Story of a Big Player from Gangnam

Chapter 107: Letter of Intent (1) – PART 2

Gun-Ho and Min-Hyeok boarded the plane to Shanghai, China after meeting at the Incheon International Airport.

“Keep this with you.”

“What is this?”

“It’s your business card. You will meet with a lot of people once you arrive in China. You will need it when you do. So I made 100 of them.”

“Team leader of foreign market development in GH Development Company? Gun-Ho, I can’t even speak any foreign language. I don’t speak English or Chinese. That’s a too big title for me.”

“Do you think I know things so I become the president?”

“Well, I do like my business card though. It looks so nice. I like the logo especially.”

“That logo was designed by our staff, Ms. Ji-Young Jeong.”

“Really? She is good at it.”

When they arrived at Pudong Airport in Shanghai, he received a call from Professor Wang.

“Gun-Ho? Where are you?”

“I just got off the plane.”

“Really? Then you will arrive here around 2 pm. I can wait for you in the lobby in Shangri-La Hotel.”

“Don’t stay in the lobby, but have a coffee in the café there while waiting for me.”

“Okay. Hurry up.”

Gun-Ho took Min-Hyeok to the Waitan.

“Wow, it’s awesome! This is the famous Waitan. It was the extraterritorial area of the international settlement.”

“You know a lot about history. I know you loved reading historical novels and cartoons even when we were in high school.”

“It looks amazing.”

“If we decide to do the joint venture, you will have many chances to visit historical sites and tourist spots because the joint venture would be located in Kunshan City which is close to Shanghai.”

“Do you think that a joint venture will be profitable?”

“As long as companies are moving to the industrial park, there shouldn’t be any problem. The real problem is the registration of the land.”

“Don’t they do that?”

“Chinese people don’t usually clearly register the land for us. It shouldn’t be a problem for a house or condo that is owned by an individual for a residential purpose; however, for a large lot like for a factory, they don’t usually clearly register.”

“Why do they do that?”

“That’s the problem of having a business here. Korean companies have problems as well.”

“What about them?”

“Many Korean companies make money by investing money in the real estate where their company is built on, rather than by their business activity. So they expect the same return when they come to China to have their business.”

“Does that mean it’s difficult to borrow money from a bank with the land where a factory would be built on?”

“That’s right. It’s possible in some areas, but it’s really hard to borrow money with the land that would be used for an industrial park.”

“I see.”

Min-Hyeok looked worried.

“Don’t worry about it. Companies will move into the industrial park as long as we provide good price and benefit.”

Gun-Ho and Min-Hyeok took an express bus from Shanghai to Hangzhou City. Min-Hyeok was writing down something diligently in the bus.

“What are you writing?”

“I’m just taking a note about the signs of destination and the street view and stuff.”

“It’s a good habit to write things down. Well, I will take a nap now.”

Gun-Ho and Min-Hyeok arrived at Shangri-La Hotel in Hangzhou City and met with Professor Wang who was sitting at the café.

“Hey, Professor Wang.”

“Hey, Gun-Ho. How are you?”

They greeted each other with a handshake and a hug.

“This is Min-Hyeok Kim. He is a friend of mine.”

Min-Hyeok gave Professor Wang his business card that Gun-Ho gave to him earlier.

“Oh, Mr. Min-Hyeok Kim. Nice to meet you. My friend’s friend is my friend. Don’t you think, Mr. Kim?”

“That’s right. We are all friends. Let’s have a cup of coffee.”

A young lady in qipao brought a menu book to Gun-Ho’s party, and they ordered a cup of coffee.

“Did you have a chance to review the business plan?”

“I did. You said you wanted to participate in the joint venture by acquiring some shares to support Deputy Mayor Seukang Li. Did you decide to give up?”

“Yeah, I gave up. I think we’d better not participate. That way the joint venture would look better. So, as you saw in the business plan already, China and the Korean company will equally take 50:50. Seukang Li agreed to it as well.”

“If I make enough money from this, I will support Seukang Li for you, Professor Wang.”

“Thank you for saying it, friend.”

Min-Hyeok listened to the conversation between Gun-Ho and Professor Wang, with an envious look on his face. He couldn’t understand their conversation at all because they were talking in Chinese, so he was just sitting there while fiddling with his cup.

Gun-Ho and Professor Wang started discussing about the joint venture with the business plan on the table.

“Since China invest in kind, all the expenses incurred for the presentation and wages for the staff of Jinxi Construction Company will be paid with the funds invested by a Korean company.”

“In the beginning, yes, probably so.”

“What would happen after we would spend all the money that a Korean company would invest?”

“1,500,000 dollars is a significant amount of money in China. It can’t be all spent within several months. As you see in the business plan, the number of workers sent to the joint venture from Jinxi Construction Company is about 30. There are a few high paid engineers but most of them are regular workers. The total wage shouldn’t be more than 100,000 dollars per month.”

“We will do at least one presentation in Korea to attract Korean companies into the industrial park. We will have to then place advertisements in a daily newspaper and the presentation will be held in a hotel. That will cost a lot.”

“We did some research about it. It won’t cost much to place an advertisement in a Chinese newspaper. The problem is the cost for Korean newspaper advertisements and the presentation room to rent in a Korean hotel. We are guessing that we would need about 30,000 dollars for them; what do you think? The workers of Jinxi Construction Company said so as well.”

“I’m not sure.”

Gun-Ho looked at Min-Hyeok and asked.

“Do you think it would cost about 10 million won to place an advertisement in a daily newspaper in Korea—the size of about 17 centimeters by 37 centimeters?”

“I’m not so sure, but an ad in an economic newspaper should be less pricey.”

“Since we are leasing the lot to companies, we can’t register the lot under those companies’ names, right? Korean companies prefer to move in a lot where they could register the land because they want to borrow money from a bank with the land they are using for their business. Is there anything you can do about it?”

“That’s hard to be done. The entire land of the industrial park is registered under Jinxi Construction Company and the land is divided into pieces to lease to companies. Some Chinese people misled Korean companies that they could borrow money with the land. Seking Li doesn’t do that kind of things. That’s why the required security deposit is not high.”

“The security deposit is 100 Yuan with a monthly rent of 1.0 Yuan per ㎡. How much would it be then for a factory with 3,000 pyung?”

“I will calculate for you.”

“Oh, Min-Hyeok. Thank you.”

Min-Hyeok calculated with his electronic calculator.

“For the 3,000 pyung, it would be approximately 175 million won for a security deposit with a monthly rent of 1,750,000 won.”

“Hmmm.”

Gun-Ho thought for a while with his arms crossed.

Professor Wang pulled out something from a large envelope he brought in.

“What is this?”

“It’s a drawing and specification of a standard factory. There are three types: A, B, and C.

“So a factory can be one of these types. Building a factory will cost a lot as well.”

“A factory will be built within a budget of a security deposit. This is a prefabricated factory building.”

“I see. Let’s have dinner now. Why don’t we go to Louwailou where we can have traditional Chinese food.”

Min-Hyeok was amazed by the dishes.

“Wow, I see all sorts of dainties.”

“Hey, Mr. Kim. Drink this.”

Professor Wang poured liquor in Min-Hyeok’s glass. He then asked Gun-Ho,

“If the joint venture starts, who are you going to send as a president?”

“According to the business plan, China will assign someone for the chairman of the board while Korea will send someone for the president position, for the first term. For the second term, they will do the other way around.”

“That’s very common. Since you, President Goo, have your business to run in Korea so I assume you wouldn’t come to China to manage the joint venture.”

“Min-Hyeok here, he will do it.”

“Oh, really? That’s what I thought.”

Professor Wang extended his hand to Min-Hyeok for a handshake.

“I was told that the president of Jinxi Construction Company will take the chairman of the board position, and for the vice president, the planning director who wrote the business plan would take the position.”

“Really? I guess the vice president will be very busy.”

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