Chapter 419: Strategizing for the Economic Crisis and Converting to USD Reserves
As a time traveler, Yang Wendong often found himself bored with the routine, so he paid particular attention to various emerging "lifestyle" consumer products, especially new types of electronic gadgets.
The cassette music player was one such product he'd been monitoring for years. Despite its apparent simplicity, it actually involved high technical complexity, and even once the device was invented, it still required a set of global standards. In his past life, Japan and the West had fought fiercely over the rights to those standards—because whoever controlled the standard could just sit back and collect royalties.
So even though Yang Wendong knew this was the future, he didn't get involved early on. After all, Hong Kong was a technological desert in this field. Pouring money into R&D at that stage would've been futile. All he could do was wait.
It wasn't until 1962 that Philips released the world's first compact cassette audio player.
"Cassette tapes? I remember seeing something similar in the U.S. back in 1956," said Wang Zhiqun. "But that player was enormous—bigger than a refrigerator."
Yang Wendong laughed. "The one Philips just released is about the size of a large radio—weighs maybe ten to twenty kilos. Not portable like a radio, but at least you can set it up in a room or at home."
Miniaturizing electronic devices was a major challenge. In fact, it wouldn't be until 1979, with Sony's release of the Walkman, that cassette players would become truly portable. Before that, they were mostly used at home or in cars.
Still, for this era, the new players were already revolutionary, and the music player industry was about to explode. That boom would also benefit the music industry at large, especially with cassette tapes being cheaper than vinyl, leading to the global expansion of music consumption—including in Hollywood.
And Yang's businesses—TVB, Changxing Film, and Commercial Radio—all needed such a device to maximize their cultural output, so of course, he was interested.
"A ten- or twenty-kilo machine is still acceptable," Wang Zhiqun nodded. "Hard to believe that in just ten years, companies in the West really managed to shrink the technology down that much."
"It's normal," Yang Wendong said. "The electronics industry is developing at an incredible pace. From now on, I want you to pay more attention to technology news from abroad, especially from the big players. What they're doing might help us leapfrog forward."
Of course, it wasn't Wang Zhiqun's fault he didn't know. In this pre-internet era, information flow was slow. One could get some intel from TV news, radio, or newspapers, but those outlets chose what to broadcast, and business-specific news was often omitted entirely.
Even world leaders and billionaires at the time had far less information at their fingertips than a teenager with a smartphone decades later. Yang Wendong could only assign people to watch select companies, and even then, the cost of doing so was extremely high.
"Understood, Mr. Yang," Wang Zhiqun said. "So you want to manufacture cassette players and tapes in Hong Kong?"
"Yes. Philips has released the patents to the public, so we're allowed to manufacture them," Yang explained. "But we don't have the technical know-how here. We'll need to buy the necessary patents, licenses, and production lines from abroad.
You'll be personally responsible for overseeing this. It's a very important project."
Smart companies often released some patents for free to establish their format as the global standard. This way, countless companies would start using it freely. But when it came to accessories and compatible technology, those were sold separately. Same logic as freemium apps or platform ecosystems in the digital age.
Business strategies were always about optimizing returns. Even though Yang knew that, he could only play the game. Besides, the tech didn't belong to him—of course its creators deserved to profit. In fact, he hoped Rongyao Electronics would one day do the same.
"Got it. I'll go to Europe myself and speak with Philips directly," Wang said seriously.
"Good. Keep me posted on all developments." Yang paused, then added, "Aside from production, I also want ongoing R&D for the music player and cassette format to happen right here in Hong Kong.
We'll hire overseas engineers to start, even Westerners, and then begin building up a local Chinese R&D team."
Previously, Yang hadn't been willing to invest heavily into R&D for TV components like cathode-ray tubes—the tech was too complex and would soon become obsolete. But the cassette player industry? He had zero hesitation.
Before smartphones, this product was a golden goose. Even MP3 players were just an evolution of it. And in comparison to CRT tech, the technical barrier was much lower.
More importantly, it was directly linked to music, making it a cornerstone of his cultural industry strategy. The Walkman alone sold hundreds of millions of units globally. It was one of the most successful consumer products in history, and brought enormous employment opportunities to the regions that manufactured them—whether Hong Kong, Taiwan, or mainland China.
"It's definitely doable. Hong Kong's electronics factories have increased a lot these past few years. We're also seeing more skilled workers," Wang Zhiqun said. "And with overseas hires, our R&D shouldn't be a problem."
"Great. Let's do it," Yang nodded. "For Rongyao's current products, just keep scaling up based on market demand. As for new product ideas—besides this music player, if your team comes up with anything else, feel free to make the decision yourselves.
If it involves a major investment, you can always bring it to me."
"Thank you, Mr. Yang," Wang Zhiqun said gratefully.
"No need to thank me. Supporting you is my job," Yang replied. "As long as everything else is running smoothly, I'll continue allocating resources to expand our overseas channels, and I'll also increase the marketing budget for the Rongyao brand.
We need to create an international Chinese electronics brand."
Chinese businesspeople had long been skilled at doing business, but building global brands was another story. It was difficult—but with Changxing Group's current scale, there was a real opportunity to make it happen.
"Understood. I'll make sure we focus on capacity and quality," Wang said with a smile.
"Alright," Yang nodded. "That's all for now. I'm heading back. Don't forget, there's a senior leadership meeting at Changxing Tower tomorrow morning."
"Yes, I'll be there," Wang confirmed.
Usually, only two or three departments that had overlapping projects would report to HQ. Most subsidiaries didn't need to know what the others were doing. Even though the information wasn't classified, it wasn't necessary to disseminate everything across all departments.
But a full company-wide high-level meeting? That only happened when Yang Wendong called it personally. Which meant it was bound to involve something major that affected all branches.
—
November 30, the final day of the month. Changxing Group convened an internal senior leadership meeting at its headquarters in Changxing Tower. All primary subsidiaries sent their top representatives.
In the top-floor conference room, executives like Wei Zetao and Zheng Zhijie had already arrived. Everyone chatted casually before the meeting began. This was typical — formal meetings wouldn't start until Yang Wendong entered the room.
Everyone stood up the moment Yang Wendong entered the room. He waved his hand and said, "Everyone, please sit."
Once everyone was seated, Yang Wendong continued, "I've gathered you all here today for one reason. Starting from now, all company operations must begin converting and holding foreign exchange reserves.
For any overseas business dealings, once foreign currency is received, try to retain it entirely in USD or JPY. For domestic transactions, if you can't directly earn foreign exchange, then partner with companies that have foreign exchange operations. Let them manage your HKD, and you convert it yourselves."
At those words, the entire room was stunned. The meaning behind such a move was obvious — it was a defensive maneuver. Even if the economy were expected to decline, there was typically no need to aggressively convert to foreign currency — unless one believed that the Hong Kong dollar might collapse.
Wang Fengzhi, the group's chief financial officer, asked, "Mr. Yang, are you suggesting that the HKD exchange rate will fall?"
"Yes, that's what I believe," Yang Wendong said frankly. "At present, the HKD is still pegged to the British pound. And you all know the current state of the British economy. In the long run, I don't see a bright future.
Furthermore, I believe Hong Kong's economy is about to experience serious trouble, so we should minimize our currency exposure risk in advance. Convert based on your business needs. USD is the safest; JPY is acceptable too."
This analysis wasn't wrong. While Hong Kong's economy was booming, the British economy was weakening. One needed a stronger currency; the other needed to devalue — this contradiction was fundamental. Historically, the HKD didn't decouple from the pound until the early 1970s, but Yang Wendong was positioning ahead of time to prepare for the crisis in 1967.
During that time, the HKD wasn't completely worthless, but many people refused to hold it. Assets, properties — everything was being dumped. If you held foreign currency, you had a huge advantage when buying distressed assets.
Of course, none of this could be said out loud. No one could "predict" such events in advance.
Wei Zetao nodded and responded, "Understood. For all my deals, I'll retain foreign currency wherever possible, primarily in USD."
Zheng Yuhua added, "Same here. A lot of our overseas shipping deals are already priced in USD. As for the Hong Kong-side operations, any HKD we earn can just be reinvested internally."
Wang Zhiqun followed up, "No problem on my end either."
Yang Wendong smiled. "Good. You three are the ones with the most significant foreign trade volumes, so this won't be hard for you. This will be a long-term effort. If any of you are short on HKD for internal operations, we'll use official exchange rates to settle between departments."
Time was still on their side. By notifying his executives early, they could gradually and discreetly accumulate foreign reserves. If Changxing Group were to convert all at once, with the size of their holdings and revenues, it would send shockwaves through the HKD. People would notice.
"Understood," the others responded.
Wang Fengzhi then asked, "Mr. Yang, we still hold a massive amount of HKD in Hong Kong. These measures only ensure that future income is in foreign exchange. But what about our existing HKD holdings? Should we try converting it through HSBC or Standard Chartered?"
"That much money — can we even convert it freely?" Yang Wendong asked back.
Though many countries claimed their currencies were freely convertible, that usually only applied to small amounts. For large-scale conversions, even in the West, restrictions always existed.
That's why many nations and corporations transferred assets through acquisitions or other legal justifications. It was a way of moving capital without spooking regulators.
Wang Fengzhi replied, "Openly requesting to convert over HK$100 million into foreign currency isn't feasible. But by opening multiple accounts and claiming it's for foreign investments, we can slowly convert it over one or two years.
Unless you, Mr. Yang, are planning a large-scale overseas expenditure or acquisition in the near future — then we'd have a legal reason to make the conversion. The colonial government wouldn't block that."
"Buying ships probably won't work, right? Even though it sounds like a lot, those deals are mostly financed with loans and happen in stages," Yang said.
"Exactly," Wang agreed. "Unless we pay with large amounts of upfront capital, but that just ties up money in depreciating assets. Not worth it."
"No, definitely not," Yang laughed. "As for ships, we'll deal with them later. But I am planning a trip to the United States soon. I'll spend some money there — not much, but it could help legitimize some conversions.
As for our HKD holdings in Hong Kong, let's take our time. I might still need to spend a large amount here in the near future."
He was, of course, referring to the coming bank crisis, specifically the potential bank run on Hang Seng Bank. He wasn't planning to stop it by brute force, but if it happened, he could easily inject capital through stock purchases — something Ho Sin Hang would definitely accept.
And if things followed their historical trajectory, Yang would end up with a large chunk of Hang Seng shares—acquired at a discount under pressure. A win-win situation.
Even if Hang Seng survived, Yang would still benefit. Ho Sin Hang was a competent banker; if he weathered the storm, the bank would emerge stronger than ever.
"Alright," Wang Fengzhi said. "Then I'll begin converting our HKD to foreign currency in a legal and gradual way."
She then added, "There's another method: borrowing USD from overseas banks, then repaying the loan using HKD, thereby legally applying to convert HKD to USD.
But if the volume is too large, it might raise eyebrows and attract unwanted attention."
"No need for that yet," Yang shook his head. "First, everyone tally up how much HKD they hold. When I return from the U.S., we'll review the full situation and decide how to proceed."
It was still early. Even if the 1965–66 economic downturn affected Hong Kong, it didn't devalue the currency. There was no rush.
Even if they failed to convert everything in time, the losses wouldn't be large — just lower profit margins.
This wasn't like the 1998 currency crisis. No broader economic harm would be caused. So Yang Wendong had no moral qualms about it.
"Understood," everyone agreed.
—
After the others left, Yang Wendong called Zheng Zhijie to stay behind.
"How's the property liquidation going?" he asked.
Zheng replied, "We've only got 780,000 square feet of saleable property left."
"Good. Get it all sold within the next month or two," Yang said. "Right now, you're holding the most HKD. I'll be using some of your funds for my trip to the U.S.
You'll be going with me."
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