Chapter 243: Leveraged Operations and the Land King Auction
After Zheng Yuhua left, Yang Wendong made a phone call and summoned Wang Fengzhi, the head of Changxing Group's finance department.
"Mr. Yang," Wang greeted as she entered.
"Take a seat," Yang gestured to the sofa across from him.
"Thank you," she said, sitting down.
After working together for several years, all the senior staff at Changxing Group had come to understand their boss's temperament. Yang Wendong was approachable and never acted above anyone else—not with the executives, not even with the cleaning staff. The term "down-to-earth" fit him perfectly.
He handed her a soda bottle and asked, "Sister Wang, I want to get a general overview of the group's current business standing. No need for exact figures—we'll go over those in detail after the New Year. But I might need a significant sum of money soon."
Acquiring a large number of second-hand cargo ships, even if eventually financed through banks, would still require a hefty upfront payment—normal risk mitigation behavior in the banking world.
Wang Fengzhi asked, "Is this for the Queen's Road Central No. 2 land plot and the new ships in Japan? I've already prepared some funds for those."
"No, this is about acquiring more second-hand cargo ships," Yang clarified.
As the financial controller, Wang had to be informed of any major capital moves in advance.
After thinking for a moment, Wang said, "Mr. Yang, here's the rough status of our key business units:
The media division is profitable, but only modestly. It earns a few hundred thousand Hong Kong dollars a year and needs constant investment, so it's self-sustaining at best.
Real estate is slightly profitable, but future capital requirements are high, especially with the upcoming auction for Queen's Road No. 2. We'll definitely need more funding there.
Changxing Shipping is doing very well. Our eight ships generated over four million Hong Kong dollars in net profit this year. But because all those vessels were fully paid for by you, there are no loan payments—meaning we've had more cash flow. Still, funds are needed for shipyard construction.
The biggest profit center is Changxing Industrial. I estimate this year's net profit will exceed HKD 45 million. However, since you've diverted a lot of cash into other ventures—and with the construction of the Wanren Industrial Park—our current cash reserves will likely hover around HKD 20 million."
"What about outstanding debts?" Yang asked.
"Our major liabilities are:
First, real estate. We've borrowed over HKD 25 million to acquire seven towers on Hong Kong Island, as well as older buildings and land in Kwun Tong. But all of those have been mortgaged, and rental income is enough to cover loan payments.
Second, the Industrial Park. We invested HKD 10 million of our own capital, and borrowed around HKD 30 million from HSBC and Standard Chartered.
Third, some smaller debts—such as the land and warehouse acquisitions in Tsim Sha Tsui, and the shipyard project in Drunken Bay. These add up to about HKD 20 million."
"So in total, we've taken on around HKD 70 to 80 million in debt," Yang nodded. "Add the upcoming Queen's Road No. 2 purchase, and that'll push us past the HKD 100 million mark."
"Correct. That plot alone will require us to pay about HKD 10 million up front, and we'll have to finance the rest," Wang confirmed. "That said, our debt profile is healthy. All our loans are backed by valuable collateral that's either appreciating or generating income.
Unless we face a serious economic crisis, we're at low risk. Most importantly, our cash cow is Changxing Industrial. With annual profits in the tens of millions, even if banks are cautious about accepting industrial plants as collateral, it'll still give us strong bargaining power for additional loans."
"Mm." Yang thought for a moment. "I remember that last year, Changxing Industrial had about HKD 30 million in reserves. So we're close to HKD 50 million now?"
"Just about," Wang nodded. "We're maintaining healthy reserves while leveraging debt in other sectors. Our monthly profit is in the millions, so this is the safest operating model.
This doesn't even include the funds in your overseas accounts."
Yang smiled faintly. "There's some money there, but not much—and I've got other plans for it."
While operating a Hong Kong-based factory allowed for profit diversion into offshore tax havens, Yang had only moved a portion. Most of the earnings were retained in Hong Kong or the U.S., partly to facilitate stock investments like the one he made in Walmart.
The main reason he hadn't shifted more funds abroad was that it was still only the early 1960s. The electronics industry hadn't yet exploded. There were investment opportunities overseas, yes—but Hong Kong was where his core growth would happen over the next decade.
Keeping profits in Hong Kong made his factory balance sheets look strong, which helped him use financial leverage to invest in real estate, shipping, and other businesses—maximizing returns.
Wang then asked, "How many cargo ships are you planning to purchase?"
"Nineteen, maybe more." Yang proceeded to explain the details to her.
He hadn't mentioned it before because nothing had been finalized, but now it was time for finance to prepare.
After listening carefully, Wang nodded. "Understood. Although the total cost of these second-hand ships is lower than the five new ones from Japan, it will consume a significant chunk of our liquidity."
In Hong Kong, well-connected shipowners could pay as little as 10–20% of a new ship's price upfront, financing the rest or paying on delivery. But that was risky. Most people paid 30% to be safe. For second-hand ships, getting loans was even harder.
Yang nodded. "That's why we have two options. One: directly pay with Changxing Industrial's cash—but that could wipe out more than half our balance. Two: use the industrial company as collateral to secure a loan. Given our profits, most banks would agree."
Until now, Changxing Industrial had only been used for low-value mortgages. This would be the first time they used it to unlock significant funding.
Wang thought for a moment. "Then I recommend using it as collateral. Even if we borrow HKD 30 million, that's only about six months of the plant's profit. And once the new industrial park is fully operational, our annual profits will grow even more.
It's best for the group to maintain strong cash reserves. Keeping that money in the bank gives us safety and flexibility."
"Alright then," Yang Wendong nodded. "Coordinate with the finance department at Changxing Industrial and get all the necessary documents prepared. We'll need those for the loan process."
If he wanted to scale up quickly, loans were essential. Even with Changxing Industrial bringing in 30 to 50 million HKD in profit a year, that was only enough to buy either a prime land plot in Central, or a few new cargo ships, or twenty second-hand ships, or a large bundle of old properties in Kwun Tong.
But with loans? He could acquire all of that in just one year. Though the debt would exceed 100 million HKD, every asset acquired—whether land or ship—would either appreciate or generate continuous cash flow.
With rare exceptions like Apple, Laoganma, or Google, most companies—especially those in heavy-capital industries—grew through this exact model.
"Understood," Wang Fengzhi replied.
With the long-term plan for Changxing Shipping set, Zheng Yuhua headed back to Japan to finalize the contract with Mitsubishi Shipbuilding. At the same time, he dispatched four teams to separately negotiate with the owners of the second-hand ships.
Wang Fengzhi, for her part, began working with the finance teams of both Changxing Shipping and Changxing Industrial to prepare documentation for upcoming bank audits.
Meanwhile, word had spread across the market: Changxing Shipping was preparing to purchase a large number of second-hand cargo ships. It didn't take long for this news to spark attention across the shipping industry.
One week later – Central, Kant Tower
This was the headquarters of Global Shipping.
After hearing a report from his subordinate Wang Xiaowei, Pao Yue-kong looked surprised. "Are you sure about this? Besides the five new ships, Changxing is planning to buy nearly twenty second-hand ones?"
"Yes, it's likely true," Wang Xiaowei confirmed. "At first, it was just a rumor. But Changxing suddenly posted job openings for a massive number of positions—captains, first officers, engineers, deckhands, hull cleaners, and more.
We don't know the exact headcount, but it far exceeds what's needed for just five new ships. That alone supports the rumor."
Seeing how confident Wang was, Pao said, "If that's really the case, and he pulls it off, then Yang Wendong will become Hong Kong's new shipping king."
"Not by tonnage—yet," Wang Xiaowei replied. "But in terms of fleet size, he's already in the league of the greats."
He added with a frown, "But it's strange. Why would he buy so many second-hand ships? We're all trying to upgrade with new ones. Usually, people only settle for old ships when they lack capital. But Yang clearly doesn't. He's close to both HSBC and Standard Chartered, and Japanese banks too. There's no need for him to buy used."
"Could be a timing issue," Pao speculated. "Even if he has the money, ordering new ships in bulk takes time. Meanwhile, second-hand ones are available immediately."
"That makes sense, but what's the rush?" Wang Xiaowei wondered aloud. "Managing so many old ships will be exhausting. Eventually, they'll all need to be retired at once. That could cause serious problems down the line."
"Maybe it's to meet the demands of the new industrial park," Pao suddenly said. "Yang's shipping business started as a way to export his own products. Now that he's built a massive manufacturing hub, he probably needs the fleet to move his goods."
"That does make sense," Wang nodded. "I'm really envious—having your own production lines makes expansion way less risky."
"Yeah," Pao smiled. "But envy won't get us anywhere. With the shipping market doing so well, we'd better buy another couple of new ships ourselves."
"Agreed," Wang said.
Meanwhile, across town—
"Over twenty ships? At once?" Tung Hao-yun sat in stunned silence after hearing the news from his son.
After a long pause, he finally said, "A true young hero."
Tung Jiancheng added, "Yes. If he really secures those twenty used ships and five new ones, his fleet will rival the top five Chinese shipping companies."
Tung Hao-yun nodded. "Alright, get in touch with international brokers. See if there are any good-quality second-hand ships available. I want to expand our fleet too."
"You're going to compete with Yang Wendong for ships?" Tung Jiancheng asked, a bit puzzled. "That doesn't seem cost-effective."
"I'm not after the same ships," Tung said. "I'm not buying the cheap American vessels from last time either. There are plenty of second-hand ships on the global market. I'm just looking to scale up Golden Mountain Shipping."
"But our debt levels are already high," Tung Jiancheng reminded him.
He knew his father well—proud, ambitious, always chasing the title of Hong Kong's top Chinese shipowner.
That goal had nearly been reached. But now this upstart, Yang Wendong, had suddenly poured massive resources into the industry. Maybe he wasn't a threat yet—but who could say in a few years?
Tung Hao-yun chuckled. "Honestly, I'm very bullish on the shipping market right now. And you're right—our debt is high. But Yang's move gives me more confidence. If someone like him is betting big, then it means the market really has potential."
"But…" Jiancheng hesitated. "Yang's core business isn't shipping—it's industry. He also has real estate. Dad, I think we need to diversify too. That would reduce our risk."
"Ships are the least risky asset," Tung waved him off. "You can't move real estate. If something goes wrong, it's stuck. And factories? They don't make much money. Yang Wendong's success with products like Post-it notes and rolling luggage—that's a once-in-a-generation story.
If you can invent the next big thing, pick any two of my ships—I'll sell them so you can start your own factory."
"Uh…" Jiancheng had no reply.
Yang Wendong's aggressive expansion was causing ripples throughout the industry. He had no idea that his moves had prompted several veteran shipping tycoons to take on even more debt and expand their fleets in response.
November 30, Morning – The Peninsula Hotel
Yang Wendong arrived.
Today was the auction for the Queen's Road Central No. 2 land parcel—the so-called "Land King" auction.
(End of Chapter)
Thank you for the support, friends. If you want to read more chapters in advance, go to my Patreon.
Read 40 Chapters In Advance: patreon.com/johanssen10