Chapter 404: The Goals of Changxing Trading
Wei Zetao added, "Yes, many of the current businesses under Changxing Group now support and reinforce each other. Mr. Yang's early strategic planning—at the time, some parts were hard to understand. But now, looking back, it's truly impressive."
"Haha, don't flatter me too much," Yang Wendong said with a mild smile. "To be honest, it's also because Hong Kong is such a small place. A lot of things have to be imported, and the market is overseas. So many times, we have no choice but to do things ourselves."
In his previous life in 21st-century mainland China, even with a great product idea, he'd have focused solely on his core product while outsourcing everything else. China had a complete and robust industrial ecosystem—everything was available, and self-production didn't make financial sense.
But in this era of Hong Kong, things were completely reversed. Almost everything had to be imported, and virtually every product had to be exported. If he wanted to scale, he had to build his own industrial chain within Hong Kong and participate in sectors like shipping. Of course, shipping was a special case. Only because Yang Wendong knew the history did he dare to invest in such a capital-intensive industry.
However, once a full industrial chain was under his control, the returns were astronomical. Just like BYD in his previous life. They started with electric vehicles, but before 2005, there wasn't a single EV ecosystem in China. They had to do everything themselves. But by 2021, with years of technical development and a cost advantage from owning the entire chain, they surged ahead of their global competitors.
Here in Hong Kong, Yang Wendong had no choice but to follow the same path. Fortunately, his company's product structures were relatively simple and still manageable to produce locally. In the future, once the business expanded into complex electronic products, even Hong Kong would no longer be able to contain the operations. At that point, he'd have to consider Taiwan or even Europe and the U.S.—but that would depend on future developments.
Wei Zetao then said, "Mr. Yang, Changxing Trading has grown significantly in scale. Do you think it's time to promote it to a first-tier subsidiary within the group?"
Yang Wendong raised an eyebrow. "What, managing a big company now bothers you?"
"It's not that, sir," Wei Zetao replied. "I've always been good at managing factories. When Changxing Trading was only coordinating with Changxing Industrial, I could handle it.
But now it's taking on more and more functions—helping other Hong Kong factories connect with clients, handling trade with the mainland, and expanding business into Southeast Asia. This is no longer my area of expertise. I'm worried I'll mess up your plans."
"You're right," Yang Wendong nodded thoughtfully. "Changxing Trading really has grown a lot. Promoting it to a first-tier subsidiary aligns with my goals too. Alright then, have its current general manager meet with me tomorrow. I'll talk with him directly."
Changxing Group, now one of the biggest conglomerates in Hong Kong, followed a decentralized 10-to-1 management structure—a modern system Yang Wendong brought from his past life. One person managed ten, then those ten managed another hundred, and so on. In principle, cross-level communication was not encouraged. There were internal audit and supervision departments for anything outside the standard reporting chain.
That said, the "ten" in the model wasn't a hard rule. Sometimes it was more. But first-tier subsidiaries could report directly to Yang Wendong. They didn't need to schedule an appointment—they could walk into his office when necessary. Of course, everyone used their discretion and wouldn't bother the boss with minor issues.
"Alright, I'll have Zhang Zefei come by tomorrow," Wei Zetao said.
"Good," Yang Wendong nodded.
He was familiar with the name. As the head of a second-tier subsidiary, Zhang Zefei had appeared in group meetings and company tours. Yang Wendong had interacted with him before, but never in depth. Now that Hong Kong's economy was booming and foreign trade was becoming the backbone of its development, elevating a local Chinese trading company to rival the British trading houses was a challenge—but a necessary one.
The next day, at Changxing Tower headquarters, Zhang Zefei arrived with Wei Zetao at Yang Wendong's office.
"Relax, Zhang," Wei Zetao said with a grin. "Mr. Yang is very fair with his people. As long as you don't make big mistakes, you can be yourself around him."
"Understood, Mr. Wei," Zhang Zefei replied. "I've met Mr. Yang a few times before and always felt he treats us all with respect."
In Hong Kong, many tycoons treated their employees like tools—summoning them at will, dismissing them coldly, often with outright disdain. Yang Wendong was different. Whether his courtesy was genuine or not, he was consistently respectful, and that made a huge difference.
Soon, the two entered the office. After the assistant announced their arrival, Yang Wendong greeted them with a handshake.
"Nice to meet you again," he said with a smile.
"Mr. Yang, thank you," Zhang Zefei responded, returning the handshake.
"Please, have a seat," Yang Wendong gestured.
Tea was served shortly after, and the three chatted briefly before getting down to business.
"Zhang, give me a summary of Changxing Trading's current operations," Yang Wendong said. "Just the core businesses—you can skip the minor stuff. I just want to get a general understanding."
Yang Wendong typically only tracked the performance of first-tier subsidiaries. Second-tier subsidiaries were managed by the first-tier heads. He received annual reports with revenue and profit data but didn't get involved in operational details unless the business had matured significantly.
Changxing Trading wasn't huge yet, but it had solid potential. As he was now considering upgrading it, he needed a clearer picture.
"Yes, sir," Zhang Zefei began. "Changxing Trading currently has three main areas of operation.
First, we import plastic pellets from Taiwan's Formosa Plastics and resell them to Hong Kong's plastic factories and other buyers in Asia."
"Formosa doesn't manage its own sales in Southeast Asia?" Yang Wendong asked, surprised. He hadn't heard about this detail before.
"For larger markets like Thailand, Malaysia, and Indonesia, Formosa handles it directly," Zhang explained. "But for many smaller countries, communication and logistics are difficult. Volume is small, and Taiwan's trade experience is limited compared to Hong Kong's.
So they let us handle those deals. However, I've noticed recently that Formosa seems interested in taking these markets back—they've started trying to deal with these countries directly."
"That's normal," Yang Wendong nodded. "Their scale has grown. It's natural they'd want to control their own distribution."
In the early days, Formosa Plastics had limited staff, resources, and few English-speaking trade professionals. Working with Changxing Trading made perfect sense. Despite being new, Changxing was based in Hong Kong, where trade talent was abundant. By pooling resources, they could quickly outperform what Formosa could do on its own.
But now that Formosa was a regional powerhouse, building an internal trade team was inevitable.
Wei Zetao added, "Exactly. Once a company reaches a certain size, it won't leave its lifelines in someone else's hands—even if we're shareholders. Wang Yongqing would never trust us with full control."
"Precisely because we're shareholders, that's why he trusts us less," Yang Wendong said with a smile. "But I'm actually happy to see that. It proves he's capable and ambitious. Only someone like that can scale a company to world-class levels."
Wei Zetao added, "But what if he grows too big and starts trying to dilute our shares?"
"We'll deal with it as it comes," Yang Wendong said calmly. "As long as we stay strong, there's not much he can do. If he wants our shares, it'll come at a very high price."
This was the paradox of investment: the more you invested in someone and the more successful they became, the more likely they were to turn against you. Everyone would do the same if the roles were reversed. That's why, in Yang Wendong's previous life, most investments in internet companies were divided across multiple funding rounds, with no investor ever taking too large a stake. This was as much a strategy by the startups as it was by investors seeking to avoid future conflict.
There were exceptions, of course. For example, Alibaba was once nearly 60% owned by SoftBank and Yahoo, which led to fierce internal resistance. Eventually, Jack Ma had to spend $7.6 billion to buy back half of Yahoo's stake when the company started declining. But even that deal gave Yahoo a spectacular return.
If you got in early, you were bound to make money in the end. And unless something went wrong on the investor's side—as with Yahoo—the entrepreneur wouldn't even have the chance to buy back the shares. The same logic applied to Formosa Plastics now. Yang Wendong already held a decent stake, and in the future, that would serve as the base of his interests in the company.
Of course, shares were one thing; corporate control was another. With government backing behind Formosa, there was no way Yang Wendong could intervene in its internal affairs.
Wei Zetao smiled. "So it looks like us investing in raw plastic production ourselves is absolutely necessary."
"If we want to become a world-class company, it's essential," Yang Wendong agreed. "There isn't another large-scale plastic manufacturer near Hong Kong. If there were someone to compete with Formosa, we wouldn't be in such a rush."
Sometimes, it was okay not to produce certain parts in-house—as long as there were multiple suppliers. If only one existed, they had you by the throat. Even though his relationship with Formosa Plastics and Wang Yongqing was good, being self-sufficient was always safer.
"Right," Wei Zetao nodded, then turned to Zhang Zefei. "Go ahead."
"Understood." Zhang Zefei continued, "The second main business is leveraging Changxing Industrial's existing distribution network to help many Hong Kong plastic manufacturers export their products—mainly household plastic goods and toys."
"I know about that part," Yang Wendong said. "How profitable is it?"
Several of Changxing Industrial's products had become hit items, and once they were in the market, distribution channels came knocking on their own. After a few years, the company had established reliable networks globally.
These channels could be used to sell goods from other Hong Kong factories, too. But Changxing Industrial wouldn't do that themselves. To maximize commercial efficiency—and to support Hong Kong's manufacturing sector—Changxing Trading took on that role.
Zhang Zefei said, "Last year, we helped over 700 local companies export goods worth HK$60 million. This year, we expect that number to grow by another 20%."
"HK$60 million? That high?" Yang Wendong asked in surprise.
Zhang Zefei smiled. "Yes, but most of it is low-value, everyday goods, which face intense global competition. Margins are thin. The only reason we can make it work is because Changxing Shipping occasionally helps with freight.
Our trade company typically makes a 5% profit margin—not much. But because Hong Kong's products are so basic, and we're still competing with British trading houses, our net profit last year was about HK$3 million."
"Three million is still decent," Yang Wendong nodded. "But if these Hong Kong businesses want to earn more, they'll need to upgrade their products. Simple plastic goods? Southeast Asia will be able to make those themselves soon, and then they'll stop buying from us altogether."
The 1960s weren't just a boom time for Hong Kong—Southeast Asia was industrializing too. Manufacturing household plastics was extremely easy, and any country with a modest industrial base could soon do it themselves.
Zhang Zefei said, "Exactly. Even the artificial flower industry is fading. Not because of demand, but because there are too many producers now. Plastic products are getting harder to sell.
But toys are on the rise. Not just our licensed toys—even things like toy guns and baby toys are becoming hot items."
"Toys will be a huge market," Yang Wendong said. "In the future, you'll need to focus heavily on expanding this sector. The potential is limitless."
During the 1970s and 1980s, Hong Kong's exports consistently listed toys in the top five categories. Even in the early years of China's reform and opening-up, toys remained a primary export product.
"Got it. I'll build out that channel and encourage local factories to shift to toys," Zhang Zefei replied. "Our third line of business is grain trading. Right now, we deal in rice, wheat, and potatoes. Initially, we got into this because of China Resources' needs. We got to know a number of overseas distributors through that. Now there's a foundation for further collaboration.
But since China Resources plans to cut back on imports, we can't negotiate bulk discounts anymore. That makes things trickier. The grain business has thin margins—it relies on high volume to lower procurement and shipping costs."
Yang Wendong nodded. "So basically, we need secure demand first, then expand the business?"
"Exactly. There's another approach, too—something like futures trading," Zhang Zefei explained. "We can sign early contracts with farmers in Europe, the Americas, or Australia, locking in prices ahead of time. That gets us a discount. Then, if grain prices rise or remain stable at harvest, we profit. If they fall, we lose money.
That's how the big players operate. Some major corporations even control half the farmland in a small country."
"Hedging risk… I see," Yang Wendong said. "Could we do that?"
"It would be hard right now. We don't have enough stable customers," Zhang Zefei admitted. "If we buy the grain, we still have to ship and store it. The risk is huge."
"Then let's take it step by step," Yang Wendong agreed. "Once we're bigger, we'll revisit the idea."
Although he had the knowledge of a time traveler, Yang Wendong wasn't familiar with 1960s grain market details. He only knew that prices rose with economic development, but that also came with large fluctuations. Better to grow slowly, gain experience, and then make bigger moves later.
At that moment, Wei Zetao said, "Mr. Zhang, the group is preparing to invest heavily in sugar processing. You could help by finding clients for the Watsons sugar refinery. If we get enough volume, we'll have better pricing power and cost control."
"Sugar? Sure," Zhang Zefei replied. "There's a huge demand for sugar in many countries. I'll do my best to open new markets."
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