Chapter 425: The Fearsome Cash Flow of Changxing Real Estate
There was nothing major left to handle in the UK, so after spending a day sightseeing, Yang Wendong and his entourage returned to Hong Kong. It was already December 22, and in the blink of an eye, another year was drawing to a close.
It was drizzling lightly in Hong Kong, bringing a refreshing chill to the air. But the soft rain didn't dampen the city's blazing hot real estate market—in fact, property prices had once again reached a record high.
On the 23rd, after arriving at the Changxing Tower, Yang Wendong was promptly greeted by Zheng Zhijie from Changxing Real Estate.
"Have a seat. I brought back some local tea from the UK," Yang Wendong said as he gestured and began preparing the tea. "Although I don't think it tastes as good as mainland tea, it's still good to change things up once in a while."
Cantonese people loved drinking tea, and despite being so close to the mainland, for a long period, British tea or teas from other British colonies had dominated the Hong Kong market. The reason wasn't that foreign tea was better, but because, in earlier decades, transportation chaos and other internal problems made mainland exports nearly impossible. Not until the 1950s did the situation gradually improve, but by then, habits in Hong Kong had already been formed and were hard to break.
However, for Yang Wendong, ever since he started drinking tea, he had preferred mainland varieties and those around him followed suit.
"Great," Zheng Zhijie smiled. "I've had quite a bit of British Da Hong Pao over the past few years. Those Brits are really fond of it."
"Mm, I also had some delivered to Sanders," Yang Wendong said. "Even though we haven't worked much with HSBC yet, it's important to maintain a good relationship moving forward."
After all, HSBC was Hong Kong's quasi-central bank. Even if one day Yang Wendong's assets grew tenfold, he would still need to cooperate with HSBC on local operations—and perhaps even in some overseas investments. Compared to other British firms, HSBC was actually the most suitable partner for Yang Wendong. It was powerful and, if history remained unchanged, was expected to become one of the world's top ten banks.
The only downside was that, as a quasi-central bank protected by Hong Kong law, even if he had all the money in the world, Yang Wendong could never acquire more than 1% of its shares. This was different from companies like Jardine Matheson. But in the short term, he didn't need to run a bank anyway. Eventually, he could always build one himself.
"I've also met with Sanders a few times recently," Zheng Zhijie said. "He, like us, no longer has much confidence in the Hong Kong property market. But as a bank, they're not allowed to invest directly."
"Yeah, and it's no skin off their nose either," Yang Wendong laughed. "If property prices rise, they earn steadily. If they fall, who dares default on HSBC loans? HSBC is one of the most stable-return assets in Hong Kong."
Hong Kong had quite a few such stable-yield assets: gas companies, power generation firms, ports and terminals—all basically immune to losses. HSBC was part of that club.
"We should consider buying 1% of HSBC shares ourselves," Zheng Zhijie suggested. "We're sitting on quite a bit of cash."
"No rush." Yang Wendong paused. "Have you liquidated all the non-core real estate assets?"
"Yes," Zheng Zhijie replied. "Aside from a few prime properties in Central, everything else has been sold off. Right now, we've got about 140 million HKD in cash. That doesn't include the $3 million you asked me to remit to the U.S."
"That's a lot of cash flow. So you've made around 150 million HKD these past few years?" Yang Wendong asked with a smile.
Since 1959, Changxing Real Estate had been selectively acquiring land. Some of the capital came from Yang Wendong's other business arms, and the rest was earned from developing housing estates. Leveraging bank loans to amplify their purchasing power, they bought up large plots of land, used rental income to cover loan repayments, and then waited for property prices to rise.
Years of aggressive investment, backed by solid capital and daring vision, had resulted in huge profits—comparable, or even superior, to the performance of Changxing Industries over the same period.
"Actually, it's even more than that," Zheng Zhijie continued. "A lot of land for Changxing Industries, Carrefour, and Rongyao Electronics was acquired by us first. Then we transferred ownership at market price to those companies.
For example, our industrial park in Kwun Tong—that piece of land is massive. Even though it's zoned for industrial use, it's worth at least 60 to 70 million HKD at current prices."
"Forget about cashing that one in. The larger the plot, the harder it is to liquidate," Yang Wendong said, shaking his head. "Unless Hong Kong's industrial sector collapses, or labor costs soar so high that Changxing Industries has to relocate, that land won't be developed anytime soon."
That piece of land was home to one of Changxing Group's key manufacturing bases. And for the next 20 years, there was no chance it would be repurposed for real estate. Only when Hong Kong's manufacturing declined in the 1980s and companies started shifting production to the mainland would it become available.
Judging by the land size, it could become something like Whampoa Garden in the future—a legendary development that, when launched in the 1980s, generated over 5 billion HKD in pure profit, along with a 1.7 million-square-foot shopping center and management contracts for more than 10,000 housing units.
Of course, the production profits from Changxing Industries weren't exactly small either. Even during the wage surges of the 1970s, it would remain profitable. When China began its reforms in 1978, a gradual transition of industrial capacity could begin.
Mainland China was the best long-term option for manufacturing. At present, using Taiwan and Singapore was more of a temporary measure. Economic reforms were still more than a decade away—it wasn't realistic to just wait around.
Zheng Zhijie nodded. "Yes, the group's core remains Changxing Industries."
"That might change in the future. It could become Rongyao Electronics," Yang Wendong added. "They've got expansion plans. Keep an eye out for factory locations on Hong Kong Island. I expect a property market crash soon. When the government's finances start to falter, we'll make our move and buy land for Rongyao."
The Hong Kong government rarely ran a surplus, and the logic was simple—if any department didn't use its entire budget, the following year's allocation would be reduced. This kind of bureaucratic behavior was universal across eras and institutions.
In the event of an economic downturn, land auctions would slow, and tax revenues would shrink. The government's fiscal position would tighten, and they'd loosen restrictions on land sales—sometimes even allowing developers to negotiate directly for plots.
"I'll speak to Mr. Wang about it," Zheng Zhijie said.
"What banks are currently holding our cash?" Yang Wendong asked.
"A portion is in HSBC, the rest is split between Hang Seng Bank and Bank of East Asia," Zheng Zhijie replied. "Basically, wherever we took out loans for property, that's where the proceeds ended up."
"Alright. Start pulling funds out of Chinese-owned banks," Yang Wendong instructed. "Move them to HSBC, Standard Chartered, or Citibank overseas."
"You're not optimistic about the Chinese banks?" Zheng Zhijie asked after a pause.
"No, I'm not," Yang Wendong said flatly. "They're heavily reliant on the real estate sector. If property goes down, so do they. Look what happened to Liu Chong Hing Bank back in the day. I want to be prepared. It may not happen, but we're not taking chances."
The run on Hang Seng Bank was a strange event. It all started with a problem at Ming Tak, a minor financial house with only a small connection to Hang Seng. But somehow, the panic spread, and Hang Seng was hit so hard it had to sell itself. Other Chinese banks suffered similar fates afterward.
That incident was likely to happen again, though Yang Wendong's presence had already reshaped much of Hong Kong's business landscape. Still, there was no telling if some Chinese banks might truly collapse, so it was only prudent to relocate funds as a precaution.
And if those banks did face a crisis, Yang Wendong would hold the upper hand. If Hang Seng was starved for cash, he wouldn't need to scramble to rescue them using his own trapped funds.
"Alright, I'll get started on the transfers," Zheng Zhijie said. "But this might raise some eyebrows. Even if the banks can't stop us, a major move like this will attract attention."
"That's fine," Yang Wendong replied calmly. "My recent acquisitions in the U.S. are going public soon. We'll just say the funds are for overseas M&A. Even if others get suspicious, there's nothing they can do."
His recent moves in the U.S.—acquisitions and capital infusions—provided the perfect cover for transferring funds out of Hong Kong and converting them to U.S. dollars. Otherwise, the Hong Kong government would've stepped in to block such a massive outflow.
"Free exchange" was always a relative concept. And Hong Kong in this era wasn't exactly the gold standard of open markets.
"That's a clever move," Zheng Zhijie admitted.
"Alright then," Yang Wendong said, nodding. "You know what to do next. Let's wait and see when this property crisis hits Hong Kong."
History's main course might not change, but the butterfly effect could shift its timeline.
Yang Wendong was curious to see just how much influence his own butterfly wings could exert.
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