Chapter 315: Moving into the Papermaking Industry
"Understood," Wang Fengzhi continued. "Carrefour currently has 31 stores in Hong Kong, with 6 more under construction. Last year, the total revenue was HK$36.7 million, with a net profit of HK$4.1 million, excluding property investment.
However, if we factor in the large capital investment in property—amortized over five years—then it would actually be a loss of about HK$2 million."
"That loss doesn't really count," Yang Wendong said after thinking it over. "Those buildings and land have market value, and they'll likely appreciate over time. Let's do it this way: like with Changxing Real Estate, separate Carrefour's real estate from its operating accounts. Don't include land appreciation or depreciation in the financial reports, but do keep a dedicated property ledger."
"Understood," Wang Fengzhi nodded. "All those properties were developed by Changxing Real Estate. According to your earlier instruction, once Carrefour's operations stabilize, the capital will have to be returned to Changxing Real Estate."
"Right, unless I specifically allocate funding, everything has to be repaid. But Carrefour's expansion won't be as fast as our factories. It'll take some time."
In reality, cooperation between companies—even under the same group umbrella—was very complex.
Take Carrefour and Changxing Real Estate: although the latter fronted the capital, many commercial properties near Carrefour stores saw increased value. Since both sides belonged to the same group, this was manageable. But if they were separate companies, negotiations over profit sharing would take a long time.
Wang Fengzhi concluded, "The last business unit is Watsons. Thanks to water sales during the drought, Watsons' beverage division finally turned a profit, earning HK$500,000 last year.
But Mr. Yang, the canning line you ordered cost US$400,000. With plant construction and raw materials, the total initial investment was at least US$500,000."
Yang Wendong chuckled. "Spread the equipment cost across five years after production starts. Just amortize it into the cost of each can."
The canning line was expensive—but justifiably so. It had equipment capable of stamping tinplate sheets directly into can shapes, as well as high-temperature sterilization ovens.
Even though it wasn't fully automated and still required a lot of manual labor, the good news was that aside from raw materials, everything else was now under control.
The equipment had arrived and been installed earlier that month. Testing and calibration were ongoing during the New Year holidays—Western engineers didn't celebrate the Lunar New Year—so trial production would begin soon after the holidays.
"Got it. I've tried Watsons' herbal tea. It's really good," Wang Fengzhi said with a smile. "Once it hits the shelves after the New Year, I'm sure it'll be a big seller."
"Let's hope so." Yang Wendong nodded. "That about wraps up last year's performance. After the holidays, prepare a detailed financial report for me.
Also, I want a comprehensive list of all properties under every subsidiary of the group. I need to see exact figures."
Changxing Real Estate handled the core property business, but other subsidiaries also held real estate—especially Changxing Industries, which owned factories, warehouses, and even equity in some suppliers with their own properties.
In the early days, Changxing's property portfolio was still small enough for Yang Wendong to remember most of it. But as the group grew—and with much of last year focused on new business ventures—it was now beyond his memory.
Which was only natural. Even Li Ka-shing in the 21st century probably couldn't recite the full inventory of his holdings offhand.
This was also one reason why some people preferred to invest in high-profile Central office buildings or landmark properties. At least those were easy to remember—and to reference in reports, unlike dozens of lesser-known sites with only square footage figures to go by.
"Understood," Wang Fengzhi replied. "The property data has been compiled before, but with the pace of expansion, it becomes outdated every few months. I'll have everything recompiled after the holiday."
"Thanks for your hard work," Yang Wendong said politely. "After the holiday, we'll arrange group travel packages for all senior executives and their families. Think about where you'd like to go with your family."
Senior executives needed to be kept close. Many were early employees, and the group's smooth operation depended on them.
This was true in any major company.
Wang Fengzhi smiled. "Thank you, Mr. Yang."
—
Around noon, Yang Wendong headed to the industrial park in Kwun Tong.
"Mr. Yang, I didn't know you were coming! I wasn't prepared at all," said Wei Zetao with a laugh as he came to greet him.
He hadn't known the boss was visiting today. While there was no need to fear a surprise inspection, it was still nice to be ready.
"No need," Yang Wendong replied casually. "It's the New Year. I just wanted to come by and take a look."
"Alright." Wei Zetao smiled. "It's almost noon. Shall we grab a bite at a nearby hotel and then tour the factory in the afternoon?"
"No need. Let's just eat at the staff canteen. It should be comparable to a regular restaurant, right?"
Wei Zetao replied, "It's about the same. We serve meat dishes, but of course, it's not as fancy as a proper hotel."
"That's fine. As long as it's decent," Yang Wendong said. "Let's eat in the canteen—just the two of us. No need to bring others. I haven't had a regular meal like this in a while."
He meant what he said. Though he'd never been picky about food, his status meant he almost always had meals prepared by a chef at home or by staff at the office.
Busy schedules and hygiene concerns also meant he hadn't eaten street food or basic cafeteria meals in a long time.
"Alright then. Mr. Yang can give us some feedback on our factory's food quality," Wei Zetao said, knowing he couldn't change his boss's mind.
The two headed to the canteen. The others dispersed.
At this time of day, the cafeteria was packed. Yang Wendong asked, "Is this the only canteen in the factory?"
"No," Wei Zetao replied. "We have three now. Initially, there was just one. But the food quality kept dropping, even after switching vendors.
Once we had more staff, we opened two more. Now, everyone—workers and managers alike—gets stamped meal tickets to eat in the canteen. They can pick whichever vendor they like. The best food gets the most traffic."
Yang Wendong grew interested. "So the tickets have set values? Do prices vary between vendors?"
"No," Wei Zetao explained. "One ticket gets you one meat dish and one vegetable dish. Rice is free. Workers receive tickets based on their shift hours: one for an 8-hour shift, two for a 12-hour day.
As for the actual menu variety and how the vendors attract customers—that's left to market forces. They have to compete."
Yang Wendong laughed. "So... does that mean there's nothing to eat in the mornings?"
Wei Zetao paused and said, "Mr. Yang, most workers actually skip breakfast. But there are food stalls selling buns and steamed bread just outside the factory gate and near the dorms. Workers pay for those themselves."
"Oh, that works too." Yang Wendong nodded, then asked, "Aren't you worried that the three cafeteria vendors might collude and form a monopoly?"
Wei Zetao replied, "It's possible, but we've made the meal tickets tradeable. Some workers live in the dorms and like to eat at the cafeteria even during rest days. Others might want to bring food home to their families.
On the other hand, some workers prefer to save money—they might eat a bigger lunch and then eat at home in the evening.
There are even workers who bring food from home and don't eat at the cafeteria. We don't encourage it, but we don't prohibit it either. Things aren't like the old days—our workers today can at least afford to eat well."
"Good. That kind of outside competition helps." Yang Wendong nodded again. "With the option to eat elsewhere, a monopoly isn't possible."
Wei Zetao smiled. "Yes, and another benefit is that we can monitor ticket trade prices to gauge food quality.
If prices are high, it means the cafeteria food is good—people are eager to eat there. If prices fall, we investigate to see which cafeteria is underperforming."
Yang Wendong praised, "Not bad—using market principles for management. We should adopt this model for future large factories."
"It's a lesson we learned over time," Wei Zetao said with a smile.
"Good."
Soon, the two had picked up their lunch trays—a basic mix of meat and vegetables, with a decent variety. Yang Wendong selected a serving of braised chicken with potatoes and a side of tofu skin with soybeans.
"No pure meat dishes?" he asked.
Wei Zetao replied, "Mr. Yang, the cost of all-meat dishes is too high. Typically, meat dishes are combined with vegetables, and they're heavy on broth. Many workers like to pour the broth over rice—it fills them up."
"Fair enough." Yang Wendong nodded.
In this era, Hong Kong's meals couldn't be compared to the mainland's lowest-PPP days of his past life. Limited refrigeration, high transportation costs, and dependence on imports—whether from the mainland or Southeast Asia—meant that food costs in Hong Kong were still relatively high.
After lunch, they did a quick walkthrough of the workshop floor and then moved to the administrative building at the front of the factory.
Yang Wendong smiled and said, "I've already reviewed the report from Sister Wang. Changxing Industries did an outstanding job this year. In terms of net profit, I doubt many Hong Kong companies can match us—and those that can are diversified across many sectors."
According to Jardine's annual report, they made HK$143 million in net profit last year—but that was across all industries, including overseas holdings.
Other major British trading houses weren't publicly listed, so exact numbers were unknown. But companies performing at Changxing's level were likely limited to HSBC, Swire, and Wheelock.
Among Chinese-owned businesses, top-tier players like Hang Seng Bank, Bank of East Asia, and Tung Hao-yun's Gold Mountain Shipping probably earned tens of millions, but likely not over HK$50 million.
And Changxing Industries was just one arm of the Changxing Group.
The rest of the group was still in its growth phase, so even if you included them, their total net profit didn't add up to much—yet.
Wei Zetao said sheepishly, "It's all thanks to your guidance, Mr. Yang. Right now, more than 90% of our revenue comes from products you envisioned. Even though we have a hundred-person R&D team, we only generated about HK$20 million in revenue ourselves."
"That's fine. Product lines need to be developed over time," Yang Wendong replied with a smile. "I hope you'll eventually come up with something like Post-it notes or rolling suitcases. But those things take time and luck."
"Yes," Wei Zetao agreed.
Yang Wendong continued, "We can't rely solely on creative product development. That's like buying lottery tickets. If we win, great. But if we don't, the business still needs to be viable.
Even 3M does more than just innovation. They focus on four areas: distribution channels, technology, supply chains, and branding.
Changxing Industries is already large. The market share for our main products is stabilizing, and capacity is no longer an issue. So we need to focus on those four areas."
Even 3M—with its world-class R&D—had only produced a handful of blockbuster products over the decades.
What kept it in the Fortune 50 wasn't those few hits, but its accumulated technology and massive supply chain.
For example, in adhesives, 3M was king. Whatever the application—aviation, medicine, automotive, home appliances, industrial use, deep-sea equipment, shipbuilding—they had a specialized tape or glue for it.
As for branding and distribution—those were natural byproducts of long-term strength.
Wei Zetao nodded. "Then the core is technology and supply chain. Channels and branding require a foundation."
"Exactly. So our focus will be on technology and supply chain," Yang Wendong confirmed. "Technologically, our products mainly rely on plastics and aesthetics. So far, those aren't too demanding.
But in terms of supply chain, I've thought it through—we need to move into papermaking."
Wei Zetao grinned. "Mr. Yang, are you planning to open a paper mill in Taiwan?"
"You really get me," Yang Wendong said with a laugh.
Wei Zetao replied, "Actually, I've been thinking about this for a while. All of Hong Kong's paper is imported. Combine that with our Post-it demand, and we could easily justify a mid-sized paper mill.
The problem is, papermaking is highly polluting. It uses a lot of chemicals and water. That makes Hong Kong a no-go. But Taiwan, which has a large Chinese-speaking population, is perfect."
"Right. And Taiwan already has existing paper mills. We can just poach a team and go from there," Yang Wendong added.
Wei Zetao said with a smile, "Exactly. I've already done some preliminary research on the Taiwanese market."
"Great," Yang Wendong said. "Where do those Taiwanese paper mills source their raw materials from? Is it wood pulp or recycled paper?"
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