Do I need an old passport to get chinese visa in Hong Kong?

I don't know about the current situation in HK, last time I looked the agents wanted far more than it would cost in my home country for a visa, going to the official processing centre, especially for more entries and longer time (I think 3x or 5x as much, so not far out of line with your quote).

I do know that the embassy uses previous entries as one of the things they use to decide how long to give and how many entries, so if you are requesting a long term multiple-entry (or even double entry visa, depending on your nationality) it would likely make a difference.

My advice is to shop around a bit, there are various agents in HK, some of them reputable. If you are getting similar numbers from others (or they say they can't do it), that's the market price. CTS (China Travel Service) is an official state run company, so a scam is quite unlikely, however they might well not be the cheapest.

then they asked me for 3500 HKD

That's not a scam. That's how it works with Chinese visas, at least in Hong Kong.

You can get a visa if you meet all the requirements. If you don't meet the requirements, you can still get the visa via the underground methods for a much larger fee (the agency will use their connections within the embassy).

3500 seems reasonable. For 5000-6000 you can get a one-year no-questions-asked visa.

I had to show the previous passport too. It seems reasonable, since some people changed their name and got a new passport to circumvent an entry ban.