Chapter 393: Paper Industry Expansion and Wang Yongqing's Request
A counterintuitive fact: the better a region's economy, the lower its prices tend to be; conversely, the worse the economy, the higher the prices—at least when it comes to industrial goods. Service industries are a different matter entirely.
In his past life, during the 1980s and 1990s, a television set in mainland China could cost the equivalent of an average person's annual salary, or even half the price of an apartment. Meanwhile, at that same time in the United States, if a TV broke, people would simply toss it and buy a new one.
The core reason behind this disparity was industrialization. Once industrial capacity reached a certain point, even staple goods like food became cheaper.
Liu Huayu explained, "Yes, many industrial products are outrageously expensive in Southeast Asia. Industrial powerhouses like Europe, the U.S., and Japan made massive profits off these regions.
Here in Taiwan, our Carrefour stores have also benefited. A lot of our industrial goods either come directly from Hong Kong, cutting out the middlemen, or are acquired through optimized procurement channels, which drastically lowers our costs."
"Hmm, that does make it clear—now is the right time to expand our market," Yang Wendong said with a nod.
What gave supermarkets their edge over traditional department stores was their superior purchasing power. They could bypass intermediaries and go straight to the manufacturers—pressing down prices and cutting out middle costs.
Liu Huayu smiled. "Yes. But the problem is, Southeast Asia still lacks basic security guarantees."
"Then we'll focus on operations in Taiwan for now," Yang Wendong said. "With Taiwan's current population and economic size, that alone will give us years of growth potential. We'll worry about other places later."
The best entry point into Southeast Asia would come next year—Singapore.
After gaining independence, Singapore's economy didn't perform well initially. The British, as they often did with former colonies, left behind quite a few structural issues. During this period, the Lee family was doing everything possible to attract foreign capital.
Whether or not one liked Lee Kuan Yew, he was at least respected globally. And for the sake of Singapore's long-term interests, he wouldn't dare mistreat serious investors. That gave Yang Wendong some peace of mind about putting money into the country.
Once they gained a foothold in Singapore, they could use it as a base to gradually build connections with influential Southeast Asian tycoons. A mutual-benefit alliance could be formed, paving the way for Changxing Group's methodical expansion into the region.
Liu Huayu added, "Alright. Taiwan's overall market size is already larger than Hong Kong's. Although its economy isn't quite as strong, we're dealing in daily necessities. The consumption of those goods doesn't differ much based on income—poor people still need basic items, so long as they aren't too poor."
"Exactly," Yang Wendong smiled. "That's the logic."
In the consumer goods industry, even a billionaire might not spend as much as ten regular people. So in the supermarket business, what really matters is the surrounding population density and demand.
Of course, the general economy couldn't be too weak. If people couldn't even afford necessities, then the whole thing would collapse.
Over the past few years, Taiwan's economy had developed rapidly. Particularly in the industrial sector. Although it hadn't yet caught up to Hong Kong overall, Taiwan had a larger landmass, more people, and strong government support. This had attracted foreign investors to set up more technologically advanced factories, unlike in Hong Kong, which still focused heavily on basic light industry.
Afterward, the group walked through the Carrefour store. After making a full circuit, Yang Wendong remarked, "This place is way bigger than the flagship store we have in Hong Kong."
"Yes, significantly bigger," Liu Huayu explained. "Land here in Taiwan is cheaper. Plus, the population density around each store is higher. So we build large-scale supermarkets. This one, for example, has only one floor, but the area exceeds 80,000 square feet. That would be almost impossible in Hong Kong."
"Hmm, then from now on, all Taiwan supermarkets should follow this large-scale model. Also, we need to build parking lots. Once the economy takes off, people will start owning more cars," Yang Wendong said with a grin.
In Hong Kong, large supermarkets could theoretically be built on the Kowloon Peninsula. But it wasn't worth it. Hong Kong was more suited to medium-sized stores distributed in higher numbers.
Mainland China in his past life—and now Taiwan—were a different story. Especially in central city locations, now was the time to build bigger and better while land prices were still low. Even if real estate appreciation was ignored, the supermarket business alone would generate enormous returns.
Wang Yongqing understood where Yang Wendong was going with this and laughed. "Mr. Yang, you're so optimistic about the real estate market in Taiwan, you're making me feel like I should invest too."
"Haha, I am optimistic," Yang Wendong said with a smile, "but supermarkets and theaters are my core interests here. Real estate is just a side benefit.
Mr. Wang, you should focus on your main business. Real estate might be highly profitable for most people, but for someone with your capabilities, there are better returns elsewhere."
That wasn't just flattery—it was a fair assessment. With Wang Yongqing's ability in the plastics industry, real estate profits were nothing in comparison. But there were few people like him in the world.
"Haha, I'm just saying," Wang Yongqing chuckled. "Honestly, I don't even have enough capital to run my main business right now."
Yang Wendong asked, "Didn't HSBC agree to give you a loan? Are you still short on funds? Or is it that the polyester production line I requested is too capital-intensive?"
As his industrial empire expanded, the butterfly effect grew stronger. He was probably changing Wang Yongqing's life trajectory significantly. In actual history, Wang Yongqing may never have had large-scale dealings with HSBC.
"It's not that," Wang Yongqing shook his head. "Recently the plastics market has been volatile. Many plastic goods manufacturers have suffered serious losses, and it's affected me too."
"That might be due to the economic crisis in the United States—it's having ripple effects throughout Asia," Yang Wendong said after a pause. "I've heard the plastic industry in Hong Kong is also struggling. The artificial flower market has taken a hit too."
The 1960s saw multiple global economic contractions, which was normal. Booming development inevitably led to cooling-off periods. A little pressure now could be healthy for the long run.
Wang Yongqing nodded. "Yes. The media here in Taiwan is full of people mocking me—saying I'm too aggressive."
"Don't pay attention to them. That's just bandwagon-jumping and kicking people when they're down," Yang Wendong said with a faint smile. "I still have complete confidence in you. If you're having funding issues, I can invest again—just like I said before."
"Mr. Yang, you already own quite a bit of stock in Formosa Plastics," Wang Yongqing chuckled.
Yang Wendong replied, "True, but there aren't any other shareholders on your end. I'm still a minority investor. And besides, have I ever interfered in your company's operations? I've invested in many companies in Hong Kong, and I follow the same principle—I never interfere."
There were simply too many profitable industries in the world. Even with the advantage of being a transmigrator and hiring top-tier executives, he couldn't possibly manage everything himself. In some cases, it was better to invest in promising future stars than to try to control everything directly.
With this model, all Yang Wendong needed to do was inject funds at the right moment, provide some timely resource support, and everything would flow smoothly. It made things easier for everyone involved, and who knows—he might even gain a reputation as a regional angel investor, earning both prestige and long-term benefits.
"I'll give it some thought," Wang Yongqing said after considering it for a moment.
An economic crisis would inevitably lead to global market contraction. For any business, it was essential to reserve some capital to survive the winter.
"Alright," Yang Wendong nodded.
After parting ways with Wang Yongqing, the group spent the evening enjoying themselves around Taipei.
The following day, they headed to the Changxing Paper Mill, located on the eastern coast of Taipei. As soon as they stepped out of the car at the entrance, a distinct odor hit their noses.
The head of the plant, Ma Jiayou, immediately stepped forward and explained, "Mr. Yang, Mr. Wei, the smell is typical for paper mills. With our current technology, it's simply not possible to fully contain all emissions."
"It's alright. It's still better than the chicken farms in Hong Kong," Yang Wendong joked with a smile. "Some industries are just like this. As long as we do our best, that's all we can ask for."
Industrial development inevitably came with pollution. It was all about finding balance. You couldn't prioritize the economy at the expense of the environment, or vice versa. A few decades down the line, when some Western countries began to deindustrialize, it would be due in part to extreme environmentalist ideology pushed by so-called "white leftists." Though of course, behind them were likely other forces with more complex agendas.
Ma Jiayou quickly pulled out two masks. "These are 3M masks imported from the U.S. They help filter out some of the odor."
"Thanks," Yang Wendong said politely.
With safety gear on, Yang Wendong followed Ma Jiayou around for a full inspection of the paper mill. Some areas were marked as hazardous, and Ma Jiayou made sure not to let him enter. Yang Wendong, understanding the risks, didn't insist.
After completing the inspection, Yang Wendong asked, "How's the current production capacity? I've heard we're falling short?"
"Yes, that's correct," Ma Jiayou replied. "Ever since we launched our 'Qingfeng' brand pocket tissue, demand has exploded. Distributors from the U.S., Europe, and Japan have all sent people to inquire. I'm so swamped we don't even have capacity to supply A4 paper to Changxing Industrial in Hong Kong anymore. Most of our office paper lines are shut down. Even regular toilet paper production has been cut back."
"That's great news. Are you planning to expand capacity?" Yang Wendong asked with a smile.
Pocket tissues were bound to be a hit. They were incredibly convenient—ideal for business trips, travel, even dining out. Especially popular with women.
Back in 1958, Yang Wendong had already thought of the idea, but without his own paper mill, he couldn't produce it. And if he had launched it without production capabilities, he'd only be helping other capitalists get rich. Compared to sticky notes, the tissue market was on an entirely different scale.
Ma Jiayou said, "Yes, we're preparing to install a new production line with 300,000 tons of annual capacity. I'll be submitting the formal proposal to headquarters in Hong Kong soon."
"300,000 tons? Will that be enough?" Yang Wendong asked.
A single pack of pocket tissue might weigh only a few grams, but demand was measured in the hundreds of millions. The amount of raw paper required was astonishing.
Ma Jiayou replied, "I've done my research. Even though our tissues are very popular, it'll still take time to sell them globally. For the next year or two, this should be sufficient. If we fall short later, we can build a new factory."
"Alright, I'll let you make the call," Yang Wendong nodded.
For matters he hadn't personally investigated, he wouldn't arbitrarily interfere. Even if the estimate turned out to be wrong, they could just accelerate expansion later. No big deal.
At this point, Wei Zetao said, "But there's one more issue we're dealing with—whether to use recycled paper or virgin pulp for the new line."
"You mean you're considering switching to virgin pulp?" Yang Wendong immediately grasped the implication.
Wei Zetao nodded. "Exactly. From a long-term strategic perspective, we believe virgin pulp is the better option. First, pocket tissues are used on the face, hands, even for babies, so there are higher requirements for hygiene and softness. Virgin pulp offers superior performance in both areas.
"Second, there's the branding angle. You've mentioned that we want Qingfeng to become a premium paper brand. Now that we've got a unique, high-demand product, we should position it as a premium item. And European and American consumers have already started paying attention to whether their tissues are made from virgin pulp. Our tissues will only face greater scrutiny."
"You make a solid argument," Yang Wendong said. "If Qingfeng can be established as a top-tier brand, then a bit of extra cost won't matter."
Wei Zetao continued, "Also, because virgin pulp processing doesn't require wastepaper treatment, the production line itself is cheaper to build, and environmental costs are lower.
"But buying virgin pulp from overseas will increase material costs. Overall, we estimate the total production cost will rise by about 25%."
"Twenty-five percent?" Yang Wendong mused. "Pocket tissues aren't expensive items, and Western consumers probably won't be too price-sensitive about them. Alright, Mr. Ma—prepare a full report with all your data.
"As long as the numbers check out, we'll expand capacity as soon as possible. This market is still wide open, and we need to move fast to capture it."
In any undeveloped sector, the first company to succeed could eat well for years. And once a brand was established, as long as no major mistakes were made, it would be nearly unshakable.
Using pocket tissues as a beachhead into the global paper market would make expanding into other product categories much easier later. Plus, there were plenty of similar innovative product ideas waiting to be realized.
"Understood," Ma Jiayou responded with a big smile.
After spending half the day at the paper mill, Yang Wendong's group headed to the Keelung Shipyard, where two new ships were being built for Changxing Shipping.
But it was still early in the process—none of the components had been assembled yet. Instead, Yang Wendong inspected a different 10,000-ton vessel that was further along in construction.
As they were getting ready to return to Hong Kong, Wang Yongqing rushed over from Taipei and intercepted them.
"Mr. Wang, what's so urgent?" Yang Wendong asked, curious.
"I've been thinking about your suggestion yesterday," Wang Yongqing said. "I'm willing to sell you another 5% of Formosa Plastics stock. As for the price, we'll renegotiate based on a fresh valuation.
"But I need you to agree to one condition."
"What condition?" Yang Wendong asked, intrigued.
"I need you to loan Formosa Plastics an additional three million U.S. dollars," Wang Yongqing said, looking serious. "And it has to be at a low interest rate."
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