In May, a trading company registered in the British Virgin Islands quietly opened in Hong Kong. The legal representative of this company, called Zhengrun, was an Australian-born Hong Kong businessman, with a registered capital of 100 million Hong Kong dollars. The company's main business was clothing, machinery, and raw materials.
The company quickly made its first deal with a French company, transporting the first batch of machinery materials through their Dutch subsidiary to the port of Rotterdam. These machines were not on the UN embargo list, so they were quickly cleared.
The transport ship set off from Europe, passing through the English Channel, the Suez Canal, the Mediterranean, and the Indian Ocean, stopping at a port in Pakistan for resupply, and finally crossing the Malacca Strait to reach its final destination, Hong Kong.
After receiving this batch of goods, Zhengrun quickly resold them to a machinery company in eastern Guangdong. The robust business channels of Zhengrun left many peers speechless.
This company was naturally established by Liao Chengde on orders, and on the mainland side, over a dozen companies in eastern Guangdong with different businesses would take turns receiving goods from all over the world through this company.
As for the capital structure of the company, the Liao family was the sole owner, at least according to public announcements. In the internal agreement, Liao Chengde and Zhong Shi, among others, held 51% of the shares, while a company from eastern Guangdong held 49%.
This was Zhong Shi's first foray into the real industry, and it might also be his only time not involving mergers and acquisitions but rather focusing on the real industry. While there was certainly a plan to diversify investments, it was more about building relationships with the top leadership on the mainland.
In July, Zhong Shi gathered about 100 million US dollars in capital and once again targeted the Nikkei index market in Singapore. The Chicago Mercantile Exchange was about to launch Nikkei index futures, presenting another rare opportunity to short the Japanese market.
By this time, it had been half a year since the collapse of the Japanese stock market at the beginning of the year. The Japanese market had initially recovered, regaining the 30,000-point mark and even breaking 33,000 points twice in a few months, showing a strong momentum to reclaim lost ground.
Zhong Shi was very clear that the Japanese stock market was far from hitting rock bottom. What was happening now was more like a strategy to fatten the sheep before slaughtering them. The Japanese stock market had only fallen by a mere 5,000 points from its peak, still the world's largest market by market value. With the improving economic situation, Japanese entrepreneurs' confidence was also restored, and they were confident that they had the strength to resist the negative impact of the Nikkei index futures launched by the U.S. market.
This was, of course, impossible.
This time, the operation was fully entrusted to Andrew, who was Zhong Shi's dedicated broker and had now officially joined his core team. Zhong Shi had great confidence in him. For the operational strategy, Zhong Shi only gave one instruction: go all in on shorting.
Despite Andrew's objections, his words carried no weight in the face of Zhong Shi's impressive track record. Besides, he had also invested 2 million Hong Kong dollars, so he had to follow Zhong Shi's strategy.
It should be noted that brokers are not allowed to use their own funds for operations, as this violates professional ethics. However, this rule could not prevent brokers from operating privately, and people around the world had ways to circumvent such regulations.
At the end of July, the Japanese stock market entered its second round of decline.
First, the Chicago Mercantile Exchange launched Nikkei index futures, bringing the total to three exchanges listing Nikkei index futures: the Osaka Exchange in Japan, the Singapore market, and the most developed financial market in the U.S. These three places worked together to undermine the confidence in the Japanese stock market.
Second, a series of financial scandals erupted in Japan, starting with bank runs and bankruptcies, followed by some financial institutions (securities firms) misusing small clients' funds to cover losses for large clients. The scandals then spread to some small enterprises, which falsified financial statements to mislead investors.
Finally, there were rumors that foreign speculative capital would withdraw significantly from the Japanese stock market and invest in the real estate market instead.
This was a combination of blows, each one hitting the vital points of the Japanese market.
Under these circumstances, the Japanese stock market plummeted, falling from 33,000 points in July to 20,000 points on October 1st, a drop of over 10,000 points, with the market value declining by more than one-third.
During the decline, due to the loss of confidence, investors withdrew funds from the stock market, and listed companies, unable to raise sufficient funds for expansion, saw their operations deteriorate. This deterioration was reflected in the third-quarter reports, causing further market concerns, and the vicious cycle continued until October.
In this situation, Zhong Shi and his team made over 1 billion US dollars in floating profits from the futures operations over these few months. Andrew's operational strategy was very aggressive; he used part of the floating profits as margin, and the rest was invested in the next phase of short positions. After a few cycles, the short positions he held reached an astronomical level. While the profits were maximized during the decline, the risks were also enormous. If the Japanese stock market reversed, the margin required to maintain these positions would be astronomical, or they would be forced to liquidate.
Zhong Shi learned about Andrew's operational methods at the end of September. He was taken aback, never expecting the usually unassuming Andrew to be so aggressive, almost like George Soros. On his orders, Andrew reluctantly liquidated all contracts for October and subsequent months, withdrawing from the Singapore market.
Fortunately, he acted in time. In October, the Japanese stock market would see a rebound. Although the real economy had not suffered as much as imagined, the downward trend of the Japanese stock market had already formed, and it would never again experience the prolonged bull market of the previous eight to nine years.
By 1991, the final blow from international capital to Japan was the withdrawal of funds from the real estate market, leaving behind a mess of burst bubbles and dragging the Japanese stock market into a long bear market that lasted for over a decade.
These were all future events.
The first thing Zhong Shi did after returning to the mainland was to persuade his family to move to Hong Kong. The ten one-way permits were already in hand, with the final deadline being December 31, 1990. By 1991, he would be a nominal Hong Kong resident.
This was supposed to be a great thing, but Zhong Shi's grandfather was a traditionalist, deeply rooted in the idea of not leaving his homeland. As for Zhong Yi's parents, Zhong Shi had to do the work to convince them. Zhong Jianjun and Liu Lan, though not very willing, had been to Hong Kong and seen its prosperity and development. Under Zhong Shi's persistent persuasion, they soon agreed.
Zhong Fangzhuo had lived his entire life on the mainland. He came from a scholarly family and had old-fashioned and traditional ideas, believing that reading was the highest pursuit. He was quite dissatisfied with his grandson Zhong Shi's actions, but he had seen the changes in the family over the years.
In recent years, the family had acquired many new appliances, things that were unimaginable in the past. After moving to the city, he suddenly realized how much the outside world had changed, and how quickly, to the point where he could hardly believe it.
Even so, he was unwilling to leave the mainland.
However, after visiting Hong Kong once, all these thoughts vanished. On the mainland, no one dared to have servants, as it was considered class oppression politically. No one dared to bear such a heavy burden. In Hong Kong, however, this was not a problem. Wealthy families often had dozens of servants, reminiscent of the pre-revolutionary era.
Upon arriving in Hong Kong, Zhong Fangzhuo was warmly welcomed by the Liao family. Liao Chengde treated him with great respect, and the servants in the house treated him as a distinguished guest, evoking memories of the old days. After returning, Zhong Fangzhuo was no longer as resistant to moving to Hong Kong. Although he did not know what Zhong Shi was doing, he believed that forming a relationship with someone like Liao Chengde, a "big shot," would not involve any improper business. More importantly, he saw the possibility of Zhong Shi restoring the family's glory.
After two or three months of persuasion by his two sons, Zhong Fangzhuo finally agreed to move to Hong Kong with the whole family to enjoy his retirement.
The only complication was Zhong Xiaohui. This young girl had worked hard and was admitted to Ritan University after a year of retaking her exams. This was one of the top universities in the country, on par with the top universities in the north. Giving it up would be a great loss. After discussions with Zhong Shi, his parents, and Zhong Xiaohui herself, they decided to let her complete her university education on the mainland. After all, if she went to Hong Kong and took the exam again, she might not be able to get into a university comparable to Ritan. At most, she could fly directly from Pudong to Hong Kong during her holidays.
As for the procedural issues, they were handled by the liaison person from the Ai Hua Society, which was simply a matter of changing a one-way permit to a two-way permit.
Although the Ai Hua Society was under the Ministry of Foreign Affairs, the specific affairs were managed by the Guangdong provincial government. Soon, Zhong Shi's family background was thoroughly investigated. They were just an ordinary family who had formed a relationship with Liao Xiaohua through Zhong Yi's studies in Hong Kong and had made a lot of money in the financial markets with Liao Chengde, living in a luxury villa in Hong Kong.
As for Zhong Shi, due to his young age, his relationship with his cousin did not attract the attention of the investigators and was overlooked, thus sparing him a disaster.
On October 31st, Zhong Shi and his entire family crossed the Luohu checkpoint. He took one last look behind him and silently said to himself, "I will eventually come back."
On the other side of the checkpoint, three minibuses had been waiting for a long time. After picking up the Zhong family, they quickly drove to a 8,000-square-foot luxury villa in Shallow Water Bay that Zhong Shi had just purchased. (The second volume has now concluded. Starting from tomorrow, new and exciting content will begin. Thank you for the support of all the readers, and I look forward to more friends joining us. Finally, thank you to the reader Feng Xiong Anmo for the generous tip!)