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Chapter 922 Negotiations at the Governor's House
On September 12, Yang Wendong arrived at Government House and met with Governor Max and HSBC tycoon Sir Michael Sandberg.

"Governor, Mr. Shen Bi," Yang Wendong said politely, shaking hands. "It's been a long time."

“Mr. Yang, we’re in the same boat.” Max said after shaking hands, “I’m sorry, my Cantonese isn’t very good, so for convenience, we’ll have to communicate in English.”

Yang Wendong said, "No problem."

Over the years, he has frequently traveled to Europe and America for business, and his English has become fluent. If it weren't for face-to-face interaction, most people might not be able to tell whether he is American or not.
Of course, English is a language full of technical jargon and jargon that Yang Wendong doesn't understand, so many business and professional meetings and documents still need to be translated by professionals.

After the three sat down, a gold-clad assistant served them coffee. After some pleasantries, Max asked, "Mr. Yang, what are your thoughts on the recent economic problems in Hong Kong?"

"Governor, are you asking about real estate or the real economy?" Yang Wendong countered.
Max said, "Either is fine, I'd like to hear about both."

Yang Wendong replied: "In terms of real estate, compared to the highest prices last year, prices in many places have basically been halved, or even dropped by 60% or 70%, which is about the same as the housing prices in 1979/1980."

In my experience, land prices have reached a point where they're pretty much at their peak. The only reason they haven't recovered is due to external factors causing a lack of market confidence. Once those external problems are resolved, the real estate market will begin to recover.

In Hong Kong's history of property crises, generally speaking, once the highest prices fall by half or slightly more, the bubble is almost burst.
However, external causes are another matter, such as those in 67 and this year. If external problems are not resolved, then the internal situation will naturally not improve.
"If that's the case, Mr. Yang's group should have started buying at rock-bottom prices, right? I haven't seen any activity from them lately," Shen Bi suddenly asked.
Yang Wendong laughed and said, "There's no rush to buy at rock-bottom prices. Besides, I don't even look at ordinary properties. But I think the Governor invited us here today not to discuss real estate, right?"

Max nodded and said, "Yes, I'm not too worried about the real estate sector; these are just data-related damages. But right now, the Hong Kong dollar issue is the most troublesome, which is why I invited Mr. Yang here."

“The recent Hong Kong dollar exchange rate is indeed a big problem, making imports very inconvenient for me,” Yang Wendong agreed.

Max said, "It's not just an import problem, but an export problem. Now many trading companies that used to do import business have started to do export business, which further leads to a shortage of goods in the Hong Kong market and increases inflation."

"They're after the dollars too, aren't they?" Yang Wendong paused, then said.

The government has blocked the US dollar supply, and the black market is just a drop in the bucket for large companies. So, the only way to obtain US dollars is to export goods.

Previously, many shops in Hong Kong did not accept Hong Kong dollars. After being suppressed by the Hong Kong government's policies, they directly shipped the goods that Hong Kong originally needed to other places out to sell.
In this way, they received less Hong Kong dollars, which they considered useless, and gained US dollars. They might lose money in the process, but at least they got the US dollars.

Sir Michael Sandberg said, “Yes, these companies don’t normally need US dollars, or aren’t in a hurry to get them, but in the current situation, everyone is thinking about exchanging for US dollars, which has led to a lot of problems.”

"I see. In that case, it will indeed lead to a further deterioration of Hong Kong's economy," Yang Wendong nodded and said.
This is the consequence of the lack of foreign exchange in the modern economy. Even if the government shuts down foreign exchange and black market exchange, various merchants can still export goods from Hong Kong, thereby indirectly selling their Hong Kong dollar assets and obtaining US dollars.
During this process, Hong Kong's internal economy will become a complete mess, with shortages of supplies, the local currency being rejected, and so on. In this vicious cycle, the longer it drags on, the more irreparable the economic damage will be.

Max said, "Yes, so I hope Mr. Yang can lend some US dollars to HSBC to ease the recent economic situation."

Yang Wendong asked, "How much money do you need?"

Sir Michael Sandberg said, "The Hong Kong government will participate in the mortgage of the US$5 million."

"The collateral is easy to say, but even with $500 million, it won't last long, will it?" Yang Wendong countered. "Given the current trend, if it can't be stabilized, even several $500 million might not be enough."

The most important thing right now is to restore the confidence of Hong Kong citizens and investors in Hong Kong and the Hong Kong dollar. I would like to ask, what are the Hong Kong government's plans in this regard?

Under normal circumstances, US$5 million is a huge sum of money, enough to support Hong Kong's normal foreign exchange trade for a long time;

But right now the public has no confidence in the Hong Kong dollar, and in this situation, no amount of money can help.
Just like the early bank runs in Hong Kong, once a bank run breaks out, the most important thing is not only to raise money, but also to find a way to stop the run, otherwise no matter how much money is invested, it may not be enough.

Shen Bi glanced at Max, who said, "Mr. Yang, please rest assured on this point. I will naturally make preparations on my side as well."

Buckingham Palace has already dispatched a special envoy to Beijing regarding the Hong Kong dollar issue. Regardless of any disputes between the two sides, they do not want to see Hong Kong's economy collapse. Once an agreement is reached, they will certainly support the Hong Kong dollar.

After thinking for a moment, Yang Wendong said, "This is too vague. Even if both sides strongly support the Hong Kong dollar, what about the exchange rate? Will the current exchange rate be maintained, or will it be allowed to depreciate?"

"This..." Max frowned slightly and said, "Mr. Yang, the future exchange rate of the Hong Kong dollar is also a major secret, and I cannot tell you."

Yang Wendong countered, "If that's the case, then if I invest so much money and you subsequently lower the Hong Kong dollar exchange rate, wouldn't I be at a loss?"

“Mr. Yang, we can use US dollars as the denominated currency. I will borrow US dollars from you and then repay you in US dollars, with interest,” Shen Bi said. “That way, no matter how the Hong Kong dollar exchange rate fluctuates, you won’t lose money. What do you think?”

Yang Wendong thought for a moment and said, "That's one way, but I don't care about that interest rate. I have another suggestion. The root cause of this crisis is that some people don't trust the Hong Kong dollar, which has led to a bank run."

However, within the Hong Kong market, there might still be some people who believe in Hong Kong's future. On the black market, some are buying Hong Kong dollars at low prices. While some of these people may be profiting from the situation, it's undeniable that some genuinely believe in the Hong Kong dollar's future. Perhaps the Hong Kong government could liberalize US dollar exchange, allowing those with US dollars to openly exchange them for Hong Kong dollars. This would alleviate some of the pressure on the government.

"You want to openly exchange them yourself?" Shen Bi's expression changed; he understood Yang Wendong's meaning.
It's important to understand that although the Hong Kong government claims to have free foreign exchange, it does have controls, and these controls are exercised through HSBC. HSBC controls most of the foreign exchange settlements in Hong Kong, which represents a huge monopoly profit.

Max frowned. He hadn't expected Yang Wendong to have such confidence in the Hong Kong dollar, so he said, "Then your exchange rate will be based on the Hong Kong government's?"

"That's impossible; everything should be based on market principles," Yang Wendong said, shaking his head.
If the Hong Kong government follows its lead, he'll be in deep trouble.

Shen Bi said, "No, if we do that, then there's no point in controlling foreign exchange."

Yang Wendong countered, "Mr. Shen Bi, even if I lend you $5 million, and you exchange it at the official exchange rate, I don't know how many days you can last. Once the news gets out, believe me, it won't take three days for this money to run out."

Let alone others, even if he knew, he would immediately borrow Hong Kong dollars and exchange them for US dollars, because the black market exchange rate is now half that of the official rate, which would absolutely drive countless people crazy.
Shen Bi remained silent after listening.
Yang Wendong continued, “HSBC is considered an official entity. If you exchange currency according to the exchange rate before the exchange rate changes, then no matter how much foreign exchange you have, it won’t be enough. If you don’t follow the official exchange rate, it may cause international economic disputes and even affect the market economy foundation of the Hong Kong government.”

"Since I'm acting on my own initiative, and I have personal capital that's not subject to government control, I can exchange as much as I want, as long as it's legal. No one, no other institution, can say anything about it, right?"

Max nodded and said, "Yes, Mr. Yang's analysis makes a lot of sense. It is indeed most appropriate for you to take the lead."

Yang Wendong continued, "Judging from the current situation, the Hong Kong dollar will inevitably need to depreciate appropriately in the future, but I don't think the Hong Kong government has a clear idea of ​​how much it will depreciate."
"Perfect timing! I can take this opportunity to see what exchange rate is more suitable in the market. This is probably more important to the Hong Kong government than borrowing US$5 million, isn't it?"

“Yes,” Max agreed after a moment of silence.
There is no doubt that the Hong Kong dollar exchange rate will inevitably fall in the future; otherwise, the foreign exchange rate simply cannot support market demand.
But how much to depreciate is a huge problem. If it depreciates too much, the entire Hong Kong economy and the assets of millions of people in Hong Kong will be severely devalued. If it depreciates too little, and it triggers a run on the bank, then the foreign exchange reserves will not be able to withstand the pressure, and the current situation will occur again. If it is forced to depreciate again, then the entire economy will be finished.
This kind of data cannot be calculated; it can only be assessed based on experience, which carries extremely high risks.
However, if a large amount of capital is available to conduct real market testing in the early stages, then the final exchange rate data will be of great reference value for the Hong Kong government in assessing the future exchange rate.
Max then asked, "So, how does Mr. Yang plan to proceed?"

Yang Wendong said, "I will open a window for exchanging US dollars for Hong Kong dollars through Hang Seng Bank. We will conduct small-scale tests in the early stages and then gradually expand the scale. The exchange rate figures will depend on market demand."

Simply put, the greater the demand, the less valuable the Hong Kong dollar becomes, and vice versa.
“Okay, I will complete the authorization as soon as possible. Hang Seng Bank has prepared enough US dollars. We just need to wait for news from the Hong Kong government.” Max agreed after a moment of silence.
This was a gamble, and he knew that Yang Wendong was betting that he could make a fortune now once the Hong Kong dollar stabilized in the future.
However, there are also risks. If the Hong Kong dollar exchange rate cannot be controlled or other problems arise, the Hong Kong dollar may become worthless.
Whether Yang Wendong can make big money depends on his luck.

In this process, the Hong Kong government faces much less pressure.

“Thank you, Governor. I will certainly make the necessary preparations.” Yang Wendong said politely, then added, “I have another suggestion. This year, the Hong Kong government has had quite a few plots of land that failed to sell at auction. How about we negotiate that I buy some of them in US dollars?”

During a property crisis, the Hong Kong government will also release land for sale as appropriate, since the government's finances are also short of money during an economic crisis.

Because they couldn't get good prices, the Hong Kong government might offer even better locations, but due to the poor economic environment, many of them failed to sell at auction.

“It’s negotiable,” Max agreed.

“Okay, I will arrange for someone to come and negotiate with the Hong Kong government,” Yang Wendong said with a smile.

After exchanging pleasantries for a while, Yang Wendong got up to take his leave.

Sir Michael Sandberg said, “Governor, currency exchange is an important tool for us to control the entire Hong Kong economy. Hang Seng Bank has obtained this, and from now on…”

“Let’s talk about the future later. Right now, the Hong Kong dollar is on the verge of collapse. If that happens, the entire Hong Kong economy will be finished, and HSBC will suffer even greater losses.” Max shook his head and said, “Besides, the rise of Chinese capital is inevitable now. Not to mention you and me, even the British can’t stop it.”

Shen Bi sighed and said, "Yes, we are indeed powerless. Yang Wendong's development speed is too fast."

Max continued, "Not only that, I've received news from Buckingham Palace that the other side is very assertive in the negotiations with Yanjing. I'm afraid we can't avoid the issue we've been trying to avoid. Hong Kong is about to undergo a complete transformation."

“I’ve also received some information. This matter is beyond our control.” Sir Michael Sandberg shook his head and said, “I have already acquired an American bank. HSBC’s main task in the future will still be internationalization.”
If Hong Kong is no longer under British control in the future, I am prepared to let HSBC return to Britain.

“Going back to England? That won’t be easy,” Max asked.

Shen Bi said, "It's just a plan. I can't implement it during my term. It's up to the people who will take over."

“Well, we don’t need to worry too much about things that are outside our scope of responsibility. We just need to do our own jobs well.” Max nodded and said, “Right now, the most important thing is to protect Hong Kong’s economy. Otherwise, if problems arise, Buckingham Palace will hold us accountable, and the mainland will do the same. No matter what, the Hong Kong dollar cannot be allowed to have problems.”

Suddenly, Sir Michael Sandberg said, "Perhaps Yang Wendong was prepared all along. I knew before that he had been accumulating Hong Kong dollars to leave for the past two years. I originally thought he would have large projects or acquisitions overseas, but now it seems that he might have been preparing for today."

“Perhaps,” Max said, shaking his head. “It doesn’t matter anymore.”
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(End of this chapter)