I'm long in this stock - and in the long run, optimistic that the
consumption tax will be ruled inappicable to biodiesel products - so I
don't want to cool any enthusiasm, but there are a few points here
that need clarifying.  First, whether Gushan got a three-year tax
break from Fujian Province or not is irrelevant to the current issue,
as far as I know, since the consumption tax is imposed by the central
Chinese government and I doubt Fujian has unilateral authority to
waive it.  The issue came up not because a three-year tax deal ended,
but - according to the news releases - because of new regulations
issued at the beginning of 2009 which appeared to make the consumption
tax applicable to biodiesel products.

Second, the consumption tax arguably does apply to Gushan's other
plants.  For whatever reason, the local governments of the provinces
in which those plants are located have not attempted to collect from
Gushan to date.  The press release Gushan issued does indicate that if
the consumption tax is levied against biodiesel products, it could
impact all of Gushan's plants.

Third, the Gushan plant may be only one of five, but the press release
indicated that it represents about 29% of Gushan's production
capacity.  It would be hard to view this as likely to have only a
minor impact on their business while the situation is in place.

All that aside, you make some good points, Gofigure.  In the current
economy and with the surplus of oil stocks, the company probably is
not running at full production anyways, which will help ameliorate the
loss of earnings while at the same time the company is minimizing
operational costs by keeping the plant idle.  Oil should resume its
upward march at some point although it may be after a good lull due to
the surpluses and reduced usage.  It is highly unlikely that China's
government will effectively kill the nation's biodiesel industry with
this consumption tax issue - they'll either "clarify" the tax is
inapplicable, or the price ceiling on biodiesel will be raised to
compensate.  (And it should be raised soon anyway!)  Furthermore, the
company has a great balance sheet, and has been well-run enough to
survive a literal tide of exceptional and unfortunate setbacks,
including the huge economic downturn; the interference of the Beijing
Olympics; and now this consumption tax issue.  That means the
fundamentals are in place, and unless lightning is just going to keep
striking Gushan, in the long run we should see a great return on our
investments.

I'd be curious to know if anyone out there can speak to (1) how long
the central government is likely to take to address the consumption
tax issue and (2) how often the price-setting body revisits price
ceilings.

On Jun 20, 12:24 am, Gofigure <wangxi...@gmail.com> wrote: