Return to 1958 and build a century-old giant

Chapter 809 The Arrival of Reform and Opening Up
In the future, these two cities will be my top investment priorities. Buying some properties in them is no problem. Although the price increases in these cities are not as good as in Hong Kong and the mainland, at least I can use them appropriately. I don't need to think too much about small properties. I can just buy them when I need them. Not every small project needs to consider the best return.

Fang Xianming said, "Okay, I will have Lin Youtian keep an eye on this matter in the United States."

Yang Wendong thought for a moment and then said, "Speaking of the United States, we should also ask Lin Youtian to keep an eye on the overall economic situation in the United States, as well as the stocks of some large American companies, such as Coca-Cola, General Electric, and some large automobile companies, etc."

Before the first oil crisis in 1973, oil cost about $3-4 a barrel. After the first oil crisis ended, the price basically remained at around $12, and the end-user prices of gasoline and diesel naturally increased three or four times.

This oil crisis will cause oil prices to rise from around $12 to $30, which is almost ten times higher than six years ago.

When oil prices are low, commodity prices are also low, and business operating costs are also low, so American businesses and ordinary people are doing very well. Now that oil prices have risen like this, life is very difficult for both American businesses and ordinary people.
In the coming years, inflation in the United States will be very severe. To suppress inflation, the government will have no choice but to raise interest rates. After raising interest rates, the US stock market will inevitably plummet, and US companies have not been performing well in the near future either.
Many large American companies are at their lowest points in the stock market for the next few years, and some companies, such as the auto giant Chrysler, have almost gone bankrupt.
At this point, if one could reap huge profits from the gold market, there would be a certain opportunity. Not necessarily to acquire a large company, but at least a large investment, like Coca-Cola or General Electric, whose returns over the next decade or so would have increased tenfold or more.
It may not be as good as emerging electronics industries, but its characteristic is that it can accommodate a large amount of capital. When the amount of capital is sufficient, it is already considered a very good result if it can double or triple. This cannot be compared with small capital.

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

He had long known his boss's ambitions. After achieving great success in Hong Kong and Asia, his boss's target was Europe and America. Only by achieving great success in Europe and America could his group be considered truly international and qualified to stand on equal footing with those European and American giants.

"Is there anything else?" Yang Wendong asked again.

Fang Xianming said, "There's a small matter: CLP Power's stock price has recently fallen again because of the oil crisis."

"An oil crisis? Doesn't CLP Power use heavy oil for its power generation?" Yang Wendong suddenly remembered.

Fang Xianming said, "Yes, heavy oil is also extracted from petroleum. With the price of petroleum soaring, the price of heavy oil is also rising. Our internal Changxing Shipping has also seen a significant increase in costs. However, Changxing Shipping can pass on the costs to customers, but China Power cannot, at least it is difficult for them to raise electricity prices at will."

"I forgot about that. Bao Yugang is going to be in trouble." Yang Wendong smiled and said, "But it's okay. Oil prices shouldn't stay this high forever. This is a political issue. It'll be fine once things are over."
"The heavy oil power plant that CLP Power invested in with ExxonMobil years ago is now a done deal, there's nothing we can do about it. Let Pao Yu-kang deal with it; as shareholders, we don't need to interfere."

In fact, it was precisely because CLP Power partnered with ExxonMobil to invest billions of Hong Kong dollars in building a heavy oil power plant that the company suffered severe financial losses, giving Pao Yu-kang and himself an opportunity to take advantage of the situation.
Fang Xianming continued, "I understand. We don't interfere with the affairs of investment companies, but I heard that Hong Kong Electric is also planning to build a heavy oil power plant, so Mr. Yang still needs to confirm this."

Yang Wendong thought for a moment and said, "Building a heavy oil power plant is also due to the Hong Kong government's environmental protection requirements, but there is indeed too much uncertainty about the future oil price. It seems that we should switch to high-quality coal power generation, as the price of coal is much more stable."

Coal is not pegged to the US dollar, and because it was developed relatively early, there are many coal seams being developed in various places, so the price has risen sharply.

Clean coal is scarce, but it can be processed in advance.

“That’s what I think too. Fuel-fired power plants are no longer profitable,” Fang Xianming said.

Yang Wendong said, "Okay, I understand. I'll discuss it with the people at Hong Kong Electric."

The Kadoorie family's choice back then was not wrong. At that time, oil was $3 a barrel, and heavy oil was even cheaper. Many ships sped up regardless of fuel costs in order to increase efficiency. But now, it's a completely different story.

After the second oil crisis, oil prices will indeed fall further, but only to the level after the first oil crisis, and will still fluctuate greatly and be highly unstable.

Although he didn't understand it very well, he could tell from the fact that in his previous life, the mainland was a power-consuming country, and thermal power was basically still coal-fired. In the long run, coal-fired power generation would inevitably be the lowest cost.

As for environmental protection requirements, there are ways to address them; a small investment in environmental protection costs can be made.
Furthermore, coal can still be imported into China in the future. Once the railway from Shanxi to Qinhuangdao is opened, high-quality coal from Shanxi can be transported out.

Furthermore, I plan to invest in power plants in mainland China in the future, which will also use coal for power generation. If possible, I also hope to participate in the research and development of power plant equipment technology in mainland China in the future.
Time quickly passed to December 24, 1978;
A shocking piece of news came from north of Hong Kong: the Third Plenary Session of the 11th Central Committee of the Communist Party of China officially announced the reform and opening-up policy.
The so-called reform and opening up refers to domestic reform and opening up to the outside world;
Domestic reforms refer to loosening economic controls, gradually stimulating the private sector, and improving the economic level of ordinary people; opening up to the outside world means attracting foreign investment to the mainland, increasing the ease of export for domestic enterprises, and introducing overseas technology and talent, etc.

The core objective is to reform the economy and improve the lives of all Chinese people.

Of course, the initial goal of the domestic leadership was to enable ordinary people to have the same standard of living as those in Southeast Asian countries. But once this lion was released, no one could have imagined how enormous its potential would be, so much so that the future Xida University would regret it immensely.

On December 25th, Yang Wendong immediately summoned several senior executives from the company who were involved in manufacturing to the conference room in the Kang Le Building. "You all know about the situation in the mainland. Do you have any thoughts?" Yang Wendong asked while sipping his tea.

Wei Zetao replied, "Mr. Yang, I think this is a very good opportunity for our group. Although the average economy in the mainland is very poor, its overall economy ranks among the top ten in the world."
According to my colleagues who were previously dispatched to inland areas, many families in major cities like Beijing, Shanghai, and Guangzhou still possess strong purchasing power.

Even though the economy is not good, the overall strength of a large country with a population of nearly one billion is still very impressive.
Leaving aside other countries, taking decades ago as an example, the average economy of mainland China during the Republic of China era was also very poor, but it still attracted a lot of overseas capital. Today, much of Hong Kong's capital was transferred from the mainland, which is why Hong Kong is known as the Pearl of the Orient.

Even the poorest families still need many basic consumer goods, such as clothing, food, housing, transportation, or some inexpensive toys and daily necessities. Every family, no matter how poor, needs these, which is a huge demand.

"Your analysis is good, but you're oversimplifying things." Yang Wendong smiled and shook his head. "The mainland has indeed opened up, but have you read the wording of the documents? They say it's a gradual and orderly opening up, so do you think our or other overseas goods can directly enter the mainland?"
Don't forget that the heavy losses of foreign exchange in the late 40s were caused by the lack of customs defenses and complete openness.

The core purpose of China's reform and opening up is to develop its own industry. It's impossible to allow large quantities of foreign goods to enter the country, even those from Hong Kong.

If a normal developing country or a poor country completely collapses, it can afford to be unprotected against imported goods because its economy is not developing and it has no domestic industry, so it will not be affected.
However, for those with some economic strength or domestic industry, once import restrictions are lifted, their mature and high-tech overseas counterparts will easily crush related domestic industries. The most famous example from the 90s was the "two Coca-Colas drowning seven armies" incident in the Coca-Cola industry.

After listening, Wei Zetao said, "Doesn't that mean that China will only import things that they can't produce themselves?"

“Yes, and they certainly won't import anything that isn't essential for daily life, military, or economic development.” Yang Wendong nodded and said, “I estimate that if it's a product needed long-term, they will definitely still demand a joint venture and related technology. You can look into General Motors' previous cooperation negotiations in China.”

People from the previous generation know that Volkswagen was the first to cooperate with the mainland, which led to Volkswagen's best-selling status in the mainland for decades to come.

However, in fact, as early as the first half of 1978, before the reform and opening up, the chairman of General Motors had already come to the mainland to negotiate cooperation with relevant parties. In the end, they reached an agreement to jointly produce vehicles and transfer some technology appropriately.
Unfortunately, General Motors' board of directors arrogantly rejected the partnership, and then the second oil crisis hit in the second half of the year, ultimately bringing it to an end.

Wei Zetao thought for a moment and said, "For us, some technologies are still non-transferable, but some can be transferred. For example, in papermaking, we basically rely on large-scale development rather than cutting-edge technology."
Investing in a large paper mill in China, even just a 50% stake, would allow us to enter the domestic market and would be worthwhile.

“Some industries are indeed suitable, not just paper manufacturing, but also beverage and food manufacturing.” Yang Wendong nodded and said, “Old Zhou, let’s put other industries aside for now. You should immediately negotiate with China Resources to produce Very Cola domestically. I hope Very Cola can capture the mainland market.”

Coca-Cola and Pepsi have been operating in the cola industry for nearly a century and have very high global brand recognition. Even polar bears like Pepsi. In the future, Pepsi will become the world's sixth largest fleet because polar bears don't have money to buy cola and can only use the fleet as collateral.

Trying to wrest market share from Coca-Cola and Pepsi in Europe, America, and Southeast Asia is virtually impossible. Even in the Middle East, where VeryCola managed to grab some market share during the crisis, Coca-Cola and Pepsi will likely return once relations between the Middle East and the US normalize. Of course, VeryCola has established a firm foothold there and can now compete with Coca-Cola and Pepsi.

The mainland market will be much larger than the Middle East market in the future, and it is also my last chance to enter the cola market. Moreover, the brand awareness and distribution channels in the beverage industry can be shared. Once Very Cola is successful, my other beverages and even food products can easily take advantage of the existing channels.

"Understood," Zhou Haoran replied.
Yang Wendong added, "By the way, let's immediately airlift a batch to some major cities in the mainland and give them away to local distributors for free, just so that the people in the mainland can have a taste first."

In the past, not long after the reform and opening up, Coca-Cola airlifted a batch of Coca-Cola from Hong Kong to Beijing. It was given to many distributors for free, which is why many Chinese people first came into contact with Coca-Cola.
Now, I naturally have to take this step first. It won't cost much, but it can have a huge advertising effect. In fact, when the history of reform and opening up is written in mainland China in the future, this matter might be included, which would make it even more valuable and meaningful.

Zhou Haoran said, "Okay, I'll make the arrangements right away."

"Okay, sure." Yang Wendong nodded, then said to everyone, "Given the current economic situation in China, it is unlikely that foreign capital will be allowed to earn foreign exchange from the country, unless it is for special-purpose goods, but we do not have any, so don't think about making money, at least not in the short term."
You've had some contact with the mainland in recent years, so you should know that there's another resource on the mainland that we can fully utilize; Hong Kong also started out based on this in its early years.”

"Mr. Yang, are you referring to such a massive population?" Wang Zhiqun asked.

Yang Wendong laughed and said, "Yes, it's because of their massive population. Their income is only one-tenth of that in Hong Kong, so many of Hong Kong's labor-intensive industries can be appropriately relocated."
Hong Kong's industries also need to transform, mainly focusing on electronics, high-end textiles, toys, and so on. Many of the more traditional industries can then be relocated to the mainland.

Wei Zetao asked, "But wouldn't building a large factory in the mainland be too risky? It seems that joint ventures are often necessary in China, and half the profits from those joint ventures go to the mainland. That doesn't seem worthwhile, does it?"

"There's no rush. There will definitely be policies in place in the future. The reform and opening up policy has only just been announced. We still need to take things one step at a time," Yang Wendong said nonchalantly.

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(End of this chapter)