Return to 1958 and build a century-old giant

Chapter 830 Progress of Investment in Mainland China
Yang Wendong said, "Director Yuan, haven't we already arranged the sticky rat trap business? Don't worry, if this business is done well, it can at least become a large factory that creates jobs for several thousand people."

Although sticky mouse traps are somewhat unsavory, their production still mainly requires manual labor, making them a typical labor-intensive industry.
The global market demand for this product is enormous. Whether in cities or elsewhere, rats are a major headache. While there are cats or other rat-catching methods, sticky rat traps, as an industrial product that is easy to transport, offer excellent value for money.

As the originator of sticky mouse traps, although the patents in many countries have expired, the distribution channels, technology, and supply chain remain. Changxing Group's sticky mouse trap business is still No. 1 globally.
However, with the increase in labor costs in Hong Kong, production operations were also transferred to Malaysia, which is also one of the group's important businesses in Malaysia. However, with the reform and opening up of the mainland, it is natural that these overseas factory operations need to be gradually transferred to the mainland. After all, the mainland is the most suitable place for industrial development in the future, and the mainland economy itself needs this kind of light industry.

"Several thousand people?" Yuan Geng was taken aback and asked, "So many people?"

Yang Wendong smiled and said, "Of course, there are still many orders. Last year, global sales of this business exceeded ten million US dollars, and the demand for manpower is also high, which is perfect for the Shekou Industrial Zone."

"Ten million US dollars?" Yuan Geng was shocked when he heard the number and readily admitted, "I'm sorry, Mr. Yang, it seems I underestimated this industry."

"Haha, Director Yuan, actually, many times, some inconspicuous things can create huge wealth because they are things that every family needs," Yang Wendong added.

In global business, the products that everyone needs constitute a huge market, from houses and cars to towels and tissues. Any small product, if made strong, has the potential to create a Fortune 500 company.

Of course, for products that are too simple, because there are no technological barriers, anyone can produce them, which makes it difficult for giants to emerge.

For example, sticky mouse traps. Although Changxing Group is a large company, there are too many small workshops around the world that can produce them. There are too many competitors. Even when there was patent protection in the early years, it was impossible to stop them. Now it is even more impossible. It can only be said that Changxing Group has no reason not to do this already successful business. Otherwise, it would not have explored this new market.
“What Mr. Yang said is very true, but I still hope that Mr. Yang can invest in some other industries, even if it is on a smaller scale.” Director Yuan added, “To tell you the truth, the central government has high expectations for Shekou and urgently needs to introduce a variety of industries, especially some modern industries.”
Your sticky mouse traps are indeed quite large, but the central government still hopes that some higher-quality industries will invest in Shekou.

"High-quality industries, such as what?" Yang Wendong asked rhetorically.

Director Yuan said, "For example, your companies' sticky notes, suitcases, electronic products, food industry, and so on."

Yang Wendong smiled and asked, "Director Yuan, these industries have very high quality requirements and are doing very well in Hong Kong. There are risks in transferring them to the mainland. Our first step in investing in sticky mouse traps is actually to try it out."

While I will gradually transfer some core industries to the mainland in the future, I will still abide by basic business rules. The world is watching and not very confident in the mainland's industrial capabilities. If I try to bring core industries in, it will be problematic and I will be seen as a fool.
If it weren't for his own prophetic abilities, he might not have helped Shekou in the first place, nor would he have needed to consider transferring the sticky rat trap industry; at most, he would have just built a small factory to try it out.

Director Yuan was somewhat embarrassed and said, "I know my request is a bit excessive, but I just want the Shekou Industrial Zone to achieve results as soon as possible so that the whole country has a role model to learn from. So please help me, Mr. Yang. If there is anything I can do to assist you or if you need anything, please feel free to ask."

"I see." If it's considered a transaction, it's not impossible. So Yang Wendong said, "I can invest in some small home appliance factories. Initially, we can ship parts from Hong Kong for assembly, and then gradually produce some parts in Shekou. What do you think?"

"Small appliances? Sure, what kind of appliances?" Director Yuan asked with great delight.
While sticky mouse traps can indeed bring in a lot of jobs and capital, it's not a good idea to include such an industry in reports to the central government. On the other hand, the home appliance industry is much better; even powerful countries in Europe and America value the home appliance industry highly.

Yang Wendong thought for a moment and said, "Let's start with some simple kitchen appliances, such as kettles, rice cookers, induction cookers, and electric fans. If we can do these well, then we can consider introducing other appliances later."

These small home appliances are also something that Changxing Group excels at. They were Glory Electronics' flagship products a long time ago, until the gaming industry began to rise.

"Haha, great, I welcome that! Mr. Yang, you can first set up a small factory in Shekou to test it out. If the quality isn't good, we'll immediately make a complete overhaul." Director Yuan was overjoyed, but remembering Yang Wendong's words, he asked, "What does Mr. Yang need?"

Yang Wendong replied, "What I need is that if one day domestic laws allow foreign investment in mainland companies, then the companies managed by Director Yuan can accept my investment."

"Investment?" Director Yuan, who was also familiar with business operations in Hong Kong, asked in return, "Mr. Yang, I can't make a written commitment about this kind of thing. And it's hard to say what the future holds."

He himself didn't know what the future policies would be like, or what the future of the Shekou Industrial Zone would be like. Even the central government didn't know. This path was being explored and trial and error, and he was at the forefront of it all.

Yang Wendong smiled and said, "No need for a written commitment, verbal is fine. In the future, if the law allows foreign investment in internal enterprises within the Shekou Industrial Zone, I hope that the investment can be within the proportion stipulated by law."

"Is that all?" Director Yuan asked in surprise.

Yang Wendong nodded and said, "Yes, that's it."

Such matters can only be resolved through verbal agreements; written agreements are not feasible.
The reason for this is that, firstly, I myself am going to gradually invest in Shekou and even deep-sea, and now I am just making a request on the side;
Secondly, there are no bargains to be had in Shekou or even the entire mainland at present. Reform and opening up have just begun, and land is not allowed to be traded, not even rented.

Therefore, the only goal is to invest in "people," and Director Yuan himself is a suitable target;
In a few years, Shekou will develop very rapidly, and he will no longer be so short of funds and projects. Even if he can participate in Shekou projects at that time, he will not have the same advantage as he does today.

His targets are naturally Ping An Insurance and China Merchants Bank, which are the future financial giants of mainland China. Foreign banks will find it difficult to participate in the mainland in the future, so investing in mainland financial companies is a roundabout way.

Of course, Director Yuan was only one of the driving forces behind these two companies; he couldn't decide everything alone, but he still had some influence. Preparing early might be helpful. "Alright, as long as it's not illegal, I'm willing to help Mr. Yang," Director Yuan agreed after thinking for a moment.
Even if such a day comes in the future, introducing capital from Hong Kong's leading conglomerate will not harm the national enterprises themselves; and it can bring new enterprises to Shekou now.

Yang Wendong nodded and said, "Alright, I will arrange this matter when I get back. But then again, no matter what agreement we reach, the investment in Shekou must prioritize quality."

If the products manufactured in Shekou cannot meet the demand, then not only would appliance factories not be produced here, but even mouse traps would not be manufactured here.

Quality is the top priority for any company, that's undeniable. This also serves as an early warning to the mainland side, so that if disputes arise later, they will need to be more assertive.
However, the workers in Shekou are all recruited by themselves and will not be transferred from existing factories in the mainland, so they are definitely easier to manage.

"Mr. Yang, rest assured, if there are any quality issues, I'll be the first to object," Director Yuan said generously.
Reaching a verbal agreement with Yuan Geng is enough for Yang Wendong. The mainland has only just opened up, and it is difficult to obtain direct benefits in the short term. At least, we will have to wait until the deep sea becomes a special economic zone next year.
After that, Yang Wendong met with officials from Shenhai City. However, Shenhai City does not yet have a clear special policy, which means that even foreign investment must be a joint venture.

If it were Beijing or Shanghai, then it would be worth discussing, since they wouldn't be allowed to have wholly foreign-owned enterprises until 86, so cooperation would be possible at that time. But Shenzhen will be a special economic zone next year, so discussing joint ventures now would be a waste of time.

So there were no results. Yang Wendong didn't want to waste time now, and thought it would be more appropriate to talk about it next year. After the meeting, he returned to Hong Kong.

"Sigh, I heard that Yang Wendong's group has started to make investments in Beijing and Shanghai, but he doesn't seem interested in Shenhai," sighed an official from Shenhai City.

"Yes, compared to Beijing, Shanghai, and Guangzhou, our Shenzhen City has nothing right now."

“Even a small project is good. The central government hopes that our Shenhai City can develop by taking advantage of our neighbor Hong Kong.”

"It's not easy. Even with better policies in Shekou, things are still tough. Let alone us. Yang Wendong has already invested in Shekou, so the pressure on us is immense."

"Go back and visit Xinhua News Agency in Hong Kong in a few days to see if they have any good ideas."

"Hmm~"

The investments in Shekou are actually small projects. After all, no matter how significant Shekou is in the history of reform and opening up in mainland China, it is still just a 2-square-kilometer industrial park, which, at least for now, cannot accommodate much industry.

Furthermore, there is no industrial chain. It is only suitable for assembling sticky rat traps or some simple small household appliances in Shekou to create some jobs for the locals. At the same time, it can also be seen as a test of reform and opening up, and it can also allow the subordinates to get familiar with the habits of Chinese people.

Comparatively speaking, the Coca-Cola project in Yanjing and the instant noodle project in Shanghai are currently the group's top priorities for domestic investment.

Both of these industries will have a large demand in China in the future, so building a factory in the mainland can not only add a production base for the group, but also help to expand the domestic market.

On October 1st, Zhou Haoran from Watsons arrived at Yang Wendong's office;
"How's it going? How are the talks with the domestic authorities progressing?" Yang Wendong asked.

Zhou Haoran said, "There are many problems that need to be solved one by one. The most troublesome ones are that we need to maintain a foreign exchange balance domestically, and domestic sales must be arranged by the mainland side. We can't get involved, which puts us in a very passive position."

“I know about the foreign exchange balance issue, and that’s not a big problem. But we need to set a timeframe. We can’t keep doing this forever. Let’s set it for ten years first, and then we can renegotiate after ten years,” Yang Wendong replied.

Foreign exchange balancing is a core policy for protecting foreign exchange reserves in China.
In other words, foreign investment is allowed, and foreign companies can also enter the domestic market, but they must also maintain exports and maintain a balance or even export more, so as to ensure that the country's foreign exchange reserves will not decrease due to the entry of foreign capital.
At that time, foreign investors were actually only interested in making money in China, not in building a large factory or transferring their technology. Therefore, it was very difficult to attract foreign investment in the early stages of reform and opening up.

In this regard, there was no room for negotiation on the part of the mainland. Historically, even a company as strong as Volkswagen had been arguing with the Chinese side for several years on this issue. In the end, the German headquarters agreed to build a factory in Shanghai to produce engines that could be exported, thus balancing foreign exchange, and the project was finally launched.

Another automaker, Yanjing Jeep, actually started its factory earlier than SAIC Volkswagen, but due to unresolved foreign exchange balance issues, it was ultimately blocked by customs from importing parts a few years after construction began. At the time, Chrysler, the company behind Jeep, handled this issue arrogantly, even using foreign public opinion to try to pressure the domestic market so that they could continue to earn the scarce foreign exchange reserves available in China.

Although the matter was eventually resolved, it completely cut off the possibility of Chrysler's future development in China. This is one of the reasons why Chrysler, one of the three major American automakers in the past, did not operate in China like GM and Ford.

Chrysler did more than one disastrous thing.

“Okay, what about domestic channels?” Zhou Haoran asked.

Yang Wendong thought for a moment and said: "It is obviously impossible for us to control the domestic channels now. Even if the law allows it, the cost is too high for us."
Initially, the domestic side can be responsible, but we must have the right to oversight. At the very least, we must ensure that when there is market demand, the mainland side can supply goods in a timely manner.

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(End of this chapter)