Return to 1958 and build a century-old giant

Chapter 796 A Summary of Wealth in 1977 (1)

Time quickly passed to 1978;
Last year, Hong Kong's real estate and stock markets performed very well, which led to a booming economy in Hong Kong, and Cheung Hing Group also made very substantial profits.

On January 15, senior executives from the company's various subsidiaries held a financial meeting to summarize the achievements of the past year.

Wei Zetao, Wang Zhiqun, Liu Huayu, Zheng Zhijie, Zheng Yuhua and other top executives of Changxing Group, who are like a pyramid, gathered together for the first time. Before Yang Wendong arrived, they chatted casually.

At 9 a.m., Yang Wendong arrived on time, and the scene immediately quieted down, with everyone standing up.
"Sit down." After Yang Wendong finished speaking, everyone sat down. Yang Wendong said first, "First of all, I would like to thank you all for your contributions over the years. This year will also be the 20th anniversary of the founding of Changxing. In particular, Lao Wei and Sister Wang, you are among the first group of people to follow me."

Wei Zetao smiled and said, "It is our good fortune to be able to follow Mr. Yang and build such a great career in Hong Kong."

"Haha, Lao Wei really knows how to talk." Yang Wendong smiled and said, "Then let's move on to the formal meeting. Each subsidiary can summarize its achievements over the past year. If there are any major plans for next year or the next few years, we can also discuss them."

This year, the mainland is about to open up, so many businesses in Hong Kong will need to face huge social changes.

However, Yang Wendong couldn't say for sure about this point. After all, even in mainland China today, although there is a reform and opening-up plan, the specific timing is still unclear.
Therefore, if his company has any large-scale investment plans in Hong Kong or Asia, he needs to understand them now to see if they are suitable for the mainland. If they are, then the plan will have to be temporarily postponed or other preparations will have to be made.

“Then let Changxing Industrial go first,” Wei Zetao said. “Changxing Industrial’s first business was the earliest sticky notes, and later various paper manufacturing businesses were derived from it. The entire paper manufacturing business had a turnover of HK$6.5 million and a net profit of HK$1.8 million last year.”

"The overall profit margin is very high," Yang Wendong asked.

HK$1.8 million still has considerable purchasing power in this era. Even with the current surge in Hong Kong property prices, it could still buy a small building in Central.
Wei Zetao said, "Yes, sticky notes are still the main source of profit."

Yang Wendong asked, "Have many of the patents for Post-it notes expired?"

Wei Zetao replied, "Yes, the contract has expired in some countries, so there are already many competitors. However, we started with the entire industry chain in the early years, controlling everything from papermaking. So in these places, we can drive the price down to a very low level while maintaining good quality. Other companies are generally no match for us."

"Yes, the entire industry chain is our most powerful weapon," Yang Wendong nodded and said.
In the electronics industry, it is necessary to outsource the most complex production processes because R&D and sales are more profitable. Given the limited resources available, it is the right decision for electronics companies to outsource production.

Traditional industries, on the other hand, prefer to do things themselves if possible, and ideally integrate the entire supply chain. Many automotive industries in the past required this approach.
After achieving early success in the sticky note industry, Changxing Industrial entered the paper and adhesive industries, and then expanded into toilet paper, office paper, and various adhesives and tapes, forming a perfect business loop.

Wei Zetao continued, "The second business is plastic products, with more than a hundred varieties, mainly daily necessities, toys, and home appliance parts. Last year, the turnover was HK$6.1 million and the net profit was HK$9300 million."

"Yes, the profit margin will be lower," Yang Wendong nodded.

Wei Zetao said: "Yes, the profit margin of plastic products is not high to begin with, and the entry threshold is too low. Anyone can do it. We also rely on our scale and advantages in the upstream industry."

Next, we will work with Changxing Culture to create our own copyrighted toys. Only in this way can we increase our profits.

In addition, we already have the qualifications to supply parts to several Japanese automakers, and this is a key area we will focus on developing going forward.

Yang Wendong laughed and said, "Good, toys are the future of the plastics industry. Hong Kong's toy industry is already ranked fourth in terms of export volume."

Hong Kong has historically been a major exporter of toys, second only to textiles, watches, and home appliances. However, it mainly produced toys for overseas clients, with meager profits and earning only labor costs.
The only way to change this is to create your own copyright; there is no other way.
As for the auto parts business, we can develop some of it, but the main thing is to learn from the Japanese auto industry's quality control methods so that we can optimize other departments and prepare for entering the mainland market.

“Yes.” Wei Zetao added, “The third business division is the container and the steel plant in Taiwan. Last year, a total of 4.3 containers were sold, with an average selling price of US$2000. That is, the turnover last year was US$8600 million, which is about HK$4.4 million, and the net profit was about HK$1 million.
The global container industry is currently experiencing a huge demand for containers. Our orders are increasing every quarter, and we are simply unable to meet the demand. Therefore, we are planning to build a sixth factory in Kwai Chung. This sixth factory will be larger than the previous five, with an annual production capacity of 3 containers.

Yang Wendong said, "Okay, no problem. Containers will be a necessity for the next few decades because, according to international law, they basically need to be replaced every 15 years. The potential is unlimited. You can expand according to the demand."

The container industry is a long-term, stable industry that I left to Changxing Group. It's even stronger than Post-it notes. This industry doesn't have many patents. Who can do it well depends entirely on the scale of the industry and cost control. Hong Kong is no slouch in this regard.
After the reform and opening up in the future, this industry can also be transferred to inland deep-sea or other port cities. While utilizing the industrial chain for local production, it will also be convenient to supply goods to the port, achieving multiple benefits in one fell swoop.
“Yes, Mr. Yang,” Wei Zetao said, “There are just some minor issues. With the real estate market booming in Hong Kong, the demand for welders has increased significantly, and it’s difficult for me to recruit enough welders.”
In addition, we also need to consider diversified production locations, so I'm thinking of building a container factory in Taiwan, close to our steel plant, which would also reduce costs.

"Okay, give me a look at the detailed plan after the New Year," Yang Wendong agreed.
Although he plans to invest in the mainland in the future, he can only invest in some light industries in the early stages. For heavy industries with stricter quality requirements, which require the support of the local industrial chain, he will not invest in the mainland for the time being, unless it is a few special projects.
In the early years of reform and opening up, it was unlikely that container production would be carried out on a large scale in the mainland. The special economic zone and Shenzhen had no industrial chain at all. Shanghai did have one, but that would require special negotiations. Our demand for containers was increasing, and we couldn't wait.
“Okay.” Wei Zetao smiled and said, “The fourth business division consists of the various products we have developed internally. Last year, the turnover was HK$1.26 million and the net profit was HK$1500 million, which is not much.”

"That's not bad either. Outside of Hong Kong, it would be considered a top-tier company," Yang Wendong said.
Changxing Industrial initially relied on his ideas to get started, but the number of these ideas was limited. Later, Yang Wendong stopped participating and focused his energy on other areas, but Changxing Industrial still has various innovation reward policies.

In this respect, we should learn from 3M. This company not only specializes in technology but also researches various small inventions. Before the advent of the electronic technology era, 3M was the company with the most patents in the world.

Cheung Hing Industries is located in Hong Kong, so its talent pool is far inferior to that of the United States, resulting in a weaker ability in invention. However, it is still quite good in Asia.

Wei Zetao said, "Yes, these are the results of my company's four business units. There are some other smaller businesses, but since they haven't reached a significant scale, I won't report them here. The specific data will be reflected in the financial statements." "Okay, Changxing Industry's performance is already quite good. Thank you, Lao Wei, for your nearly 20 years of dedication," Yang Wendong said with a smile and applause.

Everyone else clapped as well;
After things quieted down, Yang Wendong looked at Zheng Yuhua and asked, "How was Changxing Shipping last year?"

Zheng Yuhua replied, "Mr. Yang, as of the end of last year, Changxing Shipping's total tonnage was 5.6 million tons, of which more than 80% were container ships. After five years, the company has successfully transformed and disposed of a large number of oil tankers and ordinary cargo ships."

At its peak, Changxing Shipping had a capacity of over 20 million tons, including seven oil tankers with a capacity of over 7 tons.
However, Yang Wendong proposed a transformation around 73, so he sold off and scrapped some of his ships. As he predicted, after the Suez Canal opened in 75, global shipping prices plummeted. Although there were still profits, they were far less than before, including the price of ships.
Today, Changxing Shipping's core business consists of container ships and a few large bulk cargo ships.

Yang Wendong laughed and asked, "How much of the cash you've cashed out do you still have?"

Zheng Yuhua said, "There is still about HK$11 billion left, and most of the rest has been given to Fang Sheng for his use."

After hearing this, everyone was shocked. Although they knew that Changxing Shipping had made a lot of money in the previous years, 11 billion was only a part of it. This was too extravagant.

Yang Wendong was not surprised. Bao Yugang's net worth was close to 10 billion US dollars from shipping. Although it was fictitious, it was enough to show how high the shipping profits were from 67 to 75.
He also made money himself, earning three to four hundred million Hong Kong dollars a year, and later made more than two billion from selling the ship.
This shipping opportunity is even more profitable than the peak of Hong Kong's real estate market, but in terms of sustainability, it is far inferior.

Fang Xianming also said, "Yes, the expansion of many businesses in North America and Southeast Asia relies on the huge profits of Changxing Shipping."

“Well, it’s a waste to keep this money in your account. Lao Fang, you should invest this money overseas according to our previous investment direction.” Yang Wendong thought for a moment and said, “However, no matter how much profit this money generates in the future, it will still belong to Changxing Shipping. When the time is right, Changxing Shipping will still expand and buy ships on a large scale.”

Although global shipping was not doing well in the 80s, it was also a good opportunity to completely control the market. Just like buying up the real estate industry at the bottom, what he wanted to buy was the operating rights of various shipping routes. When other companies were shrinking and going bankrupt, Changxing Shipping needed to expand counter-cyclically.
In the coming decades, the shipping industry will still have several opportunities. Although on average, the profits may not be as high as those of the real estate industry in Hong Kong and mainland China, the industry has a huge influence, controls many jobs, and even affects the fate of some countries. It needs to be managed and cannot be judged solely by profit margins.

Another point is that the mainland's import and export will experience a period of explosive growth for decades in the future. This has little to do with the international market. As long as it seizes this opportunity, the future will still have unlimited potential. Even if the mainland develops its own long-distance shipping on a large scale in the future, that will be after 2000, which is still a long way off.

Let alone business, many countries generally don't consider things 20 years from now because there are too many factors that can change. Thinking about it now is just pure anxiety.

Fang Xianming replied, "Okay, Mr. Yang."

Yang Wendong nodded and said, "Yes, I predict that there will be problems in the shipping industry. You just need to stabilize your current business for now. I will continue to buy ships when the time is right."

"Thank you, Mr. Yang," Zheng Yuhua said with a smile. He understood that Yang Wendong would inevitably find an opportunity to expand Changxing Shipping in the future.

"Hmm." Yang Wendong nodded in satisfaction, then looked at Zheng Zhijie and smiled, "Old Zheng, it's your turn now."

“Okay.” Zheng Zhijie replied, “My real estate business is much simpler. In Hong Kong, the only project I’m currently developing for sale is Whampoa Garden. The rest are mainly for leasing.”

The first phase of Whampoa Garden was launched last year, with total sales of HK$4.2 million and net profit of HK$1.5 million. The Hong Kong market is booming, and it is estimated that the profits of the later phases will be even higher.
In terms of leasing, the group currently owns over 980 million square feet of land in Hong Kong, with an average rental price of HK$65 per square foot per year. Revenue is HK$6.3 million, and net profit is approximately HK$3.6 million. However, after deducting nearly HK$2 million in bank interest and liabilities, the profit from the property business last year was approximately HK$1.45 million.

Even a company with substantial capital like Changxing Group makes full use of bank funds when doing real estate business and purchasing large commercial office buildings or shopping plazas. Other capital groups do the same; it would be too foolish to hoard houses with their own funds.

Therefore, Changxing Real Estate is now very large in scale, but its debt is also considerable. Of course, compared with other real estate companies, Changxing Real Estate's debt ratio is still not high.
The others were also taken aback upon hearing this. Such high profits! Moreover, the most valuable part of real estate is the property itself. Changxing Real Estate's assets, after deducting loans, are estimated to be worth several billion.

“What about outside of Hong Kong?” Yang Wendong asked.

Zheng Zhijie said, "Outside of Hong Kong, we have just started buying office buildings in Taiwan, Japan and other places. We have spent a total of HK$6 million. Some of the properties have been leased out, and the rental income is about HK$4000 million."

“Okay, the profits from Hong Kong can be reinvested in Japan, Taiwan, or Singapore.” Yang Wendong nodded and said, “It’s not that I’m not optimistic about Hong Kong, but we already have too much investment in Hong Kong and need to transfer some of it out.”

Actually, the best direction for capital to shift is still the mainland. However, in the first two years of reform and opening up, there were not many projects available for investment. In addition, like Japan, Taiwan, Singapore and Hong Kong, real estate prices will skyrocket in the future. Therefore, the main destinations for capital inflow are still these places.
After about seven or eight years, or even ten years, when the profits in these places have increased significantly, these funds can be used to invest domestically, achieving multiple benefits in one fell swoop.
“Yes, Mr. Yang,” Zheng Zhijie replied.

Yang Wendong then asked, "What about Wharf Holdings and Hutchison Whampoa? You should also report on them. I didn't let those two foreigners attend the meeting."

Wharf Holdings and Hutchison Whampoa are independent entities, currently managed by foreigners. Yang Wendong trusts them in terms of individual companies, but he won't bring them to the group's general meeting; he'll let Zheng Zhijie understand the situation first and then report back.

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(End of this chapter)