Rebirth 1977 Great Era

Chapter 1208 Xiaolin Hands Over the Knife, Three Questions in Dialect (Combined Chapter)
Upon hearing this, Kobayashi Kazumasa did not immediately respond. Instead, he picked up his teacup again and slowly took a sip, as if he were weighing his words.

After a moment, he looked up and stared directly into Fang Yan's eyes, his expression remaining as gentle as ever:

"Perhaps I haven't explained it clearly enough. Mr. Fang is insightful, so you also know that Tsumura's ability to maintain such a monopoly position naturally has deep-rooted supporting forces behind it. The traditional alliances of certain political parties determine their maintenance of the vested interests."

Fang Yan was taken aback, then suddenly realized what was happening.

Political parties!
Tsumura Pharmaceutical and Kobayashi Pharmaceutical are backed by domestic political parties.

The national conditions are different, and the dialects are different; I hadn't even thought about it in that direction.

Kobayashi Kazumasa paused slightly, then glanced meaningfully at the Chinese representatives present, lowering his voice:
"Kobayashi Pharmaceutical has chosen a different path; we endorse a more open economic philosophy. The current political climate advocates breaking down monopoly barriers and encouraging healthy competition. Our company is in line with this direction of reform and is committed to becoming an emerging force that aligns with future trends."

Kobayashi Kazumasa put down his teacup, revealing a subtle smile:

"In short, the political winds behind both sides are no longer blowing in the same direction. Once you understand this, I think you can understand why we dare to be the game-changers."

Fang Yan nodded, then looked at Zhao Xiwu.

The leader should understand by now.

Zhao Xiwu's pupils contracted slightly, and his fingertips tapped silently twice on the edge of the table, as if he were digesting this unexpected deeper meaning.

After a moment, he suddenly chuckled softly, casually picking up a piece of steamed fish with his chopsticks and placing it in his bowl, his tone deliberately relaxed and teasing:
"It turns out that Mr. Kobayashi was a pioneer in the 'East Wind of Innovation'. I am truly sorry for my disrespect."

After saying this, he called to the crowd:

"Come on, everyone, let's eat first and chat while we eat!"

Everyone then picked up their chopsticks. They had been busy all day and were now only drinking tea; many of them were quite hungry.

Kobayashi Kazumasa and the Japanese side were not polite either.

As they were eating, Zhao Xiwu said:
"But Mr. Kobayashi, the 'breakthrough' you mentioned... can't just be a matter of the wind blowing down Tsumura, this big tree, can it?"

He looked up and stared directly at Kobayashi Ichiya, the tip of his chopsticks lightly touching the edge of his plate:
"If we're really going to cooperate, how much real money are you planning to invest in the Japanese market given your open-minded approach? After all—"

He deliberately dragged out the last syllable, scooping up a spoonful of chicken soup:
"The cost of getting our traditional Chinese medicine approved by you alone is enough to buy ten of your toothpaste production lines in Japan."

Zhao Xiwu used the "toothpaste production line" analogy to subtly target Xiaolin's main business and test the other party's determination to invest in traditional Chinese medicine.

At this moment, Professor Wang Yuchuan tapped the spoon lightly on the rim of the bowl with a "clang" and said:

"It's good that President Kobayashi has the courage to innovate, but the biggest taboo in pharmaceutical cooperation is building castles in the air."

He slowly wiped his hands with a hot towel and said in a slow, deliberate manner:

"You said you wanted to break down the barriers, but Tsumura controls 70-80% of the distribution channels for traditional Chinese medicine pharmacies in Japan..."

"How much of a breach can your company's chain of pharmacies make now?"

After he finished speaking, he paused, then bluntly stated:

"Your distribution channels are a fatal flaw!"

Seeing that Kobayashi Kazumasa was about to speak, he raised his hand to interrupt him: "Furthermore..."

He picked up the teacup but didn't drink; instead, he slowly swirled the cup and said:
“You mentioned ‘adapting to the direction of innovation,’ but what if the policy winds change direction… how many more times can Kobayashi Pharmaceutical’s ship withstand such turbulence? Will you bear this risk, or will we?”

Wang Yuchuan had an idea of ​​the size of Tsumura Pharmaceuticals in Japan.

Tsumura controls nearly 80% of the retail channels for Kampo medicine in Japan, creating a sales barrier that is difficult to overcome.

Kobayashi Kazumasa pointed out that Tsumura's "pricing power supersedes the efficacy of the medicine," and Wang Yuchuan knew that this meant Tsumura could use its channel advantages to suppress competitors' pricing and maintain its exorbitant profit structure.

Kobayashi Kazumasa just hinted that Tsumura has the support of traditional conservative political parties and has deep policy resources.

If the "reformist sentiment" that Kobayashi Pharmaceutical relies on reverses, Tsumura will quickly counterattack based on its political foundation and stifle new entrants.

Tsumura controls nearly 80% of the pharmacy channels, meaning that if Kobayashi Pharmaceutical cannot break through the terminal blockade, even if Chinese products enter Japan, they will have difficulty reaching consumers.

Wang Yuchuan's pointed questions directly targeted Kobayashi Pharmaceutical's weak distribution capabilities, suggesting that the company would struggle to compete with Tsumura's extensive distribution network.

Kobayashi Kazuya didn't speak; his expression showed he was thinking quickly.

Wang Yuchuan knows Japan too well; these questions hit the nail on the head.

At this moment, seeing that the other party remained silent, Wang Yuchuan said again:

"Tsumura Pharmaceutical is a super trust in the Japanese Kampo medicine industry. Its monopoly is built on a triple barrier of channel dominance, political protection, and industry rules. Mr. Kobayashi's company is at an absolute disadvantage in terms of capital, channels, and policy foundation. A hasty cooperation may turn the Chinese side into a pawn in the other party's political game, or even face Tsumura's all-round countermeasures."

“Professor Wang is absolutely right, Tsumura Pharmacy does indeed have a high coverage rate.” Kobayashi Kazuya nodded in acknowledgment of the pain point, but then suddenly opened his briefcase and pulled out a map of Tokyo, densely marked with red and blue symbols:

"But did you know that the chain pharmacy rate in Japan is less than 30%?" This guy directly threw out some disruptive market data.

Professor Wang Yuchuan really doesn't know anything about this area, not even the local dialect.

At this moment, Kobayashi Ichiya pointed to the blue mark and said:

"Kobayashi's 46 directly operated pharmacies have piloted a model of combining traditional Chinese medicine counters with daily chemical products to drive traffic in the Kanto region, resulting in an average monthly increase of 400% in sales of traditional Chinese medicine per store."

After saying that, he swiped towards the red marker and continued:
"We've also signed exclusive agreements with 154 independent pharmacies, which already exceeds one-fifth of Tsumura's scale. The conditions are simple: as long as your products are approved, we'll stock them immediately! Shelf fees? Kobayashi will cover them all!"

"We've offered real money as a token of our appreciation, is that enough?"

Professor Wang Yuchuan remained silent; he and Fang Yan had been worried about more than just these things.

Kobayashi Kazuya said:
"As for your concern about the shift in policy..."

"The current chairman of the Policy Research Council, who is leading the reform of pharmaceutical distribution, is also our company's largest individual shareholder."

Upon hearing this, Fang Yan and his group all showed expressions of surprise.

Seeing the change in everyone's expressions, Xiaolin smiled and explained:

"Of course, we value institutional safeguards even more..."

At this moment, Tanaka handed over a document. Kobayashi unfolded it and saw that it contained the Japanese text "Draft Amendment to the Pharmaceutical Fair Competition Regulations".

Kobayashi explained:
"Next month, the Diet will vote on a clause banning bundled sales through distribution channels." A fingertip traced the bolded clause. "If passed, Tsumura's 30% control over distribution channels will vanish."

"As for funding, there's even less to worry about. We'll cover the approval fees and security deposit. If you're still concerned... we're willing to offer our GMP factory in Tokyo Port, which is about to go into production, as collateral to guarantee your performance!"

After saying that, he raised his head and said with full confidence:
"New networks are used to break through the current distribution channels, policies are solidified through legislation, and funds are backed by assets."

"Does Professor Wang still believe that Kobayashi Pharmaceutical cannot bear this risk?"

Just then, Dr. Tanaka from the Kampo Pharmacology Research Laboratory next to Kobayashi coughed lightly, a polite smile on his face, and opportunely took over the conversation, seemingly providing a footnote to Wang Yuchuan's concerns:
"Professor Wang, Dean Zhao, Mr. Fang, and everyone else, allow me to add some context." His tone carried the objective air characteristic of a scholar:

"Tsumura Pharmaceutical's recent strategic focus has indeed shifted significantly, just as Mr. Kobayashi stated. This is due to the international market... especially your outstanding performance in the European and American markets..."

Tanaka paused here, then looked at Fang Yan meaningfully.

He then continued, "This brought unprecedented challenges and pressures, forcing Tsumura to shift a large amount of resources and attention to overseas defense and expansion. This inevitably led to a decline in its focus on and investment of resources in the domestic market."

“As you may know,” Tanaka continued, “just recently, our country and Iran signed a cooperation agreement for the Tehran-Mashhad high-speed railway.”

"This is the first time that Shinkansen technology has been exported overseas. Tsumura has high hopes for this, seeing it as a major opportunity to explore emerging markets in the Middle East and even globally. They have assembled almost their most elite business development team, including core Kampo medicine technology experts and management personnel, who are closely following the railway project team in Iran and the surrounding areas, striving to bundle Kampo medicine with infrastructure projects and seize the initiative."

"Therefore, objectively speaking, this is a window of opportunity when Tsumura's defenses in the domestic market are relatively weak and it is difficult to deal with internal changes. President Kobayashi's proposed cooperation plan has seized this fleeting moment."

"Tsumura's elite core members, as well as some of the resources and energy originally used to suppress domestic competition, are now deeply involved in that huge and uncertain project in Tehran."

"For a company like Kobayashi Pharmaceutical, which aims to revolutionize the domestic market, isn't this an opportunity worth seizing?"

Upon hearing this, everyone recalled the news from not long ago (see Chapter 1087).

Tanaka's words subtly corroborated Kobayashi's theory of timing, highlighting the fact that Tsumura's energy was scattered and his power was tied up in Iran, implying that now was indeed a good time to take advantage of the situation and break down the barriers on the mainland.

Wang Yuchuan hesitated for a moment.

He looked at Fang Yan. If he was the one who understood Japan the most, then Fang Yan was definitely the second, and this kid's mind was the fastest.

Fang Yan frowned slightly when she saw Professor Wang Yuchuan's gaze.

Tanaka's description of the "window of opportunity" and "weak period," along with Kobayashi's previous promises, were very appealing, but by then, they had not completely dispelled his doubts.

Fang Yan has already keenly grasped several key issues.

Kobayashi Ichiya was also observing Wang Yuchuan and Fang Yan at this moment. The message had already been conveyed on the scene: the outcome of this matter depended on the attitude of these two people.

While everyone was picking up food, Fang Yan pondered for a moment, then gently put down his chopsticks and looked directly at Kobayashi Ichiya. He didn't dwell on Tsumura's specific actions in Iran, but went straight to the point and asked a question.

"I have three questions that I hope President Kobayashi can answer."

"President Kobayashi mentioned that your company's largest individual shareholder is none other than the chairman of the Policy Research Council, who advocates for 'reform in pharmaceutical distribution.' This is indeed a strong endorsement. However... words are not enough." "Especially in business cooperation. How can you substantially prove to us that this chairman of the Policy Research Council is indeed your company's largest individual shareholder, and that his policy proposals can be consistently and effectively translated into support for specific projects?"

"This requires more reliable supporting evidence, rather than verbal claims."

"You mentioned that the draft revision of the Pharmaceutical Fair Competition Regulation will be voted on by the Diet next month, and if the clause prohibiting channel bundling is passed, it will be a heavy blow to Tsumura. That sounds very promising."

"However, the key lies in this 'if'. The draft is currently just a draft and has not yet become law."

"The deliberation process and the final voting results in the Japanese Diet are subject to change. What if this crucial clause ultimately fails to pass, or is significantly modified or weakened?"

"Then what is the basis of our cooperation plan, which is based on its 'imminent approval'? Doesn't that render our core weapon against Tsumura's channel hegemony ineffective? And how do we deal with Tsumura's counterattack after the plan falls through?"

"Finally, President Kobayashi proposed to use the soon-to-be-operational Tokyo Port GMP plant as collateral, which was impressive in its boldness."

The tone shifted abruptly, carrying a hint of scrutiny:

"I have a few operational questions: First, does this factory currently meet the legal requirements for effective mortgage? Who will conduct the valuation? Does it meet our expectations? Second, and more importantly, in case the cooperation fails or is interrupted for any reason, how can we, the Chinese side, effectively exercise our mortgage rights in Japan? What are the actual costs and feasibility of enforcement? Third," Fang Yan's gaze sharpened further:
"Is your eagerness to propose cooperation at this moment, even at the cost of offering such heavy collateral, precisely because you have seized upon this so-called 'window of opportunity' that Tsumura is preoccupied with its Iranian project? To put it bluntly, you want to quickly use China as a hard punch to break the ice, to attack Tsumura's stronghold that you cannot currently penetrate domestically, and to seize the market gap that may arise due to the outflow of resources? This strategic intention seems too hasty."

The final series of questions raised by Fang Yan, especially pointing out that Xiao Lin might be using someone else to do his dirty work and using China as a pawn, thoroughly analyzes the potential geopolitical game, commercial risks, and the possibility of being exploited in this cooperation.

The air instantly tensed up again.

For the first time, the gentle smile on Kobayashi Ichiya's face seemed to freeze.

Dr. Tanaka and others also looked solemn.

Professor Wang Yuchuan nodded almost imperceptibly, expressing his agreement with Fang Yan's keen insight in grasping the core risk points.

Zhao Xiwu's gaze swept back and forth between Fang Yan and Xiao Lin, waiting to see how Xiao Lin would defuse this almost confrontational interrogation.

The atmosphere at the dinner table shifted from harmonious eating to a tense and subtle stalemate and game of wits.

After a while, Kobayashi Ichiya's gentle smile turned into a more composed demeanor.

He put down his chopsticks, placed his hands folded on the table, and calmly swept his gaze over the Chinese representatives:

"Mr. Fang's concerns are reasonable. Regarding the proof of his status as the largest shareholder... I cannot provide that for the time being. He does have someone holding the shares on his behalf, but those present can testify to that."

"As for the parliamentary vote, I do not deny that there are indeed variables, but the ruling coalition already holds 245 seats in the House of Representatives. The core provisions of the draft bill were personally promoted by the Secretary-General of the Liberal Democratic Party, and five of the seven members of the Medical Committee belong to the reformist faction."

"Regarding the factory mortgage—the Tokyo Port factory has obtained the completion certificate from the Ministry of Land, Infrastructure, Transport and Tourism, and you can appoint a third-party institution to review the valuation report issued by Sumitomo Mitsui Banking Corporation."

"If the cooperation is terminated, the right to dispose of the collateral will be enforced through the China-Japan Commercial Arbitration Commission, and the process will be completely transparent."

Professor Wang Yuchuan suddenly interjected: "Including the window of opportunity for the Iran project?"

Kobayashi Kazumasa nodded:
"Timing is indeed one of the factors, but Tsumura's overseas strategy will not change in the short term. More importantly, by the time traditional powers return to defend their positions, the new channel network will have already taken root."

After he finished speaking, the room fell into a brief silence.

Zhao Xiwu suddenly laughed and stood up, picking up his teacup and looking around at everyone:

"President Kobayashi has made thorough preparations! However, such a large-scale collaboration cannot be finalized by just a few of us at the dinner table."

He winked at Fang Yan:
"The institute needs to hold three review meetings, and the ministry also needs to follow the procedures, right?"

Fang Yan nodded and continued the conversation:
"A systematic evaluation is indeed needed."

"In that case... please provide us with detailed operational data on the distribution network within two weeks, as well as weekly progress reports on the congressional vote. We will also form a special team to conduct risk simulations."

Kobayashi Kazuya nodded after hearing this:
"As it should be!"

After speaking, he raised his glass in a toast:
"We look forward to your professional assessment."

Upon hearing this, everyone raised their glasses and clinked them together.

The dinner lasted until 2 p.m. There was no tour included this time; it seemed the entire visit was specifically for discussing a collaboration with Kobayashi Pharmaceutical.

They shook hands with the Japanese at the entrance, and after seeing them off, they stood at the gate watching the convoy drive away.

Professor Tamagawa spoke first:
"It's too much of a gamble; I don't feel it's worth the risk."

"With a steady and pragmatic approach, the company can still make money overseas. Japan is just a mess."

Dean Zhao Xiwu stroked his chin, neither agreeing nor disagreeing, and said:

"Let's look into this first; I feel like it's not that simple!"

The others nodded in agreement.

Compared to Professor Tamagawa's conservatism, Fang Yan actually has some new ideas.

He knew full well that the Tehran railway project would be aborted due to the Iranian revolution, and that Tsumura Pharmaceuticals' decision to invest its elite forces in Iran at this time was a serious strategic mistake. This was not only a "window of opportunity," but also a historic opportunity arising from Tsumura's misallocation of resources.

Prior to the Plaza Accord, Japan was in a period of rapid growth before the bubble economy, with soaring national consumption power.

Entering the Japanese market now allows companies to enjoy future economic benefits, and Kobayashi Pharmaceutical's new model of using daily chemical channels to drive traffic to Kampo medicines is perfectly positioned to seize the blue ocean of middle-class consumption upgrading.

Moreover, in the foreseeable future, the appreciation of the yen brought about by the Plaza Accord will passively increase the value of their physical assets in Japan, such as mortgaged GMP factories.

Tsumura's monopoly not only blocked sales channels, but also distorted the interpretation of Kampo medicine as "orthodox Chinese medicine," for example, by prioritizing pricing over efficacy.

They sell their medicines at exorbitant prices.

Collaborating with Kobayashi may seem like being used as a tool, but from another perspective, it is essentially about driving a wedge into the enemy's rear, allowing traditional Chinese medicine to regain its voice as a "modernized preparation".

After all, they couldn't get in using dialects before.

Old Hu had mentioned this before; there was simply no chance of getting in.

Moreover, Kobayashi's proposed model of combining traditional Chinese medicine counters with daily chemical products to attract customers essentially integrates traditional Chinese medicine into everyday Japanese life. This kind of soft cultural penetration is more effective than pure academic output.

Moreover, the factory meets Japanese GMP standards and can serve as a springboard for technological upgrades.

However, it's not without risks.

Kobayashi claims the Policy Research Council chairman is the largest shareholder, but he is well aware of the fragility of political-business relations in Japan. Factional infighting is frequent within the ruling Liberal Democratic Party; if the reformist faction loses power and factions reorganize, the foundation of cooperation will collapse.

While mortgaging a GMP-certified factory is attractive, the costs of cross-border enforcement are high. If the cooperation breaks down, the Chinese party will need to establish ownership through litigation in Japanese courts, a process that could take several years.

Kobayashi proposed "jointly developing new dosage forms," ​​which may require access to core processes such as traditional Chinese medicine extraction and formulation. His background in the daily chemical industry suggests he has the ability to rapidly industrialize these technologies and may be able to reverse-engineer Chinese technologies.

Therefore, even if cooperation is to be pursued, these potential risks need to be eliminated.

Next, Dean Zhao Xiwu reported what had happened that day to his superiors to see what they thought.

The higher-ups verified the feasibility of this matter through various channels.

Zhao Xiwu's side doesn't completely deny the matter.

Professor Wang Yuchuan, who is quite knowledgeable about the Japanese, said:

"What Kobayashi Kazumasa said was only half the story. He said the Policy Research Council chairman is the largest shareholder? When I was a visiting scholar at the University of Tokyo, I saw too many of these political-business alliances. The Takeshita faction and the Fukuda faction within the Liberal Democratic Party were fighting each other openly and secretly. Today the reformists are in power and push for legislation, tomorrow the conservatives will counterattack and turn the Fair Competition Regulation into a piece of waste paper!"

"The failure of the 1976 amendment to the Monopoly Prohibition Act is not without precedent. Back then, Mitsubishi Corporation joined forces with reformers to reform the distribution system, but the conservatives, together with the Pharmaceutical Association, launched a counterattack, and the bill was eventually cut beyond recognition!"

"Don't forget what Kobayashi's main business is! 46 directly operated pharmacies using 'daily chemical products to attract customers'? It sounds novel, but in reality, they're selling traditional Chinese medicine like toothpaste! Once they figure out the formula and process, they can turn around and use their existing production lines to imitate and improve the traditional Chinese medicine, and call it localization!"

"Japan's Pharmaceutical Affairs Law classifies traditional Chinese medicine preparations as 'general-use pharmaceuticals,' meaning that patents can be circumvented simply by changing the dosage form. How did Tsumura steal our Liushen Pill and rename it 'Kyushin Pill' back then? I know this script all too well!"

"As for those 154 independent pharmacies signing exclusive agreements? From what I understand, small pharmacies in Japan all depend on Tsumura for their livelihood! If Tsumura simply increases the rebate on purchases by 5%, tomorrow these 'exclusive' agreements will become 'priority displays,' and our goods will still be crammed into the bottom shelf!"

"In 1968, the Korea Ginseng Corporation wanted to enter the Japanese market, but all the small and medium-sized distributors they found were bought up by Tsumura the next day! In the end, the goods expired in the bonded warehouse, and hundreds of millions of won were wasted."

"I am not completely against cooperation, but it is essential to ensure that all of Kobayashi's promises are transformed into verifiable, enforceable, and accountable rigid terms."

"When doing business with the Japanese, if you miss a single word in the contract, the blood you shed in the future could fill a whole medicine mill!"

Everyone nodded; what Professor Tamagawa said was true.

At this moment, Fang Yan said:

"I have a preliminary idea: if we are to cooperate, we must have Kobayashi provide a written letter of support from the ruling party's reformists, and at least fifty members of parliament must jointly endorse the bill!"

"The core technology will absolutely not be leaked; semi-finished products will be exported to Japan for repackaging. A 'reverse engineering compensation clause' will be added to the contract; anyone who copies a product will be fined one billion yen!"

"We'll only give them a three-month trial period for the first batch. If they fail to meet the promised distribution rate, we'll immediately terminate the cooperation and confiscate their deposit!"

PS: The basic chapter of 6000 words has been updated.

(End of this chapter)