Chapter Sixteen Export Subsidies

  The report submitted by the Hongxing Fertilizer Plant did not mention this issue, it was not that they didn't say anything, but at that time they hadn't considered it, and only a few days ago when Fu Xin brought it up again, the factory urgently studied and made a decision.

  So, when it comes to this price, Fu Zhenbang got a headache, patted his right temple and said helplessly: "Director Liu, speaking of this issue, I was just about to report to you! We investigated the prices of similar fertilizers abroad, which are generally around $300 per ton. Due to production process issues, our compound fertilizer may have a slightly lower purity than others, so after discussing for a long time, we finally set it at $235 per ton. If it's any higher, I'm afraid it won't sell."

  "$235 per ton, it's so high, can it be sold?" In Liu Zihui's view, $235 per ton was already a very high price. She had originally thought that $150 per ton would be about right, which was already half of the other party's price! It was too expensive and she estimated that the other party wouldn't want it. But looking at Pei Zhenbang's expression, it seemed like $235 per ton was still a loss for him.

  Fu Zhenbang saw Liu Zihui's disbelieving face, so he explained: "Director Liu, you don't know the situation. At $235 per ton, our factory has no profit margin left, and we'll even lose money. If it weren't for the sake of earning foreign exchange, we really wouldn't do this deal. If it gets any lower, it won't work."

  Liu Zihui suddenly became interested and asked: "Oh? What's going on, tell me about it."

  Fu Zhenbang replied, "To be honest with you, Director Liu, the nitrophosphate fertilizer produced by our factory, calculated based on production costs, at least 400 yuan per ton. If we sell it for $235, at an exchange rate of 1.7 yuan to the dollar, that's equivalent to 399.5 yuan."

  In that case, we still lost 50 cents, and this is the lowest cost to calculate. So, if it weren't for the factory considering that they can contribute to the country's foreign exchange earnings through exports, we really wouldn't do this.

  Liu Zihui furrowed his brow and asked, "Who told you that the exchange rate is 1:7?"

  "Really?" This made Zhen Bang confused, he clearly remembered that it was only two days ago when he specifically went to the bank to ask about this, had the exchange rate changed so much in just two days?

  Liu Zihui saw the puzzled look on Fu Zhenbang and his son, so he smiled and said: "Director Fu, you haven't done foreign trade before, so it's normal that you're not clear about this situation. The exchange rate of 1.7 yuan is the official price. If it's an export enterprise, the country has another settlement method, and the foreign exchange income has a separate foreign exchange settlement price, which is settled at 2.8 yuan."

  "Ah?" This was Fu Zhenbang's first reaction.

  Fu Xin saw much and knew widely, although he hadn't been through business in his previous life, but he still understood a bit, so he muttered to himself: "Is this the so-called export subsidy that people talk about?"

  "Oh? You actually know about export subsidies?" Although Fu Xin's voice was not loud, there were only three people in the room, and Liu Zihui still heard it clearly. Unexpectedly, Fu Zhenbang's son actually knew about export subsidies too. It seems that this young comrade is not necessarily here to make a show of himself, but rather has real skills.

  Thinking of this, Liu Zihui thought back to the events that had occurred earlier and recalled them in his mind. He was now more at ease and felt that this newcomer was absolutely not here to curry favor, perhaps this guy understood things even better than his own father, and was even more formidable.

  "What is an export subsidy?" Fu Zhenbang had never heard of this before, but seeing that Director Liu seemed to attach great importance to it, he asked.

  "Ask the factory director, let your son answer this question." Liu Zihui's words were purely meant to test Fuben.

  He could let his son take the lead for once, and although being a father meant he had to be his student this time, it was also something to be proud of. So Fu Zhenbang turned to Fu Xin who was standing beside him, eager to try: "Director Liu is letting you take the lead, so go ahead and say what you have to say! I think you've been holding back for quite a while now!"

  Fu Xin didn't hesitate, tidied up his thoughts and said: "This export subsidy, if I'm not mistaken, is also called an export rebate. It's a cash subsidy or preferential treatment provided by the government to exporters when exporting certain goods to reduce the price of exported goods and increase their competitiveness in the international market."

  "Xiao Fu, have you read the relevant policy books or something? You remember it so clearly." Liu Zihui asked. It's not just clear, but almost verbatim, no, it should be more detailed and clearer than what's written in the policy books. This made Liu Zihui feel puzzled.

  "Hehe." Fu Xin smiled awkwardly, he had never seen any policy books, but he had flipped through the future's Baidu encyclopedia many times. Moreover, as an academician-level figure, he liked to run to Baidu Encyclopedia to supplement and modify data in his free time.

  This new expression was deciphered by Liu Zihui as he had already seen it, and why he believed it even more should be due to the reason that this kid has some skills. The fact that many people didn't think of the underground resources being sold out one day can show that this kid is very smart and has the potential to become a government official.

  But Liu Zihui didn't know that Fu Xin's ambition was not here at all.

  "So, do you know anything else about export subsidies?" Liu Zihui asked with an appreciative gaze at Fu Xin.

  "Uh-huh, I see. Export subsidies should have two basic forms: one is direct subsidy and the other is indirect subsidy."

  Direct subsidy refers to the cash subsidy paid directly by the government to exporters when exporting goods. Its purpose is to make up for the loss caused by the international market price of export goods being lower than the domestic market price.

  That's right, sometimes the subsidy amount may far exceed the actual price difference, which should already include the meaning of export rewards. I think the exchange rate we are facing now, from 1.7 to 2.8, belongs to this category!

  Indirect subsidies refer to the fiscal preferences given by the government to certain goods for export, such as refunding or exempting domestic taxes like sales tax, consumption tax, value-added tax, and income tax that have been paid on exported goods.

  Imported raw materials or semi-finished products are temporarily exempt from tax or refund of import duties, and export goods are exempt from export tax. Deferred payment of taxes, reduction of transportation costs, provision of low-interest loans, implementation of preferential exchange rates, and subsidies for enterprises to develop export markets are also provided.

  "I think the purpose should still be to reduce commodity costs and improve international competitiveness." Fu Xinxin thought for a moment before responding. Since the other party asked, he might as well recite it in detail, giving the other party a "surprise".

  Fu Zhenbang didn't understand, so he was purely learning for the first time and still grasping what Fu Xin said. But Liu Zihui was shocked, his mouth wide open, scared by Fu Xin, this is too freaky!

  "Hmm..." Liu Zihui hesitated for a long time and still had nothing to say.

  This payment is new, it's even more severe than the relevant policy documents. Some things that weren't on the files and had loopholes were all supplemented by him. Liu Zihui secretly decided to report this matter.

  Fu Xin still had no idea that he was going to be hanged at a high level, but even if he knew, he wouldn't be afraid. At most, others would think of him as very clever and having political acumen, but absolutely not as a time-traveler. The person who first proposed the concept of time-travel is probably still in school! It's still early for his "The Legend of Qin" to be born!

  The atmosphere was a bit chilly, and Fu Xin suddenly calculated in his heart, "Two yuan eight, although much lower than the seven yuan exchange rate of later generations, but still one yuan more than one yuan seven."

  One ton of fertilizer costs 400 yuan, calculated at a price of $235 per ton, it will make... a little more than two hundred and thirty-five... equals two hundred and fifty-eight point five, minus five yuan, that is to say there is a profit margin of two hundred and fifty-eight yuan!

  Feng Xin suddenly exclaimed, his voice growing louder: "What! A profit of 258 yuan!"

  "What's two hundred and fifty-eight?" A new voice spoke up, startling Pei Zhenbang and Liu Zihui who were still deep in thought. The two of them asked simultaneously.

  "Of course, it's the profit from our fertilizers. For one ton of ammonium phosphate fertilizer, the country will subsidize us 258 yuan and 50 cents. After deducting the cost, we still make a profit of 50 cents, which is exactly 258 yuan."

  "Ah! Really? Isn't this more profitable than selling other fertilizers domestically?" He didn't realize it until Fu Xin mentioned it, and then Fu Zhenbang came to his senses.

  "Director Fu, can't you lower the price a bit?" Liu Zihui wasn't surprised at all. She had thought that Fu Zhenbang would know about this unusual exchange rate and lower the price, but he didn't even consider it.

  "Uh... I'd better discuss this with the factory first." After hearing that, Fu Zhenbang hesitated for a moment. Yeah, if that's the case, then we should lower the price! That's what Fu Zhenbang thought to himself.

  "We can't lower the price!" Fu Xin stood up and said firmly, "Dad, we can't lower the price. Although we made a profit by lowering the price, the factory is still losing money for the country. Why should we let those foreigners take our money?"

  "Besides, Dad, the cost of 400 yuan you mentioned is only the raw material cost, right? It doesn't take into account labor costs, machine depreciation, transportation costs, marketing costs and so on?" asked Fu Xin.

  "Hmm." Mentioning this issue, Fu Zhenbang's excitement visibly decreased. The factory indeed only considered the cost of raw materials.

  "But you're not lowering the price, it's hard to sell. You have to leave some profit margin for foreign merchants!" Liu Zihui felt that Fu Xin was being a bit unreasonable. After all, even if they made a little more money, it didn't matter as long as they could get foreign exchange.

  At this time, the value of one US dollar in foreign exchange to the country is unknown how much more precious than 1.7 yuan. If possible, never mind paying an extra 0.1 yuan, even if it's an extra 10 yuan, the country would be willing!

  However, due to various considerations, the exchange rate cannot be lowered. As a result, this situation of overvalued currency, undervalued products and high fiscal subsidies has emerged.

  But thinking about it now, this is a matter of face!

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