Chapter 620
The Middle Class Society
Time flies, and spring of 1994 arrived in the blink of an eye.
In an office building in Tokyo, three siblings, Chen Wenying, Chen Wensheng, and Chen Yingyi, are having a meeting, with Chen Wenying in charge.
At the conference table, Chen Wenying said, "Two years ago, we acquired Cisco's agency rights, allowing Chiba Investment to become a leader in the Japanese software industry. Now, we are facing the situation of going global—my father instructed me to contact the American publishing company Ziff-Davis and seek cooperation. So, this is our next task."
Starting in 1989, they began to focus on emerging technologies, first by publishing a software magazine in Japan, then by a series of acquisitions, and finally by partnering with Cisco.
It can be said that Chen Wenying was doing things step by step according to his father's instructions.
Of course, Chen Wenying himself is a 'technical person', and he is proficient in both software and hardware, which makes him even more powerful.
Today, Chen Wenying holds the positions of Chairman of Chiba Bank, Chairman of EA, and Chairman of Chiba Investment, making him a well-known figure in the Japanese business world.
Chen Wensheng then said, "Ziff-Davis is a large company, and even a partial acquisition would require a huge amount of capital. Of course, with our cash flow, we can complete the acquisition. However, there are two factors: First, we are seeking to acquire Japan's third-largest telecommunications company (Nippon Telecom), which requires a large amount of capital. Second, Chiba Investment is, after all, a venture capital firm. Therefore, we are considering raising funds externally, which would also be beneficial for our development."
Chen Wenying nodded in satisfaction and said, "Wensheng is right, that's exactly what I was thinking. Although our cash flow is sufficient to complete these acquisitions, just like our cooperation with Cisco, we've also brought in over a dozen companies to form a cooperative and monopolistic position in the market. Therefore, let's start Chiba Investment's first real fundraising!"
"yes, Sir"
Chen Wenying didn't tell his younger siblings one thing—his father also asked him to keep an eye on a Chinese man named Jerry Yang, who founded an internet company, and then seek venture capital.
This is something that needs to be kept secret. I'll tell my younger siblings when it's almost time. Anyway, it won't cost much.
After the meeting.
Chen Wenying said something casual: "We attach great importance to the education of our children. Whether the third generation can succeed in the future is related to the stability of our conglomerate and our deterrent effect against potential enemies."
Chen Wensheng nodded and said, "What my elder brother says is true. This is also what Father hopes to see. We would be very satisfied if Zegong and the others could be as outstanding as Zerui and the others!"
The eldest of the third generation of their fourth wife is Chen Wenying's eldest son, Chen Zegong, born in 1967, who is only 17 years old this year. But his excellence has already been demonstrated, and he has been admitted to the University of Tokyo.
According to Chen Wenying's plan, after Chen Zegong graduated from university at the age of 21 (1998), he would need to study in the United States for two more years before returning to Japan to join the family business.
Let's work together!
"yes, Sir"
At this time, the 'Chiba Group' was actually already in the 'beginnings of a conglomerate'.
Financial institutions: Chiba Bank, Chiba Investment
Technology Company: Electronic Arts (EA)
Real Estate Company: Blue Sky Real Estate Co., Ltd.
Telecommunications: Substantial progress has been made in contacts with Japan's third-largest telecommunications company.
Other: Comics, games.
Chiba Investment is undoubtedly the largest company in the future. It first started by publishing software magazines in Japan, and then partnered with Cisco in the United States to become a major software company in Japan. Now, it is seeking to cooperate with Ziff-Davis (the largest software sales and publishing company) in the United States, which is a "going global strategy".
As for investing in Yahoo, it was about getting involved in the internet and further developing it in Japan.
In short, Chiba Investment then embarked on a massive acquisition and establishment of companies in Japan, forming a powerful corporate network.
In the first quarter of 1994, the Hong Kong property market trend had become out of sync with the market's actual affordability, and public calls for government intervention were growing louder. On March 30, 1994, under public pressure, the Hong Kong government introduced four measures aimed at curbing property prices and appointed an inter-departmental task force to formulate specific implementation details. These four measures were:
(1) Accelerate the development of infrastructure on 200 hectares of government land in Tin Shui Wai to facilitate the construction of new houses;
(2) Accelerate the development of land stocks by private entities and invite private developers to submit plans to provide infrastructure for their land stocks;
(3) Accelerate the construction of housing by the Hong Kong Housing Authority, including providing sufficient additional land and infrastructure;
(4) Provide loans to land development companies and housing commissioners to improve their cash flow so that they can bring more commercial and residential units to market.
In June, the Hong Kong government officially announced the first phase of measures to curb property prices, which mainly included increasing land and housing supply, comprehensively reviewing planning and development procedures, continuing to crack down on speculative activities, and protecting consumers.
The Hong Kong government stated that this was only the first phase of measures, and if it was ineffective, stricter measures would be implemented in the second phase. As a result, the already high property prices fell accordingly.
During this period, Hong Kong's economy also weakened due to the macroeconomic control measures implemented by the mainland. From the second quarter of 1994 to the third quarter of 1995, Hong Kong's property market declined from its peak.
Residential buildings, which have been a driving force behind the real estate market's rise, have seen their prices fall by an average of about 3%, with some areas experiencing even larger drops.
Office building prices have also fallen sharply by 3% to 4%. The commercial property market is also experiencing a decline in both rental and sales demand due to weak domestic consumption, a sluggish and stagnant retail industry. Many shops have been vacant for a long time before finding new tenants, and some large shopping malls have as many as 4% of their shops vacant.
Industrial buildings are becoming increasingly scarce due to economic transformation and the large-scale relocation of manufacturing industries. Many developers have shelved their industrial building development plans, and there is a growing number of applications to convert them for commercial or industrial use.
In the stock market, following the upward trend at the end of 1993, trading remained very active in early January 1994, and the index rose to a historical high of 15601.09 points on January 4.
With a large amount of profit-taking already accumulated in the market, and lacking positive news to stimulate the market, the index quickly fell from January 5th to 12176.51 points on January 13th. Afterwards, it rebounded slightly as some investors bought on dips, but the increase was not significant. At the end of the month, the Ping An Index closed at 13487.02 points.
Similar to January, the stock market in February remained in a "slightly weak" pattern. In early February, trading was quite quiet due to the Lunar New Year holiday, and the index hovered around the 13000-point mark. In late February, although the index briefly dipped below 13000 points, the fluctuations were minor. At the end of the month, the Ping An Index closed at 12410.23 points. In March and April, the market continued to consolidate and digest its gains.
On March 1, the index was still above 12000 points, but it fell below that level the following day. Initially, there was buying interest when the 12000-point level was breached, but this momentum eventually died down. By March 23, dragged down by news that Jardine Matheson Group had terminated its secondary listing in Hong Kong, the index repeatedly slipped to 11029.91 points by the end of March.
In early April, there was a technical rebound, and the index rose to 11753.76 points on April 13, but soon fell back to 811299.07 points at the end of the month.
Compared to 15601.09 points at the beginning of the year, the Ping An Index has fallen by 28.5% in four months.
The current property crisis is largely due to the crackdown by the Hong Kong government and banks, and it is also an explosion of social contradictions that have accumulated over time.
Oriental Daily News, May 26, 1991:
"People work like oxen and horses for a single roof over their heads. Some people spend their entire lives trying to own their own property. Housing prices have taken up 70% of family income. How much money do real estate developers actually make off us between building and selling houses? It's impossible to calculate!"
United Daily News, June 15, 1994:
"The rise in Hong Kong property prices in recent years has reached a crazy level. Taking the city as an example, new apartments often cost seven or eight thousand dollars per square foot, and in some upscale areas, they exceed 12,000 dollars per square foot, which is unbelievable. Such high property prices have far exceeded the purchasing power of ordinary citizens. For example, a university graduate with a monthly salary of around 15,000 Hong Kong dollars would need to pay about 900,000 Hong Kong dollars in cash to buy a 2.5 million Hong Kong dollar residence. And it would take at least ten years to save enough for a down payment. If this is the case for university students, it goes without saying that it is even more difficult for ordinary secondary school students and working people."
Ming Pao, May 29, 1994:
"How to park a car has always been a headache for car owners in Hong Kong. In recent years, driven by the property speculation trend, parking spaces have become more expensive. Currently, the price of a parking space in a typical large private housing estate is close to HK$1.2 million. With an area of more than 100 square feet (equivalent to more than 10 square meters), the price per square foot is HK$10,000."
Macao Daily News, June 4, 6:
American businessman Ma Tian (Note: Ma Tian is the president of the American Chamber of Commerce in Hong Kong) pointed out that based on the guarantees of the Sino-British Joint Declaration and the Basic Law, most foreign businesses believe that Hong Kong will maintain its original social system after 1997, and the interests of foreign investors will be protected. However, what is puzzling is that with the continuous rise in high wages and high rents, some foreign businesses are therefore scaling back their operations or adjusting their investment plans in Hong Kong.
“Siemens CEO Gerhard Gottlieb recently suggested that Hong Kong’s rental levels should stop at a certain level, otherwise it will not only deter some overseas companies, but also affect the future expansion plans of foreign companies in Hong Kong.”
The high housing prices cannot be entirely attributed to real estate developers "selling at high prices," but are also closely related to the increasingly rampant speculation.
Hong Kong speculators can be broadly divided into three categories:
One type is speculator groups, mainly Chinese-funded, mainland-funded, and foreign-funded companies in Hong Kong. These companies are wealthy and powerful, and can buy entire buildings and dozens of units, waiting for prices to rise before selling them at a higher price, often making huge profits.
Secondly, there are industry speculators, mainly people working in real estate companies, property agencies, and banks, law firms, and accounting firms related to real estate. They are well-informed, have close relationships with real estate developers and homeowners, and use their professional connections to conduct organized speculation and profit from it.
Thirdly, there are individual speculators, mainly ordinary citizens, who either work alone or in groups. They have limited funds and mostly engage in activities such as speculating on pre-sale apartments and selling pre-sale permits.
Many real estate developers have been involved in speculative trading.
The most famous speculator in the early 1980s was Chan Chung-ching of the Carpenters Group. Hongkong Land purchased the Golden Gate Building for HK$800 million at the end of 1978, and Chan Chung-ching bought it for HK$10.98 billion in early 1980. He then used the media to aggressively speculate on the property, driving the price up to a staggering HK$1.88 billion by September!
At a time when Hong Kong's property and securities markets are declining, Wharf Holdings announced a major piece of news: it has acquired the site of the San Miguel Brewery on the waterfront in Sham Tseng for a high price of HK$41 billion. The land area is nearly 50 square feet, and the plan is to develop 250 million square feet of residential buildings.
The news sent shockwaves through the market.
Firstly, Wharf Holdings was originally a commercial real estate group, rarely venturing into real estate development (for sale). However, after 1990, Wharf Holdings began to enter the 'luxury residential project' sector, and subsequently, in February 1993, it defeated consortia such as Nan Fung, New World Development, and Cheung Kong Holdings to win the Diamond Hill land parcel for a high price of HK$43.3 billion. The land area was approximately 280,000 square feet, and the plan was to build five residential towers with a total area of 1.2 million square feet and a Hollywood Plaza with a total area of 650,000 square feet, with a total investment of nearly HK$65 billion, averaging about HK$3500 per square foot. The entire project was completed in August 1997.
Secondly, Wharf Holdings is a non-listed company, but it remains very famous. Besides controlling the largest commercial real estate market in Hong Kong, the key factor is the membership of the Chan family. The Chan family already has Cheung Kong Holdings in the real estate industry, and now Universal Pictures is making its move, highlighting the extent of their monopolistic power.
In fact, the Chen family has been reducing its investment in new real estate development projects in recent years, and there have been very few cases of them successfully bidding against others at government land auctions in the last seven or eight years.
However, the Chen family's land reserves are simply too vast, and through the acquisition of land reserves by foreign firms over the years, they have remained firmly the No. 1 developer of real estate.
Sing Tao Daily pointed out: "According to the current project plans of real estate companies, Cheung Kong Group is undoubtedly number one, with its five 'large-scale residential estate' projects being incredibly ambitious. Wharf Holdings has also acquired land at high prices for two consecutive years, and is poised to become the seventh largest real estate developer in Hong Kong."
At the Chan family villa complex in Discovery Bay, Chan Kwong-leung is having a meal with the "Five Tigers of the Chan Family," a tradition he regularly shares with his children.
At the dinner table, Chen Guangliang asked, "What is the starting salary for a university graduate with a science or comics background who joins our group?"
Chen Wenkai quickly replied, "For science and technology graduates, whether they join Midea Electronics or Midea Games Entertainment, as long as they are graduates of the University of Hong Kong, Hong Kong Polytechnic University, or Hong Kong University of Science and Technology, our starting salary is HK$2, with 13 months' salary per year, resulting in an annual income of around HK$30. For art students majoring in comics, the starting salary is around HK$1.6, with an annual income of HK$20 as well.
Chen Guangliang nodded and said, "So, buying a house isn't a problem for these kinds of people!"
Chen Wenkai immediately understood his father's meaning and said, "Since the 1950s, Cheung Kong Group has always valued talent and offered discounts and subsidies to homebuyers. As a result, the overall homebuying rate of the group's employees is high and the pressure is relatively low, which is something that other companies in Hong Kong cannot match."
Cheung Kong Holdings and Cheung Kong Holdings have similar collaborations, with their employees enjoying certain housing purchase channels, offering discounts as low as 5%.
All five children understood that their father was worried about Hong Kong property prices.
At this moment, Chen Mengyi, the daughter, said, "Dad, no one can interfere with this matter. Take the media group for example; those celebrities and management, they have money and like to invest in real estate. Our group also proactively buys properties for our signed idols, securing their future."
After listening to everyone's comments, Chen Guangliang sighed and said, "I know, I know. No matter what region or country, the middle class is always the best indicator of its development. Everyone living in peace and contentment is just wishful thinking. Hong Kong is like that now. There is a large increase in the middle class, and they are investors in real estate. So after a property market adjustment, prices should rise again in the second or third quarter of next year."
In this generation, Hong Kong's middle class will be more than 30% larger, so the pressure will naturally be greater. Therefore, Hong Kong property prices are destined to be higher and speculation will be even more intense.
In reality, the 'middle class' is always representative of a country or region.
Of course, there are also welfare benefits for the poor, at least ensuring they don't starve or freeze to death—this is what a civilized country should have. For example, monthly pensions in rural areas are gradually increasing, and basic wages are rising year by year. (End of Chapter)