Those Years When I Was Forced to Top the Forbes List

Chapter 339 High Value-Added Enterprises!
Chen Xuebing pondered Wu Jiesi.

Wu Jiesi was also observing Chen Xuebing.

He is indeed not very satisfied with his current job.

As a former president of ICBC, vice mayor of Shenzhen, and financial "firefighter" who successfully resolved the crisis of Guangdong International Trust and Investment Corporation, his career was full of taking on critical missions and turning the tide. After leaving his government job to become a businessman, he wanted to prove his scarce value and irreplaceable status again and regain a sense of control.

Initially, the HK$500 million annual salary and 2000 million stock options offered by Hopson Development Holdings did make up for the material deficiencies he couldn't obtain within the system. However, the company's low profile and secrecy meant that most of his work was done behind the scenes, with no one paying attention or recognizing him. It seemed that everything was just about making money, and he no longer had the satisfaction of gaining recognition when he was at the top.

How many more waves can a 55-year-old ride in life?

Even if they can work for another 10 or 15 years, they can't just do it to accumulate wealth for their descendants.

When Kan Zhidong came to see him, one sentence struck a chord with him.

"Old Wu, this General Manager Chen is so ambitious! Working under him has made me feel twenty years younger! I never thought I could still give it my all at fifty!"

He knew how Kan Zhidong had fallen to his lowest point, and he also knew that Kan Zhidong was now famous again in the domestic financial world. He not only controlled several funds with the highest returns in the country, but he also heard that in July he accurately revealed the trough and rebound trend of A-shares to some friends in the industry. The reputation of "Securities Godfather" has gradually become "Financial Godfather".

Wu Jiesi was originally from a financial background. During his years as vice mayor, one of his main tasks was to manage the Shenzhen Stock Exchange and introduce financial institutions.

How could I possibly not feel a little jealous?

On his way here, he heard Kan Zhidong talk about what Gu'an Group was doing, and he was extremely satisfied with it. Finance, technology, and real estate were the three pillars running in parallel. The industrial planning and existing scale were quite large, and it was able to navigate between local and higher-level policies. It was exactly the place where he could realize his ambitions.

But the more this is the case, the less he should rush things; he needs to demonstrate his own value.

After sitting down for a moment, Ren Ying handed me a cup of Fujian black tea.

Chen Xuebing apologized slightly and said, "President Wu, I don't usually drink black tea, and this tea is new. I apologize for the poor hospitality. Next time you come, I will prepare some aged Zhengshan Xiaozhong from Wuyi Mountain for you."

Green tea is generally best enjoyed fresh, while black tea usually requires some time to ferment.

Wu Jiesi waved his hand and said, "President Chen, you're busy, and so am I. There's no need for formalities. On the way here, I learned about the situation of your Shenzhen technology subsidiary. I heard that it's currently undergoing shareholding reform and will start selling its first batch of mobile phones in the first half of next year, right?"

"Correct."

"I'd like to know, what are your core demands regarding Shenzhen? Is it to obtain higher tax incentives, or to acquire contiguous tracts of cheap land for your industrial park development next year? Or is it to secure priority development rights for the planned Houhai Shenzhen Bay commercial land plot?"

"Forehead"

Wu Jiesi had done thorough research, and the question he posed at this moment made Chen Xuebing hesitate for a while.

"You want them all, right?" Wu Jiesi had a strange smile on her face.

"Heh." Chen Xuebing also gave an awkward laugh, feeling that he seemed to have been perceived as a greedy businessman in the other party's eyes. Not wanting the other party to look down on him, he quickly added, "The development of Shenzhen Bay is indeed one of our strategic goals, with the aim of creating a high-end real estate brand image. In fact, we are currently considering the issue of relocating our headquarters. Shenzhen is one of the candidate locations. I hope that in the next step, each subsidiary can have a part of its core business in Shenzhen to enhance our group's voice in the local area."

"It seems that President Chen values ​​policy benefits very much. In other words, he doesn't want to suffer losses, and even wants to receive policy treatment that is better than that of ordinary companies, right?"

Wu Jiesi's words hit the nail on the head, and even Chen Xuebing couldn't find a rebuttal for the time being.

"I would say so. Wherever our company goes, it has a certain positive impact on local development, which is obvious."

"Actually, in my opinion," Wu Jiesi said, crossing his arms and thinking for a few seconds, then counting on his fingers, "the Shenzhen Bay plot, the group headquarters, and the treatment of technology companies in Shenzhen are three separate things. Don't confuse them."

Chen Xuebing had actually been thinking about this issue recently, so he nodded, adjusted his posture, and listened attentively.

"First of all, after Shenzhen fully implemented the mandatory bidding, auction and listing system for commercial land in 2004, all commercial and residential land must be transferred through public bidding, auction or listing. The bidding, auction and listing rate for commercial land reached 100%. This is a hard indicator to eliminate negotiated transfers. So in this place, if you want to acquire commercial land, you must abide by the rules."

"Of course, there are priorities and privileges involved. Take the Houhai area for example. Development must prioritize the integrity of the Shenzhen Bay coastal ecological belt, and the maximum plot ratio exceeds the standard for regular residential areas. However, additional compensation for intensive land use is required."

"So if you want to get priority in acquiring land, you should first find a professional team to develop an environmental protection plan, and secondly, prepare a compensation fund for high-density development. This will greatly increase your chances of winning the bid."

"Oh," Chen Xuebing said, and upon hearing that the bidding success rate was 100%, he no longer harbored any illusions.

That’s okay too!
Since everything is public, let's make a good plan and let the highest bidder win.

When it comes to bidding, he's not afraid of anyone. He has the most daring profit expectations for Shenzhen land prices.

The opportunity presented by the land price crash during the 08 financial crisis can also be taken advantage of by participating in a wave of bidding.

Based on the current development trend of Gu'an Construction, the timing is just right.

Seeing Chen Xuebing's increasingly confident expression, Wu Jiesi nodded slightly and continued, "Secondly, regarding the group headquarters, for a diversified group like yours, I still recommend that you set up your headquarters in Shanghai."

Then they brought up the issues that Chen Xuebing was concerned about, and immediately drew a conclusion.

Chen Xuebing raised an eyebrow: "What do you mean?"

“Shanghai’s unique feature is its focus on international resources and institutional maturity. It is the preferred location for the China headquarters of foreign institutions. It has abundant international resources in the financial and trade sectors, with plenty of money and relatively more land. This gives it greater development potential for both your financial and real estate companies.”

“From a revenue perspective, Shanghai also offers you greater privileges in tax exemption. Their overall exemption cap is more than 3 percentage points higher than Shenzhen’s. Since your headquarters has a high degree of control, most of the profits from your subsidiaries will flow back to the headquarters. The 3 percentage point difference represents a difference in overall profits.”

"In terms of international trade negotiations, the Shanghai Free Trade Zone has a more complete legal system. In terms of attracting international talent, Shanghai has 2.3 times more foreign experts than Shenzhen."

“Shenzhen, on the other hand, boasts a vibrant private sector, leading efficiency in intensive land use, and a GDP per unit area that is more than 2.5 times that of Shanghai, making it suitable for asset-light headquarters.”

Wu Jiesi stopped abruptly there, leaving Chen Xuebing to make his own judgment without uttering a single unnecessary word.

At this moment, the balance and turmoil in Chen Xuebing's heart quietly tilted.

Shanghai is a municipality directly under the central government, so its policy authority is indeed much higher. Its financial advantages go without saying, and it also has a lot of room for real estate development. Moreover, in terms of land price performance in the later period, it will be more stable than Shenzhen.

“Many of Qidian’s businesses are tied to Shenzhen, which is difficult to relocate. So we’ll still have to work in two locations in the future,” Chen Xuebing sighed.

"There's no other way. Even the country can only divide different industrial advantages into the east, west, south, and north. How much more so for a diversified company like yours? Shenzhen provides strong support for technology companies. If your technology company focuses on technology research and development and the speed of marketization, Shenzhen's overall cost advantage will be even more significant."

At this point, Wu Jiesi changed the subject:
"Moreover, Shenzhen gives priority to the transfer of land for corporate headquarters, and the price discount can reach 30%. Your group is a holding company, and the technology company is undergoing shareholding reform. I think the technology company can separate its legal entity and obtain this policy in Shenzhen to get a cheap piece of land for your technology company's offices."

"This is the third question I want to address."

"For your Singularity Technology to get the best policies in Shenzhen, it's actually very simple, just one indicator: GDP." "This is also Shenzhen's only survival indicator. Shenzhen's GDP has been growing at a rate of about 100 billion yuan per year for the past three years, and is expected to reach 600 billion yuan this year. However, the GDP growth rate has inevitably slowed down, and Shenzhen is anxious about GDP growth. That's why they're closely watching BOE's project. I heard that this sixth-generation line will require an investment of 15 billion yuan? Panel manufacturers building production lines is a highly interconnected field. A 15 billion yuan investment will at least boost GDP by 30 billion yuan. In the eyes of the Shenzhen government, what can compare to that?"

“That’s not how it works,” Chen Xuebing retorted. “Shenzhen previously promised to contribute more than half of its investment to BOE. They could use that half to invest in other projects and attract even more investment.”

"And now?" Wu Jiesi asked in return.

Chen Xuebing gave a dry laugh.

Now that BOE's stock price has gone up, banks are able to increase credit lines, and the Beijing State-owned Assets Supervision and Administration Commission has also taken the initiative.
According to the new investment plan, Hefei will contribute approximately 30 billion yuan, He will contribute 10 billion yuan, Beijing State-owned Assets Supervision and Administration Commission will contribute 30 billion yuan, and the remainder will be funded by banks.

Without his connections, it would have been impossible for Shenzhen to replace Hefei. He spent a full two weeks talking with the Beijing State-owned Assets Supervision and Administration Commission (SASAC), and the two sides reached an agreement on the future development of 3G mobile phones. The Beijing SASAC was optimistic about BOE, which he was in charge of, not Shenzhen.

However, it's possible that Shenzhen might be willing to invest 70 billion yuan from a single entity.

Wu Jiesi's analysis from the government's perspective made him realize that Shenzhen's ambitions were not so easily extinguished.

"The investment funds were already in place. I was thinking of making more money because the stock market was doing well, which delayed this matter. Now it seems that we should have finalized the investment as soon as possible and put an end to their plans. Let's do it by the end of this month," Chen Xuebing said.

Wu Jiesi then laughed: "Right, now you can prove your company's strength to Shenzhen. Do you even know how GDP is composed?"

"Uh, I remember there were three algorithms, it was quite complicated." Chen Xuebing couldn't quite remember either.

"The income approach and expenditure approach apply to the service industry, investment-intensive and export-oriented industries. Your Singularity Technology Company is subject to the production approach. The calculation formula is GDP = total output - intermediate input. This is not calculated based on sales revenue, but on added value, which is similar to the principle of value-added tax."

Sales revenue is not a guarantee of GDP; high added value is.

The new quality of productivity and high-quality development in the future, from a business perspective, means producing high-profit, high-value-added products.

Wu Jiesi paused for a moment, then said, "Logically speaking, high-value-added products like mobile phones should contribute more to GDP for the same sales volume. But I heard from President Kan that you are pursuing a strategy of low profit and high volume, and you have achieved 100,000 pre-sales alone, but the profit is not high? If you turn high-value-added products into low-value-added products, you have not reached the profit standard that a high-tech industry should have."

Chen Xuebing frowned; they had never considered this angle of thought before.

So, is their indifference due to our own shortcomings?

"We've invested so much money, and the new product launch has generated a huge industry buzz. Surely Shenzhen can see that?"

“It’s not that we can’t see it, it’s that we can’t see it clearly. The government and you haven’t had a deep connection, and your production hasn’t shown much potential yet. Shenzhen is a city driven by the system, and the decision on preferential policies is supported by specific standards. I guess your contribution to GDP is not high at present. Can I see your financial statements? I want both your explicit accounts with the government and your own implicit accounts. If you manipulate them properly, your GDP data might double.”

Chen Xuebing had been nodding gradually, but when he heard the last sentence, he smiled.

"Sure, but we'll only keep one set of accounts."

"A ledger?"

This time, it was Wu Jiesi's turn to be astonished.

"Yes, one account."

After one hour.

Lu Weibing was now in the office, constantly reporting to Chen Xuebing in a low voice about the recent audits and personnel changes.

All the documents on the desk were laid out, and Wu Jiesi sat behind the desk, flipping through the general ledger for the last time, clicking his tongue in amazement.

"Your revenue growth in recent months has been phenomenal! And Spreadtrum's service fees are so high! Is that sustainable?"

“Spreadtrum is a holding company that we recently acquired. The two sides have a long-term partnership. This business can last for at least three years. Singularity’s service costs are very low and can be ignored. It mainly relies on our control over manufacturers. Can this service fee be included in GDP?” Chen Xuebing asked.

What percentage of shares do you hold in Spreadtrum Communications?

"51%."

"Then let's clarify the revenue distribution structure and the contract term for cooperation, with 100% of the profits included! That alone is huge! Is this profit sharing? Spreadtrum makes so much money? If we draft a change of interest agreement and include the profits from the headquarters' shareholding in Singularity, this alone would exceed 30 billion a year!"

As Wu Jiesi spoke, his eyes gleaming with undisguised shock: "Is this really sustainable?"

This not only represents the issue of GDP contribution, but also indicates that the net worth of this Mr. Chen in front of him is far more terrifying than he imagined.

The profits from just one holding company alone amount to 30 billion a year!
There are no service costs yet. This isn't just high added value, it's super added value! Isn't it almost the same as selling a brand?
Which brand can sell 30 billion yuan worth of goods a year?
Before Chen Xuebing could speak, Lu Weibing interjected with great certainty, "After March next year, this revenue will at least double, reaching 90 billion!"

Lu Weibing's face remained expressionless, but his ears were perked up. He was overjoyed at Wu Jiesi's proposal to change the profit distribution, and he wished he could stand up and applaud.

As for the March he mentioned next year, that's when Kunlun mobile phones will gradually start production, BOE's 4.5-generation line will begin production, and Spreadtrum's turn-key chips will also be iterated to 3G. A significant increase in profits is certain.

Chen Xuebing rolled his eyes at him and said, "These profits are going to be invested in the research and development of the two companies. Research and development investment won't be deducted from the GDP calculation, will it?"

Wu Jiesi was already amazed and shook his head repeatedly: "No way! R&D expenses are considered an investment activity and are included in the gross fixed capital formation of GDP! 90 billion. If you can realize this income, the terms in Shenzhen will be much easier to negotiate! Moreover, I have seen your purchase and production reports. The BOM cost is 2760 yuan, corresponding to three price levels of 3999, 4199, and 4499 yuan. The profit is not low! Even the mobile contract phone at 3500 yuan has a gross profit of 27 points."

Lu Weibing stood up: "Oh, 2760 is the latest purchase contract statistics. We are still negotiating, there is still room for improvement. Our target cost before we start mass production is 2500 yuan, and by the end of next year, we want to reduce it to below 2100 yuan."

“That makes things much easier.” Wu Jiesi pointed to the general ledger in front of him. “These two items alone already exceed 10 billion. With a slight adjustment to the revenue structure, we can calculate at least 15 billion in GDP! Moreover, according to your industry classification, you can apply to the Shenzhen Statistics Bureau for the ‘Core Digital Economy Industry’ designation. In recent years, this category has accounted for 30% of the growth rate assessment. Your contribution is comparable to Huawei’s! With these conditions, how could Shenzhen dare to let you leave?”

As he spoke, he stood up and banged heavily on the table.

“Do as I say, and you’ll become part of Shenzhen’s GDP next year! You’ll contribute at least two percentage points! When the statistics start in the second quarter of next year, you can move your headquarters to Shanghai! Scare them! I’ll help you negotiate and get at least half off the land price in your industrial park! They definitely won’t dare let you leave!”

Chen Xuebing had already anticipated next year's income and was not too surprised.

He simply never considered the issue from this perspective.

"Signing such an agreement won't affect Spreadtrum's subsequent R&D investment, will it?" he asked, frowning.

"No, after the dividends are distributed, they will be reinvested in the company in the same proportion. This can be resolved through contracts. This also applies to equity changes resulting from Qidian's investment. The whole process doesn't even require accounting. However, the GDP statistics will be accurately included in Qidian and Shenzhen's figures."

"Oh, that's so simple?" Chen Xuebing grinned. "Then next year we'll probably give Shenzhen a little shock."

(End of this chapter)