Those Years When I Was Forced to Top the Forbes List

Chapter 385 Winning over
While the two tech companies were making arrangements for incentive policies, the various tasks handled by Changzheng were also settled.

A simple syndicated loan agreement was signed, spearheaded by Shanghai Pudong Development Bank and jointly formed with Pudong Branch of Industrial and Commercial Bank of China.

The two companies granted credit at a 4:1 ratio, with SPD Bank granting 20 billion yuan and ICBC granting 5 million yuan. Future credit enhancement authorizations will also be carried out in accordance with this ratio.

The pledge agreement for the original 7.5 million yuan loan on the equity of Gu'an Group has been replaced by a new 20 billion yuan land plot in Sichuan (including Chengdu) and the 11.61 billion yuan Gu'an Huijin Building in Shanghai, both under the Group's name, as collateral.

The procedures were somewhat irregular, as the Chengdu land parcel had not yet been paid for. However, this was not a problem for the banks that wanted to lend money. The money was divided into two installments: the first installment of 12.3 billion yuan was paid on behalf of the Chengdu High-tech Zone, and the remaining 12.7 billion yuan was disbursed after the Chengdu land parcel procedures were completed.

According to the processing time, the 12.7 billion should arrive by the end of the month.

The TMT fund has also begun preparations to cash out its stake in BOE Technology Group.

BOE actually issued a "Notice on the Listing and Circulation of Restricted Shares" as early as March 5th.

On the day of the announcement, the stock price started to fall from 10.87 yuan, and three days later, the stock price stabilized at around 9.2 yuan.

According to the repurchase agreement with BOE, BOE was supposed to repurchase shares at 90% of the average share price of the month prior to March 20. Now, they have played a trick and kept the average share price low.

Chen Xuebing didn't say anything, and simply accepted the small loss, setting the repurchase price at 8.7 yuan. However, he informed Wang Dongsheng that the sale on the secondary market would not take place immediately after the lock-up period expired, but would have to wait until the price was high. Before the shipment, BOE had to cooperate in releasing various positive news.

Beijing State-owned Assets Supervision and Administration Commission (SASAC) felt that the price of 8.7 yuan was low enough, and notified them to buy in the same batch on March 20.

BOE currently has 39.26 billion shares outstanding. Changzheng and Hefei can each sell 5% of their shares on the stock market, for a total of 10%, or 3.926 million shares.

Of the remaining 2.594 million shares, 1.963 million were repurchased and cancelled by BOE, while 6310 million shares were acquired by the State-owned Assets Supervision and Administration Commission of Beijing.

With these 2.594 million shares, Changzheng and Hefei each earned 6.25 yuan per share, for a total profit of 16.21 billion yuan.

其中合肥盈利30%为长征所得，长征盈利要向投资人分红60%，长征总盈利为（8.1亿*40%）+合肥（8.1亿*30%）=5.67亿。

The agreed-upon profit of 5.67 million is only a small part; the bulk of the profit will come from the subsequent sale of 3.926 million shares on the secondary market.

The stock market is currently experiencing divergence around the 3000-point mark. Secondary market participants should wait for the stock market to start its upward surge again, combined with the double positive news of BOE's order volume this year, before starting to sell.

Seeing that the stock market had been trading sideways for more than a month, Chen Xuebing boldly set a red line, believing that once the divergence was resolved, the subsequent surge should be very rapid:
18 yuan.

If this deal doesn't make two or three billion, it would be a disservice to all this planning.

On the other hand, taking advantage of the positive news that TMT funds were about to be monetized, the fundraising for Changzheng Trust began.

Investors weren't very interested when they heard about the promise of up to 100% annual returns and overseas investments. But without any explanation, they raised 8 million dollars on the very first day after the announcement.

Kan Zhidong began personally calling investors.

3 month 17 day.

Chen Xuebing received a call from Jack Ma in his office, asking him to check his email.

Mr. Ma was quite efficient, and he finalized the list of guests attending the Hong Kong conference in just one week.

Chen Xuebing opened his email and looked at it for a while, then dialed Wu Guangzheng's number.

It turned out that the phone number was not in Wu Guangzheng's possession. After inquiring and waiting for 20 minutes, Chen Xuebing finally obtained Wu Guangzheng's Hong Kong landline number.

When the call connected, Chen Xuebing got straight to the point: "President Wu, do you still remember our spring appointment?"

The other party laughed loudly: "Mr. Chen, I thought you weren't going to contact me!"

"How could that be? It's just that we agreed to have a spring meeting. This year, the Spring Festival is too late, the Beginning of Spring and the Rain Water are both before and after the New Year, and the Awakening of Insects is too sudden. Bringing up this matter again at the Spring Equinox is just right."

"The Spring Equinox." Wu Guangzheng, sitting opposite him, glanced at the calendar and said, "There are still four days until the Spring Equinox. Isn't that too rushed?"

"Hehe, that's not what I meant. But I see we've started preparations for the Spring Equinox, and the date is set for April. Is that alright?"

"Okay, no problem. But, Mr. Chen said the mainland government would be involved. How are the negotiations going?"

"It was decided several months ago. I am now the chief consultant of the CEPA Internet Industry Reform Pilot Group. Shenzhen is cooperating in the preparation. My guest list has also been finalized. The founders of more than a dozen mainland Internet and software companies, including Alibaba, Tencent, Sina, Sohu, Kingsoft, Lianzhong, and 3721, are also included. The leaders of Beijing are also paying close attention to this matter. The framework we discussed at the meeting will be implemented smoothly in mainland policies."

After Chen Xuebing finished speaking, Wu Guangzheng remained silent for a while.

Such a grand display.

This Mr. Chen is truly powerful, managing to gather so many people, including the CEPA reform task force?

This isn't something that can be discussed in a public forum, is it?
The full name of this group is actually "Pilot Group for Internet Industry Reform under the CEPA Framework". Chen Xuebing intentionally omitted the words "under the framework".

Chen Xuebing's ultimate goal is to remove these three words, which would completely change the significance and scope of this reform group, elevating it directly to the Ministry of Commerce.

“Um,” Wu Guangzheng hesitated, “Mr. Chen, we were discussing the entry of internet companies into Hong Kong. With so many guests attending, are they all planning to come to Hong Kong? Is there anything else we at the Trade Development Council need to prepare?”

It was agreed that he would cooperate with the development of mainland enterprises in Hong Kong, and he was also going to pledge his loyalty on the 10th anniversary of Hong Kong's return to China. This was a win-win situation for him, but Chen Xuebing's words "CEPA reform" made him have to be cautious.

CEPA is the fundamental institutional framework for Hong Kong's economic independence.

“No, no.” Chen Xuebing laughed easily: “It’s not the Hong Kong Trade Development Council cooperating with us, but us cooperating with Mr. Wu. Half of the buildings in the south wing of Cyberport’s Twin Towers 3 and 4 are currently empty, losing tens of millions of dollars in rent every month, right? I’m bringing in mainland internet companies to fill the hole. The first two years are rent-free, and the third year they will pay 70% of the market price. Wharf Holdings will make a profit without losing money.”

During the last dinner, he mentioned to Peter Woo the two "Technology-Driven Development" plans for Hong Kong, and how Cyberport and Silicon Harbour were turned into real estate projects.

At the time, all that was known was that it was the work of the Li family. Later, after investigation, Chen Xuebing realized how abrupt it had been to bring it up.

This Hong Kong Cyberport did indeed originate with Richard Li.

In 98, Richard Li proposed the concept of "Asian Silicon Valley," and made a lot of money by presenting a PowerPoint presentation, promising to bring in 500 technology companies. He almost got 64 acres (388 mu) of land in Hong Kong for free, saving tens of billions of dollars.

As a result, only 4 of the planned 17 science and technology research and development centers were built, and the rest were all converted into the Beisha Bay luxury residential project. Of the 500 companies promised to be introduced, only 83 have actually been established.

Making a fortune is a certainty.

However, Chen Xuebing overlooked one related party: Wharf Holdings.

In 2000, Wharf Holdings released a large number of investigative reports, revealing that the profit from the Cyberport residential project could reach HK$320 billion. After much speculation, the Legislative Council also questioned the matter. Richard Li compromised and sold 34% of the Cyberport project at a discounted price, which finally calmed the situation down.

Wharf Holdings is not only a shareholder of Cyberport, but also owns many properties in Cyberport, including the four technology research and development centers.

Wharf Holdings is also one of the stakeholders behind this real estate project, and its stake is quite large.

However, it is precisely because of these investigations that we can discuss specific matters today, and Chen Xuebing has also confirmed that Wu Guangzheng is not afraid to offend the Li family, but only cares about the size of the interests involved.

He also understood why Wu Guangzheng had agreed to hold the meeting so readily.

“Mr. Wu, I checked and found that there are 18 square feet of vacancy in the two buildings. The monthly rent is HK$28 per square foot (1 square meter = 10.76 square feet), which is HK$6000 million a year. If our internet company rents the two buildings and signs long-term contracts, Mr. Wu's cash flow will increase by more than a billion, right?”

HK$6000 million a year may not seem like much, but Hong Kong is all about super-high land rents.

Back in the day, the practice of selling off-plan properties originated in Hong Kong. The unfinished houses were like "flowers" on blueprints, hence the term "speculating on off-plan properties."

The listing of Hong Kong's first REIT fund in 2005 provided another important tool for generating super rents.

REITs funds are essentially a form of crowdfunding where money is given to a professional team to buy shopping malls, office buildings, or logistics parks and collect rent. Most of the profits are then distributed to the fund investors.

In reality, REITs funds are simply real estate developers packaging and listing their own assets.

Real estate developers package their properties and sell them to REITs funds for listing, allowing market investors to buy the funds. The developers' heavy assets are transformed into liquid cash, and they continue to act as property managers, undertaking maintenance and leasing, while the funds pay them management fees.

Furthermore, real estate developers can flexibly retain a portion of their REITs shares for properties they are optimistic about, and share dividends with other investors.

The real estate developer sold the chickens, but continued to care for them, letting them lay eggs for the investors while still receiving a monthly salary.

However, the selling price of chickens depends on market investors' views on them.

Not all properties can be REITs; they must have stable rentals and good cash flow to be listed.

As long as the REITs are valued well, they don't necessarily need to be sold; they can be sold to banks.

Properties like the Cyberport South Wing Twin Towers were not favored by the REITs market in the past due to their high vacancy rates, but if they become long-term bases for mainland internet companies, their value may change drastically.

18 square feet of vacancy is only 1.67 square meters, how big is that?
The Gu'an Huijin Building has 5 square meters. If a few large companies come and book the entire floor, 1.67 yuan is not enough at all. It's easy to reach full occupancy.

The difference in returns between a fully leased and a partially leased building is more than double. This is because both fully leased and partially leased buildings require a team to manage them. With 15% of the costs and 50% of the revenue, the final return is 35%. However, with 100% revenue, the final return is 85%, making the rental value 2.4 times higher.

These two buildings, with a total annual rent of 1.3 million, generate a net rental income of over 1.1 million when fully leased. In the REITs market, they can be packaged into an asset package with an annual rental income of ten to twenty times that amount.

"The South Wing Twin Towers?" Wu Guangzheng thought for a moment before saying, "Oh, you mean Cyberport Towers 3 and 4? Mr. Chen, those don't entirely belong to Wharf Holdings; PCCW and HSBC also own them."

Chen Xuebing interrupted: "If it's not yours, you can buy it at a cheaper price. You can only get great deals in places like Cyberport."

Wu Guangzheng was taken aback.

Cyberport was originally operated by Wharf Holdings. Towers 1-4 were built to accommodate the introduction of technology companies. Towers 1 and 2 were later converted into hotels and retail malls, serving the residents of the Bel-Air waterfront luxury homes and some tourists. The office buildings in Towers 3 and 4 are very deserted.

These two office buildings are a 40-minute drive from Central, with no direct subway access and a lack of other amenities, making them difficult to rent out. If Wharf Holdings were to negotiate with other shareholders to buy out all the shares, it could indeed get a very cheap price.

Chen Xuebing previously mentioned the entry of mainland internet companies. He did intend to fill the leases of some office buildings under Wharf Holdings with vacancy rates exceeding 10% through this project. However, since Cyberport Towers 3 and 4 are not wholly owned by Wharf Holdings and have multiple shareholders, he did not make such a plan.

Why let others benefit from it?

On second thought, if we had secured the leases of these mainland tenants earlier and bought Cyberport Towers 3 and 4 to fill them with the leases, these two properties would have appreciated significantly through the REITs market. It would have been possible to buy them for over a billion dollars and then sell them for double the value.

This is something other Grade A office buildings in Hong Kong cannot achieve, because there are no other similar policy-driven office buildings in Hong Kong. Before the construction of Grade A office buildings, the location and user demand are generally taken into consideration, and there are not many with a vacancy rate exceeding 15%, so they cannot achieve such an increase in vacancy rate.

But the prerequisite is to have large clients and long-term leases, at least seven or eight years.

"Mr. Chen, are you sure there are many internet companies planning to develop in Hong Kong? And that they can hold onto the Cyberport 3-4 lease long-term?" Wu Guangzheng asked solemnly.

"Hehe, am I making such a big fuss just to tease Mr. Wu? Alibaba's annual C2C sales in Hong Kong are estimated to be over 10 billion. They charge a 5% merchant handling fee, which is 500 million in annual profit. Renting a few tens of thousands of square feet is nothing. Our subsidiary, Qidian, also has communication software and will rent at least tens of thousands of square feet as well. Rent is a minor issue. However, we need Wharf T&T's help to build a direct fiber optic connection."

Wharf T&T was formerly known as Hong Kong New Telecom. It was renamed after being acquired by Wharf Holdings in 2005.

Chen Xuebing was unaware of this until he investigated, and he discovered that Wharf Holdings was indeed an excellent partner.

This Wharf Telecom also has a Shenzhen-Hong Kong MPLS leased line, which is a dedicated cross-border fiber optic line for enterprises, directly connecting Shenzhen and Hong Kong, with a latency of approximately 10ms.

10ms, what does that mean?

There's almost no noticeable lag, making it suitable even for cross-border high-frequency stock trading.

However, this type of fiber optic cable is extremely expensive, costing over 20 yuan per month for a single company. Moreover, the reason why dedicated enterprise lines are exempt from firewall scrutiny is because the contracting entity is trustworthy, and the company must take responsibility under its real name. Ordinary internet users cannot replicate this privilege.

All we can say is that Wharf T&T has experience in building cross-border high-speed fiber optic networks and also possesses the relevant qualifications in Hong Kong.

This qualification is almost exclusively reserved for state-owned enterprises in mainland China, and it's equally difficult to obtain in Hong Kong.

A direct fiber optic connection? That's impossible, isn't it?

Wu Guangzheng wasn't a professional and wasn't entirely sure where it was impossible, but he knew that the internet in mainland China was relayed through the United States.

That's how it's always been. If we could connect directly, we would have done it long ago. Who would want to go through a transit point?
Chen Xuebing, however, knew the reason very well.

The requirement for the National Firewall (GFW) to undergo "unpacking and security checks" is only one aspect.

With this firewall, even though Hong Kong is just across the Shenzhen River, Shenzhen's network still has to be inspected and its packets unpacked at nodes in Beijing, Shanghai, and Guangzhou, which forcibly increases latency.

But what happens after passing through Beijing, Shanghai, and Guangzhou? Why isn't there a direct route to Hong Kong?
Because of disputes between mainland and Hong Kong operators over fees, the cost of building direct fiber optic connections is very high. For example, building a 10Gbps pipeline would cost around 100 million yuan. Such a large bandwidth may only be enough for Taobao to use at present. To achieve full direct connection, the cost would be extremely high, leading to the breakdown of direct connection negotiations between operators.

At the opportune moment, US carriers stepped in and offered a deal: renting US transit nodes for only about one-tenth of the annual cost of building the line. China Unicom and China Telecom naturally exclaimed that it was a great deal.

By waiting an extra second or two, netizens saved hundreds of millions in costs.

Besides, accessing overseas websites isn't mainstream anyway.

Therefore, the route for mainland internet users to access the Hong Kong network is: community broadband → provincial node → national firewall (security delay) → international exit (congestion delay) → bypassing the US node (detour delay) → Hong Kong target server.

When the access arrived, the latency was already a very high level.

Bandwidth is always congested and insufficient.

Moreover, after passing through the firewall, very few servers can be accessed.

Later, someone came up with VPNs, which encrypt data through software protocols and allow data to be transferred out of the country via public roads.

This path maintains the same, or even increases, latency, but it avoids censorship by the Great Firewall.

Some people are even more direct, using underground gray-market operators to illegally connect to the internet across borders via fiber optic cables.

This is practically cheating; they completely bypassed the public network and secretly built an underground private highway.

Now, Chen Xuebing is going to become such an operator.

However, he is neither underground nor gray; what he is going to do is red.

It was so red it looked almost purple.

(End of this chapter)