Return to 1958 and build a century-old giant

Chapter 858 Investing in Yanjing First Textile Factory

During this trip to Yenching, we finalized other university investment matters besides site selection, discussed cooperation with the inland shipbuilding industry with Bao Yugang, and also negotiated the plan to introduce Mini cars with the First Ministry of Machine Building. We also planned to build some courtyard houses so that we could live in them in the future.
The strategic plans have been largely completed;
Although there are still many projects in the mainland that can be invested in in the future, we have to take it one step at a time and can't just throw everything out at once. Moreover, in this era, even the deep-sea special economic zone has not yet been established, so many investments are not very suitable.

The projects we're discussing this time are all projects whose legal regulations won't change for a long time after the reform and opening up, and projects aimed at seizing the market first. As for other large projects, we can gradually promote them as the reform and opening up progresses.
On the evening of June 18, when Yang Wendong returned to the guesthouse, he saw Bao Yugang looking somewhat worried, so he went up to him and asked, "Bao Sheng, what's wrong?"

Bao Yugang sighed and said, "I've run into a problem. As you know, I was planning to donate a hotel, and people in Yanjing are very welcoming of it. I've also prepared a check for ten million US dollars."
At the very end, I made a request: I wanted the hotel to be named after my father, Bao Zhaolong. As a result, the officials in Yanjing refused to cooperate, and I was completely baffled.”

"Haha, I see." Yang Wendong smiled and said, "This kind of thing is very common in Hong Kong and abroad, but there is no precedent in China. And without a precedent, many people dare not take it on."

The laws in mainland China are different from those abroad, and that can be studied in detail; but many cultural customs are different, and there's really nothing that can be done about that.

Foreign investment often encounters problems, many of which even Yang Wendong, a time traveler, is unaware of. For example, when Very Cola invested in Yanjing, it encountered many problems, but Yang Wendong didn't care and just let his subordinates handle them.
He did know about the Bao Yugang Hotel incident because he had read about the reform and opening up in his previous life, and this incident was recorded in history books.
Bao Yugang wanted to name the hotel after his father, but officials in Yanjing dared not accept the collaboration.

Therefore, Yang Wendong did not inform Bao Yugang about this matter in advance for several reasons. First, it was unreasonable, since he should not have known about it, and it might even have been Bao Yugang's spur-of-the-moment decision. Second, although this matter was a headache at the moment, resolving it would be beneficial to the further development of reform and opening up. Third, it would also benefit Bao Yugang himself. Although it was a bit troublesome at the moment, he would also be included in the history books, which would be a great gain.
For the super-rich, money is no longer a major pursuit, so many of them have turned to pursuing power, fame, or a place in history.
As a Hong Kong tycoon, there's not much to pursue in terms of power; fame becomes far more important.

Bao Yugang nodded and said, "Yes, I didn't expect it to be so troublesome. I should have known better than to bring it up. But now that it's out in the open, I can't back down. Let's arrange for someone to come and negotiate later."

If you back down, your future investments in mainland China will be affected. For those who do big business, even if they intend to back down, they need to get the other party to offer a bargaining chip or a way out. It's not good to take the initiative to say it yourself.

"It's alright, it might actually be a good thing," Yang Wendong said.

Bao Yugang asked curiously, "What do you mean?"

Yang Wendong said, "You should know about the Swan Hotel that Mr. Huo invested in in Guangzhou, right?"

"I understand." Bao Yugang nodded;
Among Hong Kong's tycoons, Fok Ying-tung is the most pro-mainland, which is obvious. Although Bao Yugang, Yang Wendong and others are also showing a trend, they are still not as pro-mainland as him.

Yang Wendong said: "There is no experience in building Western-style five-star hotels in the mainland. As far as I know, Huo Sheng's hotel encountered a lot of trouble. There were various conflicts and disputes between the two sides due to different cultures and perceptions."

So it's better to delay building your hotel here. Wait until Huo Sheng has tested the waters and figured out the depth before you go through it yourself – it's like feeling your way across the river.

The biggest dispute at the Swan Hotel in Guangzhou is the foreign exchange issue. Huo Yingdong demands that all hotel building parts be imported because the inland areas do not have these industries and do not meet the standards.
However, in order to save foreign exchange, the mainland insisted on using its own products, believing that their own products were largely the same.

For example, when it comes to the most basic bathtub drain plug, the domestic side is prepared to use a wooden plug, but Fok Ying-tung insisted on importing stainless steel drain heads from abroad.
Of course, it wasn't just the hotel; his factories in China also had this problem. Yang Wendong knew a little about it, but he didn't want to get involved and just let his subordinates handle it.

Bao Yugang thought for a moment and said, "That makes sense. The construction of this hotel is a complicated matter. It might not be a good thing to start too early. But I also hope that Beijing can have its own international five-star hotel as soon as possible."

"Let's take things one step at a time. Actually, I've also been thinking about investing in a hotel, but I'm waiting to gain some experience with Mr. Huo, haha," Yang Wendong said with a smile.

Building hotels in China during this era is incredibly profitable;

Take the White Swan Hotel as an example. It recouped its investment in less than 10 years. Although the mainland as a whole is poor, there are still many rich people. This can be seen from the fact that KFC opened in Yanjing and its sales exceeded 30 yuan on the first day. In addition, after the reform and opening up, many overseas people came to the mainland and could only go to a limited number of international hotels.
Four Seasons Hotels is also one of his core projects. However, with InterContinental and Hilton hotels already dominating the global market, Four Seasons Hotels has struggled to achieve rapid growth overseas. His prophetic abilities have not been very effective in this regard.
Certainly, he could invest in Southeast Asia, but money was extremely valuable in the 70s, and there were many projects with higher returns than hotel investments, so it was impossible for him to invest in hotels on a large scale.
But now that it's the 80s, after the two oil crises and the surge in gold futures prices, there aren't many high-yield investment opportunities left. He has enough money, so investing in hotels in mainland China is naturally more worthwhile.

However, he is not in a hurry for these few months. After the four special economic zones are established in September, he plans to build wholly-owned hotels in three of them, except for Shantou.
As for other cities such as Beijing, Shanghai, Guangzhou, and Guangzhou, we can temporarily form joint ventures with local enterprises, and then buy back the shares after 86 when the hotel can be wholly owned.
Of course, everything still depends on Huo Yingdong getting through the water first, otherwise he'll be dealing with the mainland's mess and getting exhausted; Huo Yingdong, on the other hand, is already worn out because of the White Swan Hotel.

“That’s right, Mr. Yang does own a hotel brand.” Bao Yugang was clearly in a much better mood at this moment. He said, “Mr. Yang, now that you say that, I feel much better. I’m not in a hurry anymore. Let’s go, let’s go eat some more Beijing-style snacks.”

"OK," Yang Wendong readily agreed.
On his last day in Yanjing, Yang Wendong was invited by the Yanjing Municipal Foreign Trade Department to visit a large textile enterprise called Qinghe Woolen Mill in Haiding District, which was also the largest textile factory in Yanjing.
Changxing Trading Company also sent several people to accompany him. Among them, the person in charge, Shen Haoqing, said to Yang Wendong: "Mr. Yang, Qinghe Woolen Mill is also the largest textile cooperative enterprise of Changxing Trading in China. It is also the factory of Yiran Home in Hong Kong. Some of the raw materials are purchased from here."

"Yes, this factory looks quite large," Yang Wendong nodded. He could see the sizable factory next door even from inside the car.

"Yes, this area covers about 160 acres." Shen Haoqing said with a smile, "The welcoming team from Qinghe Woolen Mill is just ahead. Let me introduce them to you."

After everyone got off the car, Shen Haoqing introduced Yang Wendong and the people from Qinghe Wool Textile Factory. Yang Wendong shook hands with several of them, but there was one person he needed to get to know: Zhu Yulong, the factory director of Qinghe Wool Textile Factory. Zhu Yulong said, "Mr. Yang, Mr. Shen, shall we go in and have a look around?"

"Okay." Yang Wendong nodded;
After entering the factory, the group toured it step by step, chatting as they went. Yang Wendong also learned about the history of Qinghe Woolen Mill.
This factory was established in 1908 with government funding during the Qing Dynasty. The initial investment was 60 taels of silver, and they even borrowed 30 taels from their own family. The history of this factory is said to be quite complicated because it mainly produced military uniforms and was the largest military blanket and uniform factory in the country at that time.
Later, it was controlled by the Republic of China and the Japanese puppet regime, and finally by the new China. During this period, the government has invested a lot of money in the factory and even introduced Western equipment.

This is also one of the largest enterprises in Yanjing City. The workers' wages are higher than those in other factories. There are collective dormitories, staff canteens, staff hospitals, kindergartens, and schools for employees' children. After marriage, employees can be allocated housing, and those with long service can be allocated apartment buildings. Every year, outstanding employees are awarded national and Beijing municipal model worker titles, and so on.

However, all of this is based on the premise that companies were able to make profits in the past, but now, it is fraught with difficulties.

It's not that the factory itself has any major problems, but rather that the overall economy in mainland China is not doing well, and the entire market has shrunk severely. Although clothes are necessities, new clothes are not. When people don't have money, many people can wear old clothes, but people with money start to buy imported clothes from overseas because they are stylish, lightweight, and comfortable.

This naturally brought a significant impact to the Qinghe Woolen Mill.

After Zhu Yulong finished his introduction, he said, "Mr. Yang, Mr. Shen, our cooperation has been very good over the past few years, so we hope to further cooperate with you."

"How to cooperate?" Yang Wendong's sample article.

Zhu Yulong paused for a moment, then said, "We just hope that Hong Kong can purchase more of our clothes or wool textiles."

Yang Wendong nodded. These inland factories were used to being dominant and couldn't compare to overseas factories in many aspects. They weren't well-prepared to meet with major clients, so he looked at Shen Haoqing and asked, "Can we increase our recent procurement here?"

Shen Haoqing understood that Yang Wendong was asking questions here, so he wasn't afraid that people on the mainland would find out. He replied directly, "It's a bit difficult. In terms of quality, the wool textiles here aren't very good, and in terms of price, they can't compare with those in Hong Kong."

As for clothing, mainland styles don't sell very well in Hong Kong or overseas. There's nothing I can do about it. You know we're just a trading company; ultimately, it's the customer's decision.

"Putting aside the clothing issue, how could the textile costs on the mainland be higher than in Hong Kong?" Yang Wendong asked curiously.
Shen Haoqing replied, "That's because Hong Kong uses the latest equipment and has a high production speed. So even though labor costs are higher than in the mainland, the total cost is about the same, or even sometimes a little lower, and it also saves the trouble of transportation."
Furthermore, the main material on the mainland is cotton, while Hong Kong has begun using a blend of cotton and nylon, which significantly reduces costs.

Shen Haoqing said, “We know that Hong Kong’s equipment is much better than ours. However, importing equipment requires a lot of foreign exchange, which we cannot obtain. So we are thinking of cooperating with you more, and then purchasing equipment after we have the foreign exchange.”
Regarding materials, my country's petrochemical industry is not yet developed enough, so for the time being, we can only adopt a strategy of primarily using cotton. This is something we can't control, but I've calculated that as long as the equipment is replaced, the cost can still be reduced to below that of Hong Kong.

Yang Wendong thought for a moment and asked, "How much will those new textile equipment cost?"

Shen Haoqing looked around at the surrounding factory buildings and said, "Based on our order requirements with Qinghe Textile Factory, it's estimated to be two to three million US dollars. If the order increases, it could be even higher."

A single set of textile equipment is not expensive, but a textile factory needs many production lines, which increases the total cost.

"Two or three million US dollars?" Zhu Yulong's face changed upon hearing this;

Let alone two or three million US dollars, it's very difficult to apply for even two or three thousand US dollars now. Domestic foreign exchange control is very strict. Unless you are in a special industry, it is extremely difficult to apply.
"Well, you can apply for a loan from Hang Seng Bank in Hong Kong, and then pay it back when you make money later," Yang Wendong said with a smile.

"Borrow money?" Zhu Yulong was taken aback and said, "Borrowing so much money won't be easy to get approved, will it?"

Yang Wendong nodded and said, "Of course, it requires very strict review. You also need to have a clear plan. In addition, you need to provide collateral. Considering that you don't have any real estate, you can only ask the Yanjing Municipal Government to provide a guarantee."

Hang Seng Bank isn't stupid; there are still various procedures to follow. Some projects in mainland China require guarantees from local governments.

As a time traveler, Yang Wendong naturally knew that there would definitely be no problems with this loan in the future, but he did not interfere in such matters. Banks have their own procedures, and he could not ask the bank to make exceptions specifically for mainland China. Otherwise, if not properly controlled, it could lead to a lot of bad debts.
“The Beijing government’s guarantee? That’s definitely not going to work either.” Zhu Yulong quickly shook his head.

Several million dollars is a considerable sum for the Yanjing municipal government. Although their factory is large, it only produces clothing and does not have any national strategic significance. It is almost impossible for them to get government guarantees.

Yang Wendong nodded, then added, "There's another way: I'll invest in your factory."

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