Introduction Read
Recently, a company in Shandong, Reading Automobile Group Co., Ltd. (hereinafter referred to as "Reading Automobile"), made a real-name report online about the secretary of the county party committee. The governments of Shandong Province and Weifang City responded quickly. Before the online reports were made, they immediately issued an announcement and sent a provincial and municipal joint investigation team to investigate, so as to give everyone a true and objective investigation result as soon as possible.
This case brings us to think about: What is the correct way for private enterprises to survive the business crisis? What kind of government-business relationship is sustainable and worth establishing and maintaining?
1. The whole story
First of all, we still have to applaud the government for its quick response. We can see that Shandong has made huge progress in improving the business environment and responding to online public opinion. I think this is rare in many northern cities.
Let’s briefly review the content of the real-name report. The reporter is Li Guoxin, the founder of Reading Automobile. The core content of the report is fraud, which is very lethal. Reading Auto reported to the government that the county party secretary forced the company to falsely report the company's output value of 4.683 billion yuan in 2022. Because the government wants performance and good economic data, and as Reading Auto is an influential and large-scale local company, it seems logical that the government requires its data to be better.
Looking back on the recently popular "County Party Committee Courtyard", there is actually a similar plot. Whether it is Guangming County or other counties, because the government is so happy about success and officials want to be promoted for performance, they force their affiliated companies to come up with beautiful data. If they can't do it, they can only make up beautiful data. Data falsification is a phenomenon that has been severely cracked down on and absolutely cannot be tolerated.
2. Causes and consequences
(1) Will Reading Automobile be the real version of "County Party Committee Courtyard"?
The reason for the report by Reading Auto was that the capital chain was broken. Reading Auto actively negotiated financing plans with the financing parties, sought external capital investment, and received 3.2 billion in financing support. The most critical question at this time is, who will provide the guarantee? Reading Automobile hopes that the government can come forward to provide government guarantees. This is the core demand. Because in 2019, Reading Automobile acquired Yema Automobile and became the only company in Weifang City with new energy vehicle qualifications. This loan was initially completed with the assistance of the county government.
The founder of Reading Auto said: "The company has sought financing support before, but the county government has been unwilling to provide collateral for loan renewal support for Reading, which has affected the confidence of investment institutions. The financing funds have not been received as scheduled. The county party secretary neither provided a loan nor a solution, which directly forced the company into a desperate situation of suspending work and production, so the founder reported it angrily."
(2) Is the guarantee provided by the county government legal and compliant?
The Civil Code promulgated in May 2020 has prohibitive provisions on guarantors. According to Article 683 of the Civil Code of the People's Republic of China, "Official legal persons may not be guarantors, except for those that are approved by the State Council for re-lending using loans from foreign governments or international economic organizations. Non-profit legal persons and unincorporated organizations for public welfare purposes may not be guarantors."
Therefore, government agencies generally cannot serve as loan guarantors. The county party committee secretary most likely believes that continuing to provide guarantees for Reading Auto in 2023 carries the risk of violating laws and regulations.
3. Comments by Chigua Lawyer
After three years of epidemic, business operations have been struggling. If the founder of Reading Auto was not at the end of his rope and desperate, he would never have reported the county party secretary in such a heroic way.
This reporting incident can also reveal two problems: First, when private enterprises encounter a broken capital chain and financing difficulties, do they have to go to the county magistrate or secretary to solve it? This requires a question mark. Second, what kind of political-business relationship can promote the coordinated development of the government and enterprises, which not only requires economic data, but also helps enterprises develop?
(1) Private enterprises must have a high degree of risk awareness and use market-oriented methods to resolve business difficulties
The relationship with the government is very important for the development of local industries, but they cannot put the cart before the horse.The development of enterprises is essentially the result of market competition. The fittest survive and the unfit are eliminated. If you rely on the government for any problem, you will go to the county magistrate, the mayor, or the secretary. This is not the state of an enterprise in a normal market economy. When an enterprise encounters a business crisis, it must find ways to resolve it in a market-oriented manner.
Of course it doesn’t hurt when you stand and talk, but when we sit down and talk, we still have to explain this matter thoroughly. Market-oriented methods are difficult, but debt-for-equity swaps are debt-for-equity swaps, bankruptcy reorganization is bankruptcy reorganization, and strong investors are introduced. This is what a market economy should be like, and private enterprises in particular should be fully aware of the risks of market operations.
Obviously, Reading Motors did not take precautions in this regard, and past legends can also prove it. The most typical example is that in 2017, Reading Automobile purchased a famous painting by Mr. Huang Binhong - "Huangshan Tangkou" for a high price of 340 million yuan. From this move alone, it is not difficult for us to judge the normal state of the business run by Reading Motors and its executives. It may be that they are drunk now, but it seems logical to encounter a crisis now.
(2) Establishing and maintaining a pro-Qing political and business relationship is a win-win situation
A pro-Qing political and business relationship means one is close to the other. The so-called pro-Qing government certainly means being close to the enterprises. Within the scope of the government's responsibilities, it will try its best to create a good business environment for enterprises and promote high-quality development of enterprises. The government does not stand on top of things. It must think about enterprises in order to promote local economic development. Only when government tax revenue increases will it have more financial resources and can do more things.
The current county government was unable to provide guarantees and stayed away. This did not seem to meet the requirements of pro-Qing political and business relations, and was not conducive to economic development and social stability. After all, Reading Automobile received support from the county government and completed the acquisition of Mustang Automobile in 2019. The government and enterprises can be regarded as a community with a shared future for economy and development.
In 2023, the county government will change its leadership and face new problems. There may be other non-compliances that we don’t know about. It is understandable that as a government official, you must be clean and honest and maintain a clean relationship with companies. However, the county government's avoidance is definitely not a solution to the problem. The county government must not forget its responsibility to serve the public and benefit society. It must actively communicate and actively connect with enterprises to find solutions to promote problems and avoid intensifying conflicts and expanding their impact.
