Song here with you, it must be related to this arrangement, right?"

Yang Mo laughed, then patted Song Wenxuan on the shoulder affectionately: "Sure enough, I can't hide it from Lao Liu. Lao Song is the office director of our Dahua Company and the Chinese representative of the China-Japan Economic Promotion Association. In the past six months, he has handled at least 80 projects of all sizes, including tens of millions of yuan. Inviting him to be the director of the Project Inspection Department, Lao Liu, you have picked up a great bargain!"

Hearing that Yang Mo was only planning to arrange Song Wenxuan to be the director of the Project Inspection Department, a position that could obviously be held concurrently in addition to the main job, rather than being responsible for two departments at the same time, Liu Jiong was stunned at first, and then laughed: "Director Song can condescend to come over, even if it is just to lend a hand in your spare time, I am very grateful... No problem, Lao Yang, I will accept it first... What about the second request?"

Yang Mo laughed for a while, then his face turned serious: "Old Liu, do you know why I only let Old Song serve as the director of your project inspection department?"

Liu Jiong glanced at Song Wenxuan, who was still smiling, and then asked cautiously, "I don't know about this, Lao Yang, why?"

Yang Mo leaned back slightly and said in an unquestionable tone: "Because my work here cannot be separated from Lao Song, but I also need Lao Song to use his identity as the director of the Project Inspection Department to ensure that all agricultural projects in Dezhou area are used for their intended purposes after receiving policy-based financing and loan support, and that the final actual profits of most subdivided industrial clusters remain in the range of 0% to 15%!"

"This is the second condition I proposed, and it is also a prerequisite. If we can't reach a consensus on this one...just pretend I didn't say anything before!"

! ! ! ! !

Liu Jiong opened his mouth in disbelief: "Control the industry's profits below 15%!? Lao, Lao Yang, are you wrong? It should be 51%, right?"

It is no wonder that Liu Jiong said that. In this era of incremental market where there are information barriers everywhere but the economy is developing rapidly, as long as private enterprises and township enterprises in various places dare to fight and strive, let alone 51% profit, even doubling it is not unimaginable... People can get 70% gross profit and 50% profit by selling steamed buns.

Yang Mo shook his head: "You heard it right, Lao Liu, it's 15%, not 51%!"

"Besides, I think you misunderstood something. I meant the final actual profit, not just the book profit... I personally think that the profit range of 0% to 15% is very suitable!"

The final actual profit, not just the paper profit?

Liu Jiong suddenly understood something.

I believe everyone is clear about the difference between gross profit margin and net profit margin. Generally speaking, companies will deduct various direct costs such as operating costs, indirect costs, taxes, etc., and use gross profit margin and net profit margin to reflect their own business profits.

However, policy-based lending business is often targeted at a certain industry field within a region, and often does not cover a single enterprise, but rather a group of enterprises in the industrial chain. Therefore, using a general gross profit margin to measure it will not only be biased, but may even cause various problems... After all, under the smile curve, the gross profit margins of enterprises in different industrial links are completely different.

Therefore, if we do not introduce those complicated parameters and calculation formulas, using the net profit range to describe and reflect the actual situation of these companies would be more useful for reference.

Don’t forget that incubating industries is very different from simply incubating enterprises. At the very least, when incubating an enterprise, more consideration is given to the direct costs of the enterprise, and indirect costs are often selectively forgotten; however, when incubating a regional industrial chain, various indirect costs, such as R&D investment, cannot be ignored and are even more important than direct costs.

As expected, Yang Mo quickly revealed his real purpose: "The reason is very simple. I need to build the moat of these industries step by step... a real moat... rather than simply piling up production and relying on low prices to lure others into the market. This is irresponsible to everyone, especially to those fellow villagers who trust us!"

“This not only requires our staff to conscientiously provide all kinds of guidance and assistance to all enterprises in this industrial chain, but also requires a huge amount of funds, especially the continuous investment of endogenous funds… Therefore, I personally think that relying on the particularity and scale of policy-based financing and lending business, and depending on the different natures of enterprises that need to be incubated in various links of the industrial chain, it is very appropriate to require them to control the final profit within the range of 0% to 15%!”

At this point, Yang Mo smiled at Liu Jiong and said, "I know this request will definitely attract a lot of opposition and will also bring great pressure to you, Old Liu;"

"But don't worry. With the assistance of Dahua Company and Xialiu Sales Agency, and the inspection director Lao Song who comes to inspect the work from time to time, once this model is put into operation, those companies won't be able to cause any trouble."

"As for the opposition from other levels..."

Yang Mo raised his lips in a strange arc: "Hasn't our country always emphasized that everything should have precedents to follow?"

"Haha, Lao Liu, when the time comes, you can use the famous Western company Coca-Cola as an excuse and say that you learned this from Coca-Cola... I wonder what those people who keep clamoring to learn advanced European and American experience will say!"

"Humph, in the European and American markets, mature companies such as Coca-Cola will tacitly control the profit margin of mass products at 5%, in order to form industry entry barriers and balance the flow of funds in various channels, and rely on a large amount of indirect investment costs to form a moat. We have raised the upper limit of the profit range to 15%, which is already very high... If our bank's fixed deposit interest rate had not soared to 12%, I would even want to push this upper limit down!"

Coca Cola?

Not to mention Liu Jiong, even Song Wenxuan couldn't help but be stunned when he heard it. Then he quickly went over the logic of the matter from beginning to end, and then cold sweat broke out on his back.

What a great move of using the opponent's force to your advantage. What a bold and ingenious chess game!
------

PS: Happy National Day to everyone!

In addition, I will be going on a long trip tomorrow, and I, a poor young boy, will be treated like a mule and a horse for seven days.

So, I’ll say in advance that there will be no updates in the next few days.

But whether the update will be suspended for five days or seven days depends on the actual situation.

　　over!

(End of this chapter)