Chapter 310: A Ripple That Shakes the Industry
When you know the future holds no risk—and enormous profit—but your capital is limited, the most important thing becomes maximizing your loan ceiling with the banks.
To achieve that, even making certain concessions, such as on the final price or the interest rate, becomes acceptable—as long as they aren't too outrageous.
In fact, even those without foresight often rely heavily on bank financing to do business. Debt, no matter how large, isn't seen as a problem—so long as it drives growth.
The shipping industry is even more capital-hungry than real estate. Anyone looking to grow fast has to lean on banks. That's how every major shipping tycoon in Hong Kong got started.
Over the next few days, Zheng Yuhua continued negotiating with Mitsui Shipbuilding. Yang Wendong was kept up to date with every development.
Finally, on January 12, both sides signed a Memorandum of Understanding: Changxing Shipping would purchase seven large oil tankers and three bulk carriers from Mitsui Shipbuilding, with a total combined deadweight of 610,000 tons. The final deal price: USD 49.2 million.
Of that amount, 62% would be financed jointly by Mitsui Bank and Sumitomo Bank.
The MoU was a legally binding agreement requiring both parties to maintain confidentiality during negotiations prior to the final contract. Such arrangements are standard for major commercial transactions and even state-level agreements. Terms like base pricing and after-sales clauses are considered sensitive commercial information. Even if the deal ultimately falls through, the buyer is prohibited from disclosing details.
Takizawa Ichiro, now elated with the deal, turned to Yang Wendong and said, "Mr. Yang, this is a huge project for the Japanese shipbuilding industry. When it's time to sign the final contract, I hope you'll attend in person."
"Of course," Yang Wendong nodded. "This is the first time our two sides are working together. I hope we can maintain a long-term relationship."
Building a good rapport with one of Japan's top zaibatsu would undoubtedly be of great benefit to him. Japan was destined to be one of the key markets for several of his future ventures—whether in culture, toys, electronics, or other sectors.
A strong business relationship meant mutual buying and selling—this was the healthiest form of engagement between countries and companies alike.
Takizawa Ichiro added, "No problem. Whatever kind of ship you need in the future, we can build it. Even 200,000-ton supertankers—we can handle that."
"Good to hear." Yang Wendong paused, then asked, "Do you build container ships?"
"Of course," Takizawa replied. "But they're produced in limited numbers, because there aren't many buyers. Container ships require modern port infrastructure.
Right now, container shipping is mostly limited to a few cities in Europe and the U.S. In Asia, there aren't many ports equipped for it. Are you interested, Mr. Yang?"
"I am," Yang Wendong said. "But current infrastructure in Asia doesn't support container ship operations yet."
Without container terminals, using container ships would actually be less efficient than traditional cargo ships. These massive boxes can't be loaded or unloaded manually.
Equipping ports around the world with container handling facilities—or rebuilding them entirely—would be a massive undertaking.
Even in Western countries, the rise of container shipping met fierce resistance. Because these systems slashed the need for dock workers, there were frequent strikes and even sabotage, which slowed the global container revolution.
As an industry veteran, Takizawa nodded. "I agree. I actually believe container ships are the future. It's just a matter of time."
"You have sharp foresight, Mr. Takizawa," Yang Wendong smiled.
Many people with vision could already see this trend coming. After all, several ports in the West had already begun operating container terminals. Their efficiency and cost control benefits were well-documented.
But the reality was, there were too many entrenched interests—millions of dock workers. Changing that wouldn't be easy.
The next day, Yang Wendong returned to Hong Kong. After getting home, he told his family about everything that had happened in Japan.
The news hadn't yet spread to Hong Kong—but it would soon. After all, this was a massive deal, and Japanese shipyards were publicly listed companies. Disclosure was mandatory. With banks involved, it couldn't stay secret for long.
"Fifty million U.S. dollars?" Both Bai Yushan and Su Yiyi were stunned into silence when they heard the number.
After a moment, Su Yiyi asked, "Won't such a huge sum affect the company?"
"You think it requires a lot of capital?" Yang Wendong smiled. "In truth, the amount I actually need to put in is quite small."
Bai Yushan followed up, "Because of the loans?"
Yang Wendong nodded. "Exactly. The Japanese banks have already agreed to cover 62% of the cost. I'll also work with HSBC to take on a portion of the loan.
In the end, I only need to contribute about 10 to 15% of the total cost—so around 5 to 7.5 million USD."
Bai Yushan asked, "But even 6 or 7 million is a lot, right?"
Yang Wendong explained, "It is, but do you think I'm paying it all at once? Shipbuilding is a multi-stage process. I only need to pay a small deposit at first to initiate the project.
As the ships are constructed, I pay in installments. The bulk of the funds aren't due until the ships are delivered—which is one or two years away. In the short term, I probably only need 2 million USD."
This was the magic of financial leverage. With a bold enough mindset, a little capital could move mountains—whether in real estate or shipping.
Years later, Hong Kong's infamous fraudster Chen Songqing would take this principle even further. Though his methods involved some illegal practices, the core idea was the same—leveraging financial instruments to control far larger sums than you actually possessed.
Su Yiyi asked, "But isn't this extremely risky?"
Bai Yushan said, "Sister Yiyi, there's always risk. But that's just how this industry works. All the big Hong Kong shipping companies operate this way.
Even people like Tung Hao-yun and Zhao Congyan—despite having far less capital than Changxing Group—run fleets with far greater tonnage. It's all done through aggressive financing."
"Exactly. What I'm doing now is nothing new," Yang Wendong said with a faint smile. "You've heard of Bao Yugang, right? His company is partially owned by HSBC. The level of support they've given him is astounding—far riskier than what we're doing."
Hong Kong's shipping and real estate sectors grew so rapidly because the players had guts—and because they hit a golden age of economic expansion. That combination created the city's legendary business stories.
Of course, there were failures too. In his past life, 8 of the 10 wealthiest Chinese families in Hong Kong rose through real estate after 1968. Most of the developers before 1966 were wiped out in the following property crisis—only a few, like Cheng Yu-tung, survived.
Bai Yushan asked, "I thought Bao Yugang's low-risk model was based on leasing his ships out long-term?"
Yang Wendong shook his head. "When your debt ratio is that high, everything becomes risky. Sure, long-term charters reduce volatility—but if your operations run into trouble, your whole capital structure becomes unstable."
"That's true," Bai Yushan nodded. "I remember Saunders mentioning in a meeting that he's very optimistic about the future of shipping. That's probably why he dares to back people like you."
"I'm optimistic too," Yang Wendong said with a smile.
Then Bai Yushan asked, "Brother Dong, are you opposed to letting HSBC take equity in your company?"
Yang Wendong shook his head and said, "That won't work. I've probed the idea before, but Saunders never gave a clear response. I think he sees me as too high-risk."
His recent operations—one focused on transporting water during the drought, and the other on laying groundwork for the future Middle East crisis—were all carefully planned.
But from an outsider's perspective, this investment strategy looked incredibly risky. After all, owning so many old ships would inevitably lead to a mass retirement within a decade, creating a massive shock to regular operations.
Even leasing businesses couldn't escape this reality—replacing large fixed assets could only be done gradually. That was the norm.
And although HSBC was optimistic about the shipping industry, it still chose to back Bao Yugang and his long-term charter model, rather than larger shipowners like Tung Hao-yun. Yang Wendong's use of short-term charters made HSBC uneasy.
Bai Yushan said, "It was all for water transport. Honestly, most people didn't understand what you were doing back then. It's only now, with the drought this serious, that it makes sense. Maybe Saunders will change his mind now."
"Maybe," Yang Wendong said, unconcerned. "I'll meet with Saunders tomorrow. I'll feel him out again then."
Japanese banks typically only financed 50–60% of ship construction costs. The rest had to come from Hong Kong banks. That was why every Hong Kong shipping company had to curry favor with HSBC.
Yes, selling equity to HSBC meant giving them a cut. But if it brought full support, Yang Wendong could grow the pie far larger—giving up a slice wasn't a big deal.
More importantly, it would strengthen his relationship with HSBC, smoothing the way for future real estate and overseas investments.
"I hope it goes well," Bai Yushan said.
"Mm." Yang Wendong nodded.
For other businesses—like real estate holdings—he would be extremely cautious about bringing in external shareholders, weighing every risk and reward carefully.
But shipping was different. Though he had no plans to abandon the industry, by the late 1970s, its profitability would decline sharply. It could still be run, but competition would be fierce and margins low.
By then, what he valued most wouldn't be shipping profits—but the influence that came with placing ship orders.
The next day, Yang Wendong arrived at HSBC's headquarters.
"Mr. Saunders," he greeted with a smile.
"Mr. Yang," Saunders said warmly. "Please, have a seat."
After some brief pleasantries, Yang Wendong got straight to the point, explaining the outcome of his Japan trip.
Saunders laughed. "Ordering 600,000 tons of ships in one go—Mr. Yang, you really don't hold back."
Yang Wendong smiled. "I'm extremely optimistic about the future of shipping—especially large oil tankers. Looking at the global economy, many regions undergoing recovery will need massive amounts of oil."
"Indeed. Oil is the lifeblood of every economy," Saunders nodded. "I'm optimistic about the shipping sector too. I'd be happy to support you."
Yang Wendong smiled. "Then I hope HSBC can cover 28% of the financing for these ships. What do you think, Mr. Saunders?"
"That's quite a high percentage, isn't it? Over ten million dollars, and there's no collateral," Saunders said slowly.
Yang Wendong nodded. "Given current market returns, as long as operations go smoothly, large oil tankers and bulk carriers can recoup their investment in three years. The risk is low.
The lack of collateral isn't by choice—Japanese banks have already secured the liens. But in return, HSBC would enjoy higher interest income."
Early on, HSBC and other Hong Kong banks didn't touch maritime loans. Shipping was seen as too risky, and new ships bought from Japan couldn't be pledged to local banks, as Japanese banks had first lien.
After all, they covered most of the loan and charged fairly low interest—leaving Hong Kong banks with only unsecured lending options.
But while Hong Kong banks' loan amounts were smaller, they were crucial. Without them, shipowners would have to invest two to three times more of their own capital.
As maritime tech improved and the insurance sector matured, risk decreased. That's when HSBC began cautiously entering the business—though they still charged higher rates.
Saunders smiled. "How about five years, at 12% interest?"
"That's a bit high," Yang Wendong said with a wry smile.
In the 1960s, interest rates weren't very high—thanks largely to low U.S. rates.
Hong Kong mortgage loans were around 6%. Industrial and commercial loans averaged 8%. Shipping loans were higher—generally around 10%.
Saunders said, "It is high. But if we cover 28%, you'll only need to pay about 10% out of pocket. I don't need to explain what that means for your cash flow.
Even Tung Hao-yun has to front at least 15% when buying new ships."
Yang Wendong chuckled. "I get it. But we've been long-term partners, haven't we?"
After some back and forth, they finally agreed on an interest rate of 11.2%.
"Mr. Saunders, here's to our continued cooperation." Yang Wendong extended his hand.
As long as he got a high enough loan ceiling, he could accept a slightly higher rate. The profit margins in shipping could easily absorb even a 20% interest cost.
Still, it never hurt to negotiate.
Saunders shook his hand. "I'll have our legal team draft the loan agreement. Once it's ready, we'll meet again to finalize everything."
"No problem," Yang Wendong nodded.
Saunders added, "Mr. Yang, I do admire your boldness. But running at such high risk all the time—you should be more cautious. Long-term, stable growth is the ideal path."
"I'm much more conservative than Global Shipping," Yang Wendong said.
Bao Yugang's rise in just 20 years had eclipsed many century-old shipping families. His talent was undeniable—but so was his aggressive use of leverage.
Yang Wendong wished he could play the same game, but no bank was ready to take that much risk on him yet.
Saunders shook his head. "That's different. Bao Yugang uses a long-term charter model. Even if something goes wrong, the leasing companies take the hit."
"True. But I won't be using long-term charters for now," Yang Wendong said, then tried probing. "Still, I might consider bringing in some shareholders. What's your opinion on that?"
Saunders thought for a moment. "That's certainly possible. At HSBC, even when we invest, we don't interfere with internal management—as long as your decisions don't pose major risks."
"Great," Yang Wendong said, leaving it at that.
Clearly, HSBC had invested in Bao Yugang because they believed in his long-term charter model.
Yang Wendong's preference for short-term charters made Saunders less optimistic about his long-term potential.
That was understandable. High-risk operations could make massive gains—but one mistake could destroy everything. Every bank had to factor that in.
Three days after the agreement with HSBC, the cooperation MoU was finalized. After both parties confirmed the terms, they signed the documents.
Then Yang Wendong flew to Japan once more to sign the official purchase agreement for ten large oil tankers and bulk carriers with Mitsui Shipbuilding and Mitsui Bank.
Japanese business media quickly caught wind of the news. Such a massive deal was rare even for Japan's shipbuilding industry.
And when the story reached Hong Kong, it stirred up a storm.
Hong Kong China Daily and Oriental Daily were the first to break the news:
[$50 Million: The Largest Ship Purchase in Hong Kong's History]
[A New Shipping King Is Born]
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