Chapter 331: Ambitions in the Paper Industry
"Understood. This woven bag market indeed has huge potential." Wei Zetao smiled, then continued, "Yang Wendong, there's another matter. We've made new progress with the Taiwan authorities regarding our investment in a paper mill."
Yang Wendong asked, "Have the land and policy discussions been finalized?"
Unlike the Hong Kong government's "free market" stance, other regional governments are generally more supportive of foreign investment. At the very least, this support often includes cheap land, tax breaks, and other incentives.
The Taiwan government, for example, had already begun implementing foreign investment attraction policies in the mid-1950s. By the 1960s, many foreign enterprises had already started investing—somewhat similar to the reforms and opening up on the mainland in the 1980s and 1990s.
This time, Changxing Industrial was making a sizable investment, planning to build the first major paper mill in Taiwan. Naturally, before making the investment, certain terms needed to be negotiated.
Wei Zetao replied, "Yes. The Taiwan government has offered us a piece of land by the coast in Taipei, but the location is quite remote, far from any cities or even towns."
Yang Wendong asked, "Is it because our paper mill would cause too much pollution?"
"Yes," Wei Zetao explained. "Even though we have pollution control and recycling measures in place, the discharged water is still toxic. So, the authorities in Taiwan want us to build the plant on an uninhabited stretch of coastline. After treatment, the wastewater can be discharged directly into the sea."
"And what about Taiwan's other paper mill? Are they doing the same?" Yang Wendong followed up.
"Yes," Wei Zetao replied. "The Yongsheng Paper Mill is located in Kaohsiung, also by the coast. In fact, many major paper mills internationally are built near the ocean for the same reason. Clean wastewater treatment is still largely unattainable, so placing these facilities inland and discharging into rivers would cause devastating ecological disasters."
"Then let's go with the coastal option," Yang Wendong nodded. "But isn't such a remote location going to cause problems with water, electricity, and transportation?"
No one wants pollution, and everyone hopes for high-profit, pollution-free industries. But in reality, that's rarely achievable. Many industries inherently come with pollution, and even the very foundation of industry—electricity generation—is heavily polluting in this era.
To develop an economy and grow an industrial base, some sacrifices must be made. Compared to an agricultural society where people barely had enough to eat or wear, minor environmental damage could bring jobs, affordable industrial goods, abundant food, electricity, running water, and even home appliances and automobiles. That tradeoff was absolutely worth it. Many countries couldn't make that trade even if they wanted to.
Only after an economy matures do nations begin to think about environmental protection or relocating high-pollution industries to other countries. This is a cyclical trend in modern human history—from Europe and America, to Japan, and in the future, to the mainland. Every country follows the same path.
"Water and electricity can be supplied there," Wei Zetao said. "Taipei isn't that big, and while this location is remote, it's not too far from the city center. The only issue is land transport—there's only a small road, which isn't suitable for large trucks. The Taiwan authorities suggest we build a small dock nearby and handle all large shipments by sea."
"Can we build a dock there? Are the conditions suitable?" Yang Wendong asked.
"Yes, that's not a problem," Wei Zetao replied. "We're just talking about a small dock that can handle small boats. In the future, our recycled paper, wood pulp, or finished paper products can be transported through it. For lighter items, we can use the existing road for land transport."
"Still sounds a bit troublesome," Yang Wendong frowned.
Wei Zetao said, "Yang Sheng, this is just the nature of doing business in Taiwan. Economically, Taipei today is roughly where Hong Kong was ten years ago—basic infrastructure is still lacking. And heavy polluting industries, especially those producing large amounts of wastewater, are not something anyone dares to place near urban areas. So it's normal that the infrastructure around these remote industrial zones is underdeveloped. It's the same across Southeast Asia."
"Alright then. How big is the land parcel? What's the cost?" Yang Wendong asked.
If the pollution had only been gaseous, perhaps there could have been room for negotiation—just place the factory downwind from the city. But when it comes to water pollution, there's no room for error. Most cities are built near water, and if freshwater sources get polluted, their entire economies could collapse.
It's said that after the mainland's economic reforms, Shanghai had to shut down or relocate countless water-polluting enterprises just to protect the Yangtze River's water quality.
Wei Zetao responded, "The land in Taiwan is 250,000 square feet (25,000 square meters), priced at 0.5 Hong Kong dollars per square foot."
"Fifty cents per square foot? That's only 125,000 HKD total?" Yang Wendong asked.
"Yes," Wei Zetao confirmed. "It's practically a giveaway. If not for legal restrictions preventing a completely free grant, the Taiwan government probably would have given it to us outright. Additionally, they're offering a five-year half-tax policy once operations begin."
"Even at half-tax, it still doesn't beat Hong Kong," Yang Wendong chuckled. "But to be fair, Hong Kong isn't suited for this kind of heavy pollution industry anyway."
"Exactly," Wei Zetao said. "Also, my team investigated Taiwan's chemical industry. It's pretty solid—strong acids, bases, and other compounds used in papermaking can all be sourced locally. As long as our factory is built and raw materials are secured, we can start operations right away."
"Alright then. Let's proceed," Yang Wendong nodded. "Entering the paper industry marks an important milestone for Changxing Industrial this year. We can't rely solely on creative-type products forever. Conventional products may be fiercely competitive, but the market is massive. That gives us plenty of opportunity."
Creative products are indeed lucrative, especially with patent protection. Even with knockoffs, they outperform standard goods. But in the end, such products have limited market potential. The demand for sticky notes is minuscule compared to A4 paper, toilet paper, or cardboard packaging paper—by a factor of a thousand or more.
Running an enterprise like this, even with low profit margins, the total revenue can be enormous. That leads to substantial profits, not to mention the employment it creates, the upstream and downstream industry chains it supports, and the broader influence it generates.
Once the scale is large enough, it can even enhance one's international influence.
By this point, with the employment and economic contributions driven by Changxing Industrial in Hong Kong, it was about time for Yang Wendong to gradually enter the international market.
"Got it," Wei Zetao smiled. "One more thing—I've been in contact with the Hong Kong education department. They've agreed to expand the engineering programs and plan to admit 300 new students annually in fields like electronics, mechanical design, mold fabrication, and factory management."
"Three hundred?" Yang Wendong thought for a moment. "Still a bit low."
Changxing Industrial currently employs over 15,000 workers. With upcoming ventures like Glory Electronics and other new creative-driven industries, it's estimated that by the 1970s, he'll have 40,000–50,000 workers under his name.
Wei Zetao explained, "Yang Sheng, the physical size of the Chinese University of Hong Kong is limited. These 300 spots already required cutting back on liberal arts students—this is pretty much the max they can do."
"Alright," Yang Wendong nodded.
It wasn't worth forcing the issue. In a small city like Hong Kong, both talent and technological capabilities are limited. For high-level R&D in the future, he would likely have to rely on overseas research centers or bring in foreign experts.
The local talent pool would only be able to fulfill a portion of the needs.
Another week passed, and Wei Zetao arrived once again at the Changxing Building on Hong Kong Island.
"Yang Sheng, we've finalized the agreement with the Taiwan side." Wei Zetao handed over a file and said, "This is the investment contract. It includes our land acquisition cost, Taiwan's tax incentives, environmental regulations, and more. Our first-phase plan is to build a paper mill with an annual output of 100,000 tons, mainly producing A4 and sticky note paper."
Yang Wendong took the file and carefully reviewed it before asking, "Has legal reviewed everything?"
"Yes, we had both Hong Kong and Taiwan lawyers go over it," Wei Zetao replied.
Yang Wendong asked, "About the pollution control requirements—these data points are over my head. What kind of equipment and costs are we looking at to meet those standards?"
"Nothing too steep. The required equipment will cost around 200,000 HKD. It's electrically powered, consuming roughly 500 kilowatt-hours per day. With the addition of some neutralizing chemicals, we can recover most of the pollutants," Wei Zetao explained. "The principle is to use centrifuges to separate out heavy metals and compounds. The rest—some organic pollutants—will be managed chemically. The cost per ton of paper is..."
Wei Zetao continued explaining the technical details, and Yang Wendong listened attentively. Once the overview was complete, he nodded. "The cost isn't too high—let's go with it."
Even though the factory was built by the sea and Taiwan's environmental oversight was lenient in order to attract investors, outright dumping untreated waste into the ocean was still a no-go. Basic standards had to be met—otherwise, contaminated waters drifting to other coasts would cause bigger problems down the line.
Wei Zetao smiled, "Exactly. Taiwan eased its environmental requirements to lure investments. If we were following Japan's current standards, costs would be at least five times higher."
Pollution control follows a predictable pattern. The first 80% of cleanup is relatively easy. It's the final 20%—the effort to go from 80% to 100%—that becomes exponentially more difficult, much like sweeping dust from a floor.
"I understand," Yang Wendong nodded. "Have we finalized the equipment purchase with the Japanese supplier?"
"It's just down to pricing now. Take a look." Wei Zetao took out a stack of photos and placed them in front of Yang Wendong. He pointed at each image and explained, "This set of equipment is brand new and uses the latest technology. You feed pulp in one end, and through a streamlined process, it comes out as finished paper—cut and packaged automatically.
"If we're using waste paper as raw material, there's a separate machine that chemically and mechanically breaks it down using a centrifuge, turning it back into usable pulp."
"Alright. I don't really understand all this anyway. I'll visit the site later when everything's set up," Yang Wendong said with a laugh.
Although he was ambitious about entering the paper industry and eager to develop the market, this first factory was just a small-scale pilot. He didn't plan to personally go to Japan to inspect the equipment—it could all be handled by his team.
Once the machines arrived in Taiwan and the factory was operational, he'd take a look then.
"Got it," Wei Zetao said with a smile. "Both sides are moving fast. I believe we can start production in the second half of this year."
"Alright," Yang Wendong nodded. "But make sure the market side is fully prepared. Changxing Industrial will absorb a good portion of our capacity, but that's not enough. If I just wanted to lower the cost of sticky notes, I wouldn't be personally entering the paper industry."
Even though sticky note sales could reach the hundreds of millions, they still didn't consume a significant volume of paper. His true goal in entering the paper business wasn't just to cut costs—it was to scale up and take over the market.
Wei Zetao chuckled, "I get it. The paper market is massive. If we do this right, it'll be far bigger than the suitcase market."
"Exactly. My goal is to become one of the largest paper manufacturers in Asia," Yang Wendong declared. "Asia's economies are starting to take off, and demand for paper will only increase. That's our opportunity."
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