Chapter 114: Managing Financial Risk
Before the rise of the internet era, it was almost unheard of for companies to offer stock options to senior employees. Even renowned Hong Kong salarymen like Ma Shiming and Ho Kin Ning in Yang Wendong's past life only ever received salaries.
Of course, if those employees believed in the company, they could later purchase stock—often with a small discount. But fundamentally, stocks were a dream sold by bosses who couldn't offer real incentives. A proper boss talked about salary and benefits, not dreams.
Yang Wendong was a pragmatic man. After a round of discussion with Qian Shangde, he offered the professor 1.5 times his current American salary, plus housing and a car in Hong Kong. Once the glue factory was operational and successfully producing, Qian's salary would increase another 30%.
This was, by Hong Kong technical standards, already top-tier compensation. But it was what Qian deserved. Ordinary talent earned wages based on local averages—and in a place like Hong Kong versus the U.S., that difference could be manyfold.
But elite talent? Their value was universal. To convince them to come to less developed regions, you had to pay even more than what they earned in the West.
Once the deal was made, everyone sat down for a celebratory meal.
"Mr. Yang," Qian said after a few beers, "I'll need about two weeks to resign from Dow Corning.
In the meantime, I can go visit 3M's plant in New York for an on-site inspection. Also, the Hong Kong workers you're planning to send should start preparing soon. The earlier they go, the better.
Skilled labor is the backbone of any factory. Once we have enough trained technicians, we may not even need to rely on 3M's equipment—we can purchase alternate production lines instead."
"Excellent," Yang said with a nod. "We've been actively recruiting educated workers—those who can read technical documentation or speak some English. So far, we've got about a dozen interested candidates."
Truthfully, this process had been underway even before the glue factory was in the plans.
Any company looking to scale up needed people—particularly middle management and technical staff. They needed to be literate, experienced, and capable of independent thinking. Otherwise, even basic tasks like batch management could turn into complete chaos.
Qian nodded. "Once I return to the States, I'll start researching the glue types we'll need. With 3M's patent support, this factory should be no problem at all."
Yang raised his glass with a smile. "Thank you, Professor Qian."
"Mr. Yang," Qian laughed, "no need to call me that. Everyone just calls me Old Qian. Only strangers use titles. Friends just use names."
"Haha, alright then—Old Qian, cheers."
They clinked glasses.
Qian was right—regardless of whether it was China, the U.S., or Europe, formality was reserved for strangers. Once you got familiar, titles faded fast. Among peers, it was just names—or worse, nicknames.
After dinner, Yang arranged a company car to drive Qian back to the hotel, while he himself rode with Wei Zetao.
"Old Wei, didn't you say you wanted an American car?" Yang asked curiously. "How come you ended up buying a Volkswagen?"
Wei laughed. "I was planning to buy a Ford. But this VW was special—the previous owner was a woman who barely drove it. Less than 10,000 kilometers, and the price was amazing. It's practically brand new."
"Nice catch," Yang chuckled.
Wei added, "With Old Qian handling the glue factory, most of our problems are solved. It's time we pick a site."
"Right. But this factory isn't like the others," Yang said. "Even though glue production counts as light industry, it still involves chemicals. It's less polluting than heavy industry, sure—but it still shouldn't be near residential areas.
Focus on working with the Hong Kong Waterworks Department and China Light & Power. Pick a site with few residents, then extend utilities there for construction."
Even though Yang believed in the future of real estate—and had yet to dive fully into the sector—he always selected factory locations with potential land value. Why waste a good plot?
But this glue factory was different. It wasn't large, and the upside wasn't high. There was no reason to build it in a high-potential zone.
More importantly, he didn't want to get into legal disputes later by building near homes. There would be endless complaints. Not worth it.
Besides, making money shouldn't come at the cost of people's living environment. There were plenty of chances to speculate on land during the booming 1960s. No need to rush.
"Got it," Wei replied. "But we also need to consider transportation. We'll need to ship in raw materials and ship out product. Also, if it's too remote, commuting becomes a pain."
Yang nodded. "That's why we need balance. Worst case, we can build dorms for the workers."
In Hong Kong, factories rarely provided housing anymore. A long time ago, some factories had dormitories—workers would finish work, sleep there, and get up to work again.
Some even locked their gates to prevent workers from going out.
But the living conditions were poor, and no one cared about fire safety. Eventually, a major fire broke out. Dozens died. And even though there wasn't much legal liability back then, the tragedy had a lasting impact.
Now, no one dared to offer housing anymore. Even Changxing Industrial, with hundreds of employees, didn't offer dorms. It wasn't about money—Yang just didn't want the risk.
But for a small number of technical staff, dorms were fine. As long as the environment and fire protection were well designed, it was worth the cost. After all, this glue factory would be core to the company's future.
"Got it," Wei nodded. "One more thing—I've finalized the deal with the government for our new factory plot. It's that 350,000-square-foot lot near Huarong Road. Price negotiations are still ongoing."
"Perfect," Yang said. That plot had always been his top choice. Only in today's Hong Kong could you get land that big on the outskirts of Kowloon. In a few decades, even if you had the money, you wouldn't be able to buy that much land.
"Has the government shown any flexibility on price?" he asked.
Wei shook his head. "Not yet. They're quoting HK$3.20 per square foot. I've already hired a Central-based legal team to negotiate.
I'm trying to get them to agree to a total price under HK$1 million."
"HK$1 million?" Yang nodded. "What about land leveling costs?"
By now, almost all the easily developed flat land in good locations was gone. What was left required heavy development—clearing, grading, reinforcing.
If that weren't the case, tens of thousands of people wouldn't still be living in hillside slums.
Wei Zetao replied, "If we want to fully level the land, it might cost HK$600,000 to HK$700,000. But since the first phase only uses about 40% of the area, the cost will be much lower."
Yang Wendong nodded. "Hmm, in that case, along with all the equipment, raw materials, and construction costs for the new factory, even with the money from 3M, we're still a bit short."
Wei agreed. "Right. And we also need to keep some of the funds for purchasing production lines from 3M, securing patent rights, and investing in the glue factory.
So, Mr. Yang, we need to start discussions with Liu Chong Hing Bank—or maybe other banks—about securing another loan."
"Alright. Actually, a few days ago, Liu Liewen personally called and invited me to visit their new headquarters in Central." Yang smiled. "Now that the glue factory matters are mostly settled, it's the right time to push forward with the new factory."
The goal of the new factory was to invest heavily up front to resolve all short- and mid-term capacity issues in one go. Otherwise, he'd end up like Li Ka-shing last year—forced to expand capacity so quickly that he had to scramble to rent new space every few months, often overpaying desperate landlords.
The location, layout, and blueprint for the factory had to be chosen carefully. Even if they were in a hurry, they couldn't rush this. If they made the wrong call now, it would create endless trouble down the line.
Also, purchasing land from the colonial government wasn't something you could just snap your fingers and get done. If you acted too eager, they'd bleed you dry.
Despite constantly preaching "free markets," the British colonial administration didn't care whether you invested or not.
Unlike mainland China in the future, where government officials would chase investment harder than the entrepreneurs themselves.
Right now, Yang's primary focus was finishing the glue factory plan. That was mostly done—so it was time to begin planning and building the new factory to guarantee enough production capacity for the next one to two years.
Of course, this was just the plan for now. If he came up with another product as successful as Post-it notes, even this factory wouldn't be enough.
Wei smiled and asked, "When are you planning to go?"
"I'll call them this afternoon and set an appointment—probably sometime in the next few days," Yang replied. The sooner it was done, the better.
The new factory would be massive. Once operational, it would allow them to pump out glue traps, Post-its, and flypaper for the U.S. market, and even begin expanding into South America.
With that kind of production scale, their cash flow problems would basically be solved.
Thanks to the high profit margins of Post-its, Yang figured that even if he had to build more factories later, he wouldn't need another loan.
That's not to say he wasn't interested in real estate—but for now, his priority was industry. Once the cash from industry overflowed, then he'd consider property investment.
Wei added, "I heard Liu Chong Hing Bank is moving its headquarters. They just bought a new plot in Central and plan to build an even taller building."
"This bank's growth over the past few years has been insane," Yang said thoughtfully. "Their model of high-interest small deposits has really paid off.
They've expanded branches fast and are already building a new HQ in Central."
Wei said, "Mr. Yang, I'm not a finance guy, but I have a bad feeling about the way Liu Chong Hing Bank operates.
I've heard that Liew Baoshan is directly using depositor money to speculate in real estate. If something goes wrong..."
"I know," Yang nodded. "Once we secure this next loan, we'll start moving our major accounts to other partner banks."
As someone who had lived through this era in a previous life, Yang knew full well that in just two years, Liu Chong Hing Bank would be hit with a serious bank run crisis.
Naturally, he was preparing ahead.
The reason he worked with this bank in the first place was because it was the only one that accepted small HK$100 account deposits early on.
And more importantly, it was willing to take risks and offer loans with no collateral—something no other bank would consider.
It was a mutual exchange of interests.
Once the bank run eventually happened, Yang would have long since transferred all his deposits and cash flow.
As for the loan he took from them? That was their problem. No risk to him.
Wei chuckled. "So you already planned for this. Good to know—I won't worry about it then."
Yang said, "Old Wei, I might not know operations or factory management like you guys do. And I definitely don't know tech.
But I do understand commercial risk. That's something I'm very familiar with. Still, I appreciate your warning.
In the future, if you ever feel concerned about anything—even if it's outside your area—let me know."
As a time-traveler, Yang had the advantage of knowing many future events. He could predict macro risks that others didn't see.
But on the day-to-day level, every business had its own internal challenges. While he had experience running businesses in his past life, he wasn't arrogant enough to think he knew more than the professionals of this era.
A lot of the risks specific to 1950s Hong Kong were things he couldn't anticipate.
"Got it. I'll keep that in mind," Wei said. "Then which bank should we work with next?"
Yang glanced out the window at Victoria Harbour and asked, "How about HSBC?"
Wei replied, "If we just want to open an account, with our current cash flow, they won't say no.
But HSBC mainly works with British companies. Getting a loan will be tough. You know how those British firms look down on Chinese businesses."
"Yeah..." Yang nodded. In the 1950s, the British still carried a colonial arrogance. That wouldn't change until the 1980s, when they were finally humbled by Chinese companies.
In fact, HSBC was one of the smarter ones. They eventually realized the future belonged to Chinese capital and began investing heavily in promising Chinese businesses.
But that came much later. Right now, it wasn't clear whether anyone in HSBC had that kind of vision.
"What about Hang Seng Bank?" Yang asked. "It's the biggest Chinese bank in Hong Kong."
Wei answered, "Hang Seng would definitely be fine. The Ho family there has always supported Chinese businesses.
Their controls are a bit stricter, though. So even with the same qualifications, we'll get a smaller loan than we would from Liu Chong Hing."
"Haha, that's fair," Yang laughed. "Can't expect to have it both ways. Okay, then let's open an account at Hang Seng and slowly start shifting funds over."
Among Chinese-owned banks, Hang Seng was the best choice.
"Understood," Wei said.
After a moment, Yang added, "Let's open an account with HSBC too. It never hurts to diversify."
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