Chapter 393: The Difficult Pass (Part 2)

Work had resumed. According to tradition, the new year’s tasks were only just beginning. Here, I wish my friends all the best, good health, career success, and steady promotion!

Hou Weidong still felt a faint sense of satisfaction regarding the events of that morning. He had been studying the issues facing state-owned enterprises, and now he had encountered a vivid, real-world example.

He waited until Zhou Changquan returned to his office. As he poured more water into Zhou’s enamel mug, Hou Weidong said, "Secretary Zhou, I believe the Central Government will soon issue policies to address the situation of state-owned enterprises."

Zhou Changquan was already pondering this matter. He glanced at Hou Weidong and encouraged him, "Tell me your thoughts."

"At the Fifteenth National Congress, reform goals were proposed, including advancing the modern enterprise system, developing diversified ownership structures, and implementing strategic restructuring of state-owned capital. However, from 1997 to the present, the dilemma of state-owned enterprises has not been fundamentally resolved. I recall the Premier once stating that state-owned enterprises must achieve relief within three years, or he would resign to answer to the public. The People’s Daily has been signaling this direction continuously. Therefore, I am convinced that the Central Government will introduce new policies at the Fourth Plenary Session of the Fifteenth Central Committee."

Hou Weidong’s ability to articulate such an analysis surprised Zhou Changquan. Eager to see what else this young man had in his repertoire, Zhou said, "Good, good. Continue."

"There are many ways for the state to address the excessive debt ratios of enterprises. These include increasing bank provisions for non-performing loans, appropriately reducing the proportion of state-owned shares, selecting strong companies for listing to increase direct financing, transferring land use rights for compensation, and converting enterprise assets into cash. Debt-to-equity swaps are just one of the tools. Looking at the situation of the Shazhou Cement Plant, the most likely solution is to implement debt-to-equity swaps."

The materials provided by Wang Hui included theoretical articles specifically discussing debt-to-equity swaps. Hou Weidong had dabbled in specialized laws such as the Company Law. The previous night, he had studied the issue of debt-to-equity swaps in depth and had gained considerable insight.

Seeing Zhou Changquan listening intently, his confidence grew. He continued, "Theoretically, debt-to-equity swaps refer to state financial asset management companies acquiring non-performing assets from banks. This transforms the creditor-debtor relationship between the bank and the enterprise into a controlling (or shareholding) relationship between the financial asset management company and the enterprise. The state financial asset management company effectively becomes a temporary shareholder of the enterprise. It exercises shareholder rights and participates in major corporate decisions but does not interfere in normal production and operations. Once the enterprise’s economic condition improves, these funds are recovered through listing, transfer, or enterprise buyback."

Zhou Changquan had heard this viewpoint during a meeting at the Provincial Party Committee. It had been raised by a leader from the Provincial Development and Reform Commission during a group discussion, and the attendees had debated it seriously. He had not expected someone close to him to propose the same opinion. Deciding to test him further, Zhou said, "Be more specific. Use the cement plant as an example."

"Specifically, take the Shazhou Cement Plant. It borrowed over a hundred million yuan from banks. By the end of 1998, the principal and interest approached one hundred million. The main problem of the Shazhou Cement Plant is not poor management, but a mountain of debt. If we can promote debt-to-equity swaps, the obligation to repay principal and interest transforms into dividend distribution based on shares. The relationship changes from a loan that requires repayment to an investment cooperation that does not. This neither increases fiscal expenditure nor lightens the enterprise’s debt burden. The bank also gains management rights. This is a debt restructuring plan with the lowest realistic cost and minimal social disruption. It can be applied on a large scale, helping to resolve the debt knots of state banks and state-owned enterprises in a short period. The dilemma of the Shazhou Cement Plant would thus be easily resolved."

Zhou Changquan looked at Hou Weidong with appreciation. He praised him, saying, "Rare. Little Hou has strong independent thinking abilities. If your viewpoint is feasible, it will have guiding significance for the overall work. However, theory alone is not enough. We need a team to conduct systematic research. The Municipal Party Committee and Municipal Government will propose corresponding measures based on the research results."

It was rare for Hou Weidong to receive praise from Zhou Changquan, and he felt pleased inside. However, he did not expect Zhou Changquan to act with such swift decisiveness.

In the afternoon, Zhou Changquan spoke with several department heads and then instructed, "Notify Secretary-General Hong Ang. Ask him to preside over a meeting of the Municipal Party Committee Research Office. Also, invite Mayor Bu and the Municipal Government Research Office to attend."

Hong Ang’s office was nearby. To show respect for the Secretary-General, Hou Weidong always walked to his office when he had business with him, rather than sending a message. This time was no exception. Putting aside his own thoughts, he went directly to find Hong Ang.

Hong Ang looked somewhat puzzled and asked, "Weidong, what is this about? Why such a big commotion?" Hou Weidong, of course, would not admit that he had instigated this. He said, "I estimate it is regarding the cement plant matter this morning. Secretary Zhou wants to study and formulate corresponding countermeasures."

Hong Ang had served as a county party secretary and was very familiar with enterprise conditions. He felt a headache coming on. "Studying enterprise problems is likely beyond the capability of our current group. The Central Government raised this issue at the Fifteenth National Congress, and the Premier proposed a three-year relief plan. It is still hard to say what the results are. This matter is difficult to handle."

Hou Weidong intentionally reminded Hong Ang but pretended to speak casually. "From Secretary Zhou’s tone, it seems the Fourth Plenary Session of the Fifteenth Central Committee is about to convene. Judging from the recent signals in the news media, the Plenary Session will likely introduce new moves regarding state-owned enterprises. Having the two research departments prepare in advance will allow us to seize the initiative."

Hong Ang narrowed his eyes and thought for a moment. He sincerely said, "So that is the thinking. Leaders are indeed leaders; they view problems from a higher vantage point."

When the meeting began, Zhou Changquan attended personally. After Vice Mayor Bu Haiyun briefly discussed the situation of state-owned enterprises in Shazhou City, Zhou said, "The two research departments of the Municipal Party Committee and Municipal Government should not merely be departments for writing speeches for leaders. I just reviewed the responsibilities of the Municipal Party Committee Research Office. The first item is to be responsible for comprehensive research and investigation of the city’s economic development, focusing on major strategic and policy issues in the deepening reform, expanded opening up, and accelerated development of the urban industrial economy, and to propose countermeasures and work suggestions."

"The comrades in the research office are all high-quality talents. You should be the think tank for the Municipal Party Committee and Municipal Government. Although the work of the research office is arduous, and there have been achievements in the past two years, I believe its role has not been fully utilized, or rather, its impact is not large enough."

Since everyone present was internal staff of the Municipal Party Committee and Municipal Government, Zhou Changquan spoke directly. "Development levels vary across regions, and there are indeed countless differences. However, whether one can make good use of policies is a very important factor. Over the years, I have traveled extensively across the country. Based on my experience, the ability to utilize policies well determines the economic development level of a region. Places with high economic development levels proactively study Central Government policies. They look at what the Central Government has not forbidden, and they boldly do what is not forbidden."

Hong Ang and Bu Haiyun smiled upon hearing this.

"Regions with average economic development levels also proactively study Central Government policies. They look at what the Central Government permits, prepare in advance, and as soon as Central policies are issued, they immediately launch supporting measures, gaining many advantages."

"Economically backward regions wait for Central Government policies. After the policies are issued, they still take time to study them. By the time they wake up to the reality, they can only drink cold, thin porridge."

Zhou Changquan raised his voice. "The research offices of the Municipal Party Committee and Municipal Government must consciously learn from economically developed regions and dig deeper into policy loopholes. Today, I am assigning a topic here: study the upcoming Fourth Plenary Session of the Fifteenth Central Committee, predict the central issues of the session, and propose Shazhou’s response methods." He fixed his gaze on Zhou Biao and said, "Director Zhou, you are the Deputy Director of the Municipal Party Committee Research Office. Have you thought about this issue?"

Zhou Biao had an imposing name, but he had a fair complexion, wore his hair in a large slicked-back style, and appeared scholarly and refined. He said, "The research office has discussed related issues, but not systematically or in depth. We will conduct a special study on this shortly."

Zhou Changquan said, "This is a work of global significance. Over the next few months, a team will be established to conduct special research on state-owned enterprise reform. Mayor Bu will lead as the group leader, Secretary-General Hong Ang will be the deputy leader, and the office will be located in the Municipal Party Committee Research Office. Deputy Secretary-General Zeng Yong will serve as the office director, with Zhou Biao and Mo Weimin as deputy directors."

Bu Haiyun said, "Since the office is located in the Municipal Party Committee Research Office, I suggest Secretary-General Hong Ang serve as the group leader, and I will cooperate."

Zhou Changquan did not accept his suggestion. "Mayor Bu is in charge of industrial enterprises and is most familiar with the situation and has the most say. Do not decline. I will add one more point: the special research must focus on two things: first, study the problems of Shazhou’s state-owned enterprises; second, align with Central Government policies. These two points are very important." He added, "Two more deputy directors will be added. Hou Weidong from the Municipal Party Committee side will also participate."

This statement surprised everyone. However, Hou Weidong was already the Deputy Director of the Municipal Party Committee Office and the Chief of the Comprehensive Section, so his appointment as deputy director was reasonable.

Hong Ang’s mind raced. He thought to himself, "Secretary Changquan relies heavily on Hou Weidong and is gradually increasing his responsibilities. Hou Weidong, although young, cannot be underestimated."

Since Hou Weidong was transferred to the Municipal Party Committee Office, Bu Haiyun had begun to pay attention to this young man. From Bu Gao, he knew a little about Hou Weidong’s past. He thought, "Bu Gao has a good eye for people."

After the meeting dispersed, Hou Weidong pondered the events of the past two days. A single suggestion might have a significant impact on the economy of a region, which made him feel the weight of his words.

Thinking of the various things happening around him, his thoughts expanded. He told himself silently, "No wonder so many people sharpen their heads to work close to leaders. The invisible power near leaders is too great. If one’s intentions are not upright, a slight twist of the mind can bring personal gain."

He warned himself, "My position is too important. In the future, I must be cautious in my speech and actions. I cannot act recklessly, nor can I be used by others."