"Okay," Zhao Xiaohai stood up from his chair, paced back and forth in the slightly empty hall, and then crossed his arms and said slowly, "Ladies and gentlemen, the most important link in this high-tech smuggling is to exploit loopholes, exploiting loopholes in customs taxes between the exporting country and the smuggling destination country. Everyone should know that customs taxes are not only a source of government finances for a country, but also a major way to protect the stable development of its industrial and agricultural production. In more popular terms, customs taxes can be regarded as a price adjustment lever. For example, in your country, the price of one pound (0.9 catties) of refrigerated pork is set by the state at 0.7 rubles. In China, price adjustments are currently primarily market-driven. According to current market prices, the price of a pound of frozen pork here fluctuates between 1.5 and 1.7 RMB. This raises a crucial question: at the current ruble-to-RMB exchange rate, one ruble is equivalent to nearly 28 RMB. Therefore, in your market, a pound of frozen pork costs nearly 20 RMB. You may find it incredible that two neighboring countries could have such a huge price difference for a common commodity like pork, but I must say that this is reality, a result of the Soviet Union's long-standing, highly centralized, planned economy.
In reality, Zhao Xiaohai's explanation of the price gap between China and the Soviet Union wasn't comprehensive. This gap arose from multiple factors. First, China's tight monetary policy limited domestic price increases. Second, the Soviet Union was already relatively scarce, and high prices were inevitable in a seller's market. Third, and most importantly, the Soviet Union's generous welfare policies and flawed monetary policy had long since decoupled the ruble's actual purchasing value from its nominal value. Simply put, the ruble was no longer valuable, at least not at all against the RMB. Its current strength was merely a propping-up by the Soviet government, and this was the fundamental reason for the ruble's dramatic devaluation in the following years. Zhao Xiaohai was well aware of these reasons, but he kept silent, partly because even if he did, these people wouldn't necessarily understand. And partly because these truths were the foundation of his future wealth, and he didn't intend to reveal them.
"Then this kind of trade would have a 1000% profit?!" Sophia said in shock.
"If I could really achieve a 1000% profit, why would I still be involved in the smuggling business?" Zhao Xiaohai curled his lips and said, "The leverage effect of customs tax that I just mentioned comes into play in this situation. We in China have our own considerations. We must ensure the stability of the domestic market. Therefore, the customs will not only limit the quota on pork export trade, but also impose a higher tax, like the current 40%. This high tax basically levels the price difference between pork in the domestic and international markets. As for your country, you must ensure the stable development of your animal husbandry industry. Therefore, your Foreign Trade Commission will adjust the import tax on pork based on domestic prices. The current tax rate is 60%. Once these two factors are offset, normal pork imports and exports will actually be far less profitable. Furthermore, another crucial point is that, under the so-called 'two parallel world markets' theory, your Soviet Union has maintained remarkably little foreign trade for decades. Your foreign trade is completely state-monopolized, and import and export operations are exclusively handled by your foreign trade companies. Although trade has begun to occur at Sino-Soviet ports over the past two years, as you've seen, due to limitations on transaction scale, the annual volume is pitifully small, and most of the traders are small businessmen like me. In this situation, large-scale bilateral trade is just empty talk, and the idea of earning substantial profits through truly legal means is naturally as unrealistic as a castle in the air."
"Mr. Zhao, what you said makes a lot of sense," Zyuganov said, frowning. "I have to admit that you understand our country's situation very well, but I'm increasingly confused. According to what you're saying, cooperation between us seems to be becoming increasingly difficult."
"That's not necessarily true. I just said that our trade is mainly to find loopholes in your country's policies, and according to your current trade policies, such loopholes exist everywhere." Zhao Xiaohai shook his head in agreement, and then said, "Yes, your country's trade conditions are indeed very closed, and your foreign trade is indeed pitifully small, but there is one thing we must not forget, that is the so-called 'socialist camp' economic and trade system you have built. This economic and trade system is very interesting. In addition to covering your various Soviet republics, it once included almost all socialist countries in Eastern Europe, and North Korea in the east is still enjoying your care based on this system. Within this system, your country and its partner countries enjoy most-favored-nation treatment in trade. Not only are the terms of trade much broader, but the tariffs on various commodities are also surprisingly low. As far as I know, in your country's trade with North Korea, In trade, tariffs have always fluctuated between 1% and 10%, which is basically equivalent to tax exemption. Alas, such favorable trade conditions are enviable, but it is a pity that North Korea's socioeconomic conditions are obviously no match for yours. Although they have always enjoyed such good trade preferences, they are still in a trade deficit. Hehe, those North Koreans are indeed the darlings of international trade. They currently enjoy most-favored-nation treatment not only from your Soviet Union, but also from our Chinese foreign trade partners. Since our country embarked on the path of reform and opening up, we have implemented preferential tariff policies for the vast majority of goods exported to North Korea. Let's take the humble commodity of pork as an example. We impose a tariff of 30 to 50 percent on exports to any country in the world, but when exporting to North Korea, we only impose a small, symbolic tariff..."
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