Return to 1958 and build a century-old giant

Chapter 816 The Layout of the Gold Market
One week later, at Yanjing International Airport:
Several people from the Ministry of Foreign Trade arrived at the airport entrance, holding signs that read: Mr. Zhou from Watsons Group, Hong Kong;
"The plane is almost here. Get ready so you don't embarrass yourselves in front of the foreign guests," a middle-aged man reminded the others.

"Old Wang, Hong Kong isn't a foreign country. You can't just say things like that anymore," someone next to him reminded him.

Old Wang's expression changed, and he quickly said, "Haha, Old Wu, thanks to your reminder, I made a mistake, I'll correct it right away."

"Well, that's a small matter. We need to entertain the distinguished guests well and get this project off the ground. That's what the central government hopes to see too." Old Wu continued, "It's been a few months since the reform and opening up started, but there hasn't been much progress. Now, Hong Kong is interested in investing HK$100 million, which is about US$20 million. Once this project is on the ground, our Yanjing City's goals for this year will be pretty much achieved."

Old Wang frowned and said, "Old Wu, didn't they say there were two projects in Hong Kong, and the other one is in Shanghai?"

Old Wu said without changing his expression, "That's just a plan, it can be changed at any time. Besides, there's already a project as big as Baosteel in Shanghai. What's the big deal if Yanjing takes away another investment from Hong Kong?"

"Haha, Lao Wu, you've got your own ideas, but I heard this is Yang Wendong's plan. It might be difficult for you to change it," Lao Wang said, shaking his head.

Old Wu nodded and said, "Yes, Yang Wendong is someone the central government specifically wants to win over. You know, I heard that Yang Wendong's personal wealth is at least two billion US dollars, making him arguably the richest Chinese person in the world."

"20 billion US dollars? That's more than our country's foreign exchange reserves!" Old Wang was shocked. He couldn't understand how someone could be so rich.
Old Wu continued, "And it's not one of those century-old families; he started from scratch and earned it in 20 years. His achievements are said to have been praised even by great figures—it's incredible."

"Sigh, 20 billion US dollars! If we had that much money, I don't know how many foreign exchange problems we could solve," Old Wang said with some emotion.

There is a huge demand for imported equipment and materials in China, many of which are related to people's livelihoods. However, due to insufficient foreign exchange, we even have to sell gold to balance the foreign exchange.

One of the important objectives of reform and opening up was to save and earn foreign exchange. On the one hand, it was hoped that the materials needed domestically could be produced domestically, which would save a lot of foreign exchange. On the other hand, domestically produced products could also be exported, which would earn foreign exchange. At the same time, it was also hoped that relevant technologies could be acquired.

The goal is admirable, but in reality, it's very difficult. Many foreign companies run away without even looking back when they hear such conditions.
After a while, the plane landed. In this era, it was still relatively rare to be able to fly. There weren't many people at the airport. The two directors from the Ministry of Foreign Trade and Economic Cooperation soon met their target.

"Mr. Zhou, hello." Director Wu quickly stepped forward to shake hands and said, "This is Deputy Director Wang from our bureau."

"Director Wu, Director Wang, hello." Zhou Haoran had already contacted Director Wu and they were acquainted. He then looked at the people beside him and introduced them: "This is Mr. He Guoyuan, and Mr. Lin Yuelong."

After everyone shook hands, Director Wu led them out of the airport, where a minibus had already been prepared.

However, once everyone boarded and the minibus started moving, they realized that it was really shaking and had a strong diesel smell.
Along the way, He Guoyuan looked at the scenery outside and suddenly felt as if he had returned to his childhood.
The next day, the Ministry of Foreign Trade and Economic Cooperation quickly held a cooperation negotiation with the representatives from Watsons. He Guoyuan also participated. Although he was mentally prepared, the demands from the domestic side were simply outrageously high.
They only have the right to sell overseas; everything else is handled domestically.

The first round of negotiations was a complete mess; dozens of contentious issues simply couldn't be resolved.

After the meeting, Zhou Haoran invited He Guoyuan to a nearby guesthouse for tea, and asked with a smile, "How was it?"

“The requirements in mainland China are just too high, no wonder so many foreign companies are unwilling to invest here,” He Guoyuan replied.

"This was within our expectations; China Resources had already informed me of it," Zhou Haoran said with a smile. "Whether it's you or me, our positions mean we'll inevitably face these kinds of issues."
Actually, these issues aren't limited to mainland China; you'll encounter them when negotiating with powerful overseas suppliers and clients as well. You'll need to learn more about them in the future.

"Yes, I will study hard." He Guoyuan nodded and said that his age and experience were still far behind Zhou Haoran's.

Zhou Haoran added, "Yang Sheng's intention is to cooperate with the mainland, so you and I need to solve the problems we can solve first. If we really can't solve them, then we should inform Yang Sheng, and then Yang Sheng will take charge."
We must be careful with these kinds of things. We should only inform Yang Sheng if we lack the authority to do so; otherwise, the boss might have other ideas.

"Thanks for the reminder." He Guoyuan understood that Zhou Haoran was teaching him, so he asked, "So what do we do next?"

Zhou Haoran said, "You should have noticed that Yanjing wants to monopolize our project, and I suspect Shanghai is doing the same. This is our breakthrough point."

Yesterday's questions seemed to number in the dozens, but in reality, many of them were unreasonable demands from the mainland side. We cannot give up on foreign investment policies that are permitted by law. In addition, we need to fight for domestic management, quality control, sales supervision, and so on.
If all else fails, then we can talk to the Shanghai side. We are the investors, and they need our help, so there's no need to worry too much.

"Haha, truly impressive." He Guoyuan added, "However, some of them involve domestic legal restrictions, right?"

"We'll discuss these issues later. If we can't resolve anything involving the law, then we'll have to consult Mr. Yang," Zhou Haoran replied.

He Guoyuan said, "I understand."

Yang Wendong, who was in Hong Kong, had a general understanding of the basic situation of the negotiations on the mainland. The team that went to the mainland also had people from the headquarters. The people from the headquarters did not participate in the specific matters, but they would record everything and then report to Yang Wendong by phone.

If it's too complicated, we can arrange for another person to urgently return from Yanjing with the documents; it will only take half a day.

As this was Yang Wendong's first investment in mainland China, he took it very seriously and kept a close eye on it.

The relocation of Hong Kong's industries to the mainland is an inevitable trend that cannot be changed. Yang Wendong will not try to go against the tide; that would be foolish. However, he also plans to leave a small portion of the industry in Hong Kong, such as Red Bull, some high-end electronics industries, headquarters, and technology research and development. These will be enough to create tens of thousands of direct jobs, which is sufficient for Hong Kong's future.

No matter how wealthy he is, he can't support half of Hong Kong. In the future, Hong Kong's finance, real estate, tourism and other industries can support a lot of people. He only needs to provide employment for a portion of the people. He can take care of the livelihood of most of the people himself.
The industrial relocation is a long-term plan for the future. The current investment is just to seize the domestic cola market in the early stages; otherwise, there would be no need to rush it.

Recently, there has been an urgent short-term plan, no less important than industrial relocation: investing in gold.

In just one year, gold has increased more than threefold. Such a high increase may occasionally be seen in some stocks, but they are small stocks that cannot accommodate much capital, and Yang Wendong is generally not very interested in them. However, the market for gold is very large.

At the end of February, Fang Xianming returned from overseas and went straight to Yang Wendong's office.
Yang Wendong also warmly welcomed him: "Old Fang, you've worked hard these past few days."

"Mr. Yang, you're too kind. I've actually been doing alright lately, except for visiting a dozen or so large banks. Besides, you even lent me your private jet, so you've really had a good time," Fang Xianming said with a smile.

If you're traveling all over the world and have to catch flights, even if it's first class, it's exhausting.
However, if you are traveling on a private jet, it is much more comfortable. Admittedly, you can't use the rooms inside the private jet when you are on the boss's private jet, but the spacious environment outside, the one-on-one care, and the airline sofa that can be laid flat as a bed make it feel like you are staying in a hotel during the flight.

"Haha, then summarize the gold matter again and tell me." Yang Wendong didn't care about the private jet. The main reason for arranging such an important mission for Fang Xianming was that he had to be quick and in good condition when negotiating with various banks, so he lent him the plane.
Once the gold market succeeds, he could buy several Boeing 747s without batting an eye, let alone Boeing 737s.

In fact, Fang Xianming had been reporting the details frequently during this period, but he could only get to the point on the phone most of the time, and the time difference was always there, so he couldn't explain things very clearly. Now that he's back, he still needs to find out more.
“Okay, Mr. Yang.” Fang Xianming said seriously, “Mr. Yang, I have gathered funds from several subsidiaries of the group, totaling US$10.6 billion, and have made long positions in 17 banks in Europe and the United States.”

The largest of these banks was Citibank, which took on our $100 million funding with a leverage ratio of 3.5. Other banks provided smaller amounts, but still offered leverage of 3-5 times. On average, our leverage ratio this time was approximately 3.7 times.

"Is it really that low?" Yang Wendong retorted.

Fang Xianming said, "Three to five times leverage is indeed not much, but our amount is too large. The value involved after leverage is too high. Each bank also needs to control the risk to avoid losses caused by the bank being unable to act in time when gold suddenly plummets. This is almost the limit of leverage."

If we only have a few million dollars, some banks can even offer leverage up to 20 times, which involves a risk management issue.

Moreover, the current global gold futures market only sees a daily trading volume of around $5 million to $10 billion. Our funds would need to be invested over multiple days. Excessive leverage could itself cause problems, as it would require someone to sell a sufficient amount of gold.

“Hmm, good, 3.7 is already pretty good. Our amount was indeed a bit high.” Yang Wendong nodded and said, “And doing it this way also reduces the risk a lot.”

Banks also face risks when it comes to going long or short. Small amounts are manageable, but large amounts can lead to sudden margin calls if the market fluctuates wildly. In such cases, the bank may be unable to liquidate the position, and the losses may fall on the bank. Of course, some agreements may stipulate that the customer bears the losses, but this involves legal proceedings and the other party may go bankrupt, so banks generally won't take such risks.
Therefore, whether it's stocks, commodities, or foreign exchange, banks need to consider all aspects to determine the leverage ratio for investors.

Generally speaking, the smaller the amount, the stronger the background, and the ability to withstand margin calls, the higher the multiplier can be. However, the limits that the capital market can withstand must also be considered.
Regarding the risks, although I know that the price of gold will increase 3-4 times in a year, the actual process may not be a straight upward line, but rather a curved fluctuation. If the leverage is too high, I may be liquidated if I hit the bottom.

Fang Xianming said, "Yes, it's not just us speculating on gold. Many bulls have emerged recently. The banks are considering the risks, and it's not just us. If there's a problem with gold, some banks that have taken on a lot of bullish positions might not have time to liquidate their positions and could go bankrupt."

"Risk and opportunity go hand in hand. How can banks not face risks when they can obtain extra high interest rates?" Yang Wendong said with a smile and a shake of his head.
Whether you go long or short, banks need to charge huge high interest rates. Essentially, this is a high-interest loan without collateral, so the interest rate is naturally much higher than usual.

In the 90s, when Soros attacked the currencies of some countries, these countries would raise the cost of overnight interbank lending, forcing a large amount of international speculative capital to withdraw due to excessively high interest rates. When going long or short, bank interest rates are a very important indicator. If they are too high, the risk is huge and the profit will be greatly reduced, because the interest rate locks in the total amount of leverage borrowed.

Fang Xianming said, "Yes, Mr. Yang, we also need to be cautious. The US has been raising interest rates continuously lately, and normal deposits are now earning 10% interest. Our interest rates are even higher. If gold prices don't rise significantly, we're likely to lose money."

In fact, from Fang Xianming's perspective as a professional manager, this gamble was too risky. Even if he was bullish on gold, he shouldn't have taken such a risky approach.

Yang Wendong said: "I know this time the risk is quite big, but the global situation will inevitably lead to a large amount of funds flowing into gold, and as you just said, many people are going long on gold like us."
Regardless of whether gold is truly favored or not, if enough people invest in gold, its price will inevitably skyrocket.

The characteristic of finance is that when most people are optimistic, even if it's based on false information, as long as enough funds enter the market, it can really drive up stock prices or the financial attributes of commodities, thereby attracting even more funds to enter the market, until the big players exit.

Not to mention, this surge in gold prices is essentially a reflection of global capital's distrust of the US dollar. After all, the dollar is supposedly tied to oil, but the US seems unable to control the Middle East, this vast oil reserve, and Russia occasionally adds to the chaos. Naturally, capital will seek safer currencies, and gold is the only safe haven option.

Seeing his boss's attitude, Fang Xianming could only say, "Alright, Mr. Yang, now we'll just wait and see how much the price of gold rises."

"Haha, don't worry too much. As long as it rises by 20% or 30% in the next two or three months, we'll be completely safe," Yang Wendong said with a laugh.

Whether you go long or short, the risks are actually very high. However, if the price of gold continues to rise after you go long, even if it falls again later, it is unlikely that you will be liquidated.
Given its actions in Asia, it is unlikely that it can influence the price of gold; history will most likely remain unchanged.
So if the price of gold rises by tens or hundreds of dollars in another two or three months, then your long position will be basically safe. Then you just need to wait until the end of the year or the beginning of next year to cash out.

"I hope so," Fang Xianming added.

Yang Wendong continued, "Alright, this matter is now complete. Next, you just need to send someone to keep an eye on things. There's one more thing I need to entrust to you: send some people to the mainland to investigate the economic situation of various cities and prepare relevant data for me. In the future, the group's main financial investment direction will be in the mainland."

PS: Please give me a monthly ticket
(End of this chapter)