Chapter 541: Planning and Strategizing

"Xia Yu, you're here! Please, have a seat!"

Hearing the footsteps at the door, Wu Hongyi, who had been frowning and deep in thought, instantly woke up. He looked up in the direction of the sound and, upon seeing Xia Yu, immediately broke into a smile, stood up, and walked to the tea table.

"What's wrong? You look troubled. Have you encountered any difficulties?" Xia Yu asked as he sat down without hesitation.

Wu Hongyi poured hot water into the teapot, sighed, and gave a wry smile. Glancing at Xia Yu, he spoke frankly, "What else could it be? It's about the Chinese Business Consortium you mentioned. You just brought it up and left, leaving me sleepless all night thinking about it!"

Xia Yu chuckled and thought to himself that the Wu family had indeed taken the bait, but he said, "Hongyi, what specific problems have you encountered? I'll answer any questions you have!"

"Let me be straightforward," Wu Hongyi said after thinking for a moment, looking somewhat unsettled and continuing to speak.

"After you mentioned it yesterday, my grandfather thought it was feasible, but because of his poor health, he handed the whole matter over to me. The pressure is on me now!"

"Having me coordinate the entire Chinese Business Association is a challenge. Besides my family's background, I lack the connections and influence needed. It's a huge difficulty!"

"Furthermore, although you suggested using the model of the Japanese consortium, I don't know much about it. Starting from scratch would be too slow, and some aspects are confidential, so even if I research, I might not fully understand them."

"So right now, I'm feeling overwhelmed and clueless, and I can only turn to you for help! Even just a direction would be useful!"

At this point, Wu Hongyi's face showed a look of distress again.

"And you're also a shareholder of Huashang Bank. If this succeeds, you'll be part of the Chinese Business Consortium. You can't just ignore this!"

Seeing that Wu Hongyi was beginning to be somewhat pushy and seemed determined to cling to him, Xia Yu couldn't help but feel a mix of amusement and frustration.

This clearly showed that Wu Hongyi was in a real bind, or he wouldn't be in this state.

"Alright, don't worry. I happen to know a bit about the Japanese consortium model. Let me explain it to you," Xia Yu said after a moment's thought.

Wu Hongyi perked up immediately, nodding and pouring Xia Yu a cup of tea. "Please, go ahead. I'm listening carefully!"

Xia Yu took a sip of tea, cleared his throat, and began to explain. "The six major conglomerates in Japan represent the Japanese business world. These six major conglomerates can be divided into two categories: one is the family-style conglomerates, which evolved from the old four major zaibatsu in Japan. They are Mitsubishi, Mitsui, Sumitomo, and Fuji."

"The old four zaibatsu dominated Japan for a century or two. By the time of World War II, they reached their peak, monopolizing heavy industry, transportation, resources, finance, and other sectors. Unfortunately, after Japan's defeat in World War II, the European and American governments, aiming to eradicate Japan's foundation, and European and American conglomerates, seeking to suppress competitors, disbanded these four zaibatsu in the name of the United Nations."

"However, after the war, to deal with the mainland and the red northern bear, the United States had to rearm Japan, relax restrictions, and even return some of the production lines that had been moved or dismantled. The enterprises of the original four zaibatsu in Japan, relying on their foundation, once again seized opportunities to rise and consolidate, forming the current four major conglomerates."

"These four conglomerates are all controlled by a core family. For instance, the Sumitomo family controlled over 90% of Sumitomo's capital stock in 1937. Even after the breakup and reorganization following World War II, I'm confident that they still hold more than 50%!"

"But this model isn't quite suitable for the current situation."

Xia Yu lightly emphasized this last point, and Wu Hongyi nodded slightly without argument. After all, the Wu family's power was not vastly superior to other families and enterprises, so it was not suitable. He would look at the other model.

"The other type is the model of the two remaining conglomerates, Sanwa and Kyoei, which are not family-style conglomerates but are more like patchwork conglomerates. They are relatively looser and less cohesive."

"Sanwa is primarily a coalition of major enterprises in Kansai, Japan, formed to counter the competitive pressure from the four major conglomerates."

"Kyoei is even more prominent than Sanwa. It is the conglomerate with the largest number of constituent companies at its inception. Its characteristic is the classic method of conglomerate formation, involving constant cross-shareholding and increasing the number of subsidiaries."

"If the Chinese Business Consortium is to be established, it should refer to the models of Sanwa and Kyoei, with a focus on Kyoei!"

Xia Yu finished explaining and took another sip of tea, feeling a bit dry. Wu Hongyi immediately refilled his cup and asked, "Xia Yu, if we use Kyoei as a reference model, what should we pay attention to?"

Xia Yu smiled slightly and said, "First, you need to establish the core position of a bank. Without a doubt, that should be Huashang Bank, making it the financial hub of the entire consortium."

"However, this means that Huashang Bank's shares must be dispersed, with cross-shareholding involving a dozen or even dozens of companies. This is to link them, not requiring too many shares—about 1% per company is sufficient. Companies with stronger strength can hold up to 2%."

"Companies that are weaker and not qualified to be core enterprises do not need to have cross-shareholding with the bank. Huashang Bank should be established as the main financial bank and creditor for those enterprises."

"In this way, Huashang Bank's shares become particularly important. I suggest first privatizing the bank, and then, apart from us, expelling other shareholders. Reallocate the shares later to confirm the Wu family's leading position, otherwise, it will benefit others and leave you with a diminished stake."

Hearing this, Wu Hongyi silently nodded, noting the importance of Huashang Bank in establishing the consortium. Naturally, he did not want to let so many shares fall into other hands.

Cross-shareholding, which can link the most companies, is undoubtedly Huashang Bank. Controlling Huashang Bank means controlling access to various companies, which is of paramount importance!

The bank must be privatized, and the shares held by other shareholders need to be reclaimed. Xia Yu's shares should remain untouched and might even increase due to the privatization. Wu Hongyi understood this deeply but recognized it as a necessary measure.

"Then let's proceed with privatization and delisting. We'll discuss the specifics later!"

Wu Hongyi decisively made the decision, representing the Wu family's stance. He believed that even his grandfather would make the same choice.

Xia Yu nodded in agreement. Seeing Wu Hongyi looking at him quietly, he continued, "With the financial core of the consortium established, the next step is to focus on the Huashang General Association."

"The cohesion of a consortium greatly affects its competitiveness. Therefore, there must be an organization standing above all enterprises to set policies at the highest level. In simpler terms, it's about establishing a council for the alliance."

"In Kyoei, this is the 'San Kin Kai,' composed of chairpersons from the core enterprises of the Kyoei conglomerate. Other lower-level company leaders do not have the qualification to join."

"In the San Kin Kai, there are three levels: General Manager, Deputy General Manager, and Executive Director. The 'San Kin Kai' meets on the third Friday of every month to discuss the development and future of the consortium and to conduct business negotiations."

"Currently, the Huashang General Association is too loose and has a low entry threshold. The members' strengths vary, but its advantage is that it has already brought together all the capable Chinese merchants in the UK!"

"So adjustments can be made based on the actual situation. The Huashang General Association is an outer layer. We need to select capable and representative enterprises from it to form the core of the Chinese Business Consortium. Using the leaders of these enterprises as the core, establish a more streamlined organization with circulation channels, allowing for competition and improvement, and giving hope to the outer enterprises to avoid conflicts."

Wu Hongyi thought for a moment and solemnly nodded, clearly taking Xia Yu's words to heart.

"Therefore, selecting the founding core enterprises should be done with great caution. However, there are situations where, for example, in the food retail industry, there are at least ten companies in the Huashang General Association, and the top five have similar strengths. It's impossible to select all five, and selecting one or two isn't ideal. How should this be resolved?"

Wu Hongyi frowned and asked, catching the crux of the problem.

Xia Yu smiled lightly and replied, "Of course, you can't select all of them!"

"In each industry sector, you should select at most two companies. If there's only one, that's even better. This will help avoid internal competition and ensure a unified front against external forces!"

"You need to understand that once you become a core enterprise of the consortium, Huashang Bank must provide special treatment and full support. With Huashang Bank's financial strength, it can't cover all, and

 ten medium-sized enterprises can't match one large enterprise. Concentrating funds and nurturing one large enterprise is the best option."

"After all, in the UK, apart from internal competition among us Chinese merchants, the greater competition comes from outside. Without internal integration, how can we compete with the British under disadvantaged conditions?"

"If, as you said, there's no obvious leader in the food retail industry, then we need to facilitate mergers. Try to connect several companies into one. Although this is challenging, if the business owners know they are being selected as core enterprises for the consortium, they will agree to merge, even if reluctantly, due to practical considerations. They might even prefer that other enterprises give up their chance to join."

Hearing this, Wu Hongyi nodded repeatedly, clearly agreeing with Xia Yu's analysis.

Being chosen as a core enterprise of the consortium means having the support of the entire consortium, gaining absolute advantages in both finance and market. Enterprises that aren't selected, unless exceptionally outstanding or backed by stronger allies, will likely be absorbed or eliminated in the competition.

This is the trend!

Under the rolling wheels of the trend, one can only choose to comply!

Wu Hongyi said, "Then Xia Yu, I'll first identify some core enterprises in the industries with clear leaders within the Huashang General Association and establish a preliminary framework. For industries like food retail, the difficulty of facilitating mergers will be smaller."

"That's the right approach. Tackle the easier tasks first, and once the momentum is gathered, difficulties will no longer be so daunting!" Xia Yu agreed with a smile.

"By the way, considering the overall business situation of Huashang, even if the Chinese Business Consortium is established, it will initially focus on light industry, trade, transportation, and services—fields that are less valued by British capital. Concentrate resources on these sectors to monopolize them. It's better to have one bird in hand than ten in the bush. Only after securing these fields should we jointly explore other areas."

"You should be aware that heavy industry, telecommunications, oil, metals, mining, and chemical fibers are mostly dominated by the major British conglomerates. Even if Huashang Bank puts in all its effort, it can't compete and doesn't have suitable supporting enterprises."

"Of course, if there are enterprises in these industries that seem to be developing well, they can be established as core enterprises of the consortium. However, in terms of support, we must be cautious to avoid wasting funds and dragging down the entire consortium. These industries require enormous investment, and a single misstep can affect the entire consortium's financial chain!"

At this point, Xia Yu recalled the information about Sanwa. To counter Sumitomo Bank of Sumitomo Group, Sanwa Bank shifted its focus from the textile industry to heavy industry. However, the oil crisis of 1973 brought operational crises to core enterprises like Unicaja of Sanwa Group, leading to significant losses for Sanwa Bank and dragging down the entire conglomerate.

Huashang Bank, which couldn't even make it into the top ten banks in the UK, lacked the strength. Xia Yu advised against venturing into capital-intensive and highly competitive industries like heavy industry, oil, and mining. The prospects were too bleak.

When Huashang Consortium's strength is still weak, it's better to develop quietly, monopolize smaller and less critical industries, and establish a solid foothold.

Although these industries are looked down upon by major British conglomerates, achieving monopoly still offers a promising future. Transforming Huashang Consortium from a small fish into a medium-sized one is feasible.

When it's time for stealthy development, one must indeed be stealthy and not wasteful!

---

Later, Wu Hongyi asked Xia Yu many related questions, all of which Xia Yu answered in detail.

After the discussion, the gloom on Wu Hongyi's face disappeared, and he now had a framework for his thoughts.

That night, Wu Hongyi returned home and spent the entire evening discussing with his grandfather, Wu Chengde, relaying everything Xia Yu had said.

After reflecting, Wu Chengde gave Wu Hongyi the greatest support, encouraging him to proceed boldly, advising him to consult Xia Yu or him whenever there were questions, and to seek his help if troubles arose.

The next day, Wu Hongyi, full of energy, began preparing for the establishment of the Chinese Business Consortium.

Meanwhile, Xia Yu quietly visited the Chinese Embassy in the UK, where he had a lengthy discussion with Qian Wenchao. After Xia Yu left, Qian Wenchao immediately reported to the domestic authorities via a secret channel.