Chapter 957 - Local Finance

Chen Ce reflected on how Qiongshan's commerce and industry had become the most developed in all of Hainan—at least by this timeline's standards. What distinguished it from Lingao was that Qiongshan had grown organically, its prosperity arising naturally from the land and its people rather than being force-fed by Australian investment.

Only been county chief for a few days, and already the seeds of localism are sprouting, he mused to himself. The coming disputes over taxation would be troublesome indeed. Lingao still lacked any formal revenue-sharing system, and the question of how to allocate collected taxes promised to become yet another headache.

Though Chen Ce remained stationed at Delong Bank's main office—his days consumed by planning branch establishments across the counties and erecting the scaffolding of rudimentary tax institutions—the contradictions within the financial system had begun surfacing with increasing frequency as the Spring Awakening and pacification campaigns drew to a close.

As county-level governments took shape throughout the region, the thorny matters of local finance and taxation could no longer be avoided.

Lingao County technically had Xiong Buyou serving as its most senior county office director, yet the county hadn't established any separate administrative apparatus. All construction and investment flowed directly from the Executive Committee, wholly divorced from any concept of local revenue or expenditure.

The Greater Sanya District presented an even stranger case—it could hardly be called a local government at all. It functioned merely as an extension of the center, a dispatch organ rather than an autonomous entity. The region had possessed neither population nor commerce nor agriculture before the Australians arrived; Sanya was a colony built from nothing, conjured into existence by Senate decree. The vast majority of its output—ore, agricultural produce, timber, fish—flowed directly to Lingao. Everything the district required in return—clothing, grain, tools, even fuel—came by ship from Lingao. Investment derived entirely from Lingao allocations; operations depended wholly on materials and cash disbursed from the mother colony. Economically speaking, Greater Sanya was a complete vassal, as dependent as a suckling infant.

But the various prefectures and counties now under their control presented an entirely different picture. Though each county's economic circumstances differed, all were independent economic entities. Each possessed a market town, a scattering of villages, varying populations. They had farmland. They had commerce and industry at various scales. The old "Lingao equals Senate" model had become obsolete. Every county now boasted an Elder serving as county chief, presiding over an entire administrative apparatus.

And with administrative apparatus came the inescapable question of local finance. The Great Ming's fiscal philosophy during the Zhu Yuanzhang era had essentially amounted to extracting everything for the center while leaving almost nothing for local use. From a centralization standpoint, this approach was undeniably effective—but for local administration, it spelled disaster. Starved of funds, county magistrates found themselves incapable of accomplishing virtually anything. Even maintaining the bare minimum of governance proved an ordeal. Naturally, without resorting to creative measures—acquiring off-budget working capital through whatever means necessary—no official could long remain in office.

The Elders clearly perceived the defects of this system. Yet reforming it touched upon an enormous constellation of issues—not merely taxation and fiscal policy, but the fundamental question of how power should be divided between central and local authorities. The Executive Committee had recently been convening expanded meetings on the subject, debates that often stretched past midnight without resolution.

Until a definitive plan could be formulated, the stopgap solution was full allocation of administrative expenses from the center. When each county office director assumed their post, the Finance Supervisory Department issued a one-time allocation of Circulation Vouchers. Currently, these Vouchers remained backed by grain reserves. Based on each allocation, the Planning Commission designated an equivalent quantity of grain as backing. The grain itself required no long-distance transport—after the pacification campaign concluded, the Planning Commission had amassed considerable stocks in each county, drawn primarily from former Ming county granaries and from grain confiscated or seized during the pacification operations and land surveys. Some had been shipped to Lingao, but the remainder lay stored in local granaries. The transaction needed only to pass through the books.

The funds distributed to each county didn't flow directly to the county office directors but rather into dedicated fiscal accounts at local Delong branches, with directors making specific disbursements as needed. Because local administrative expenditures covered an endless variety of items, the Finance Supervisory Department had compiled a list of recurring expense categories—providing at least a rough framework for monthly allocations. These funds were designated for designated purposes; county office directors couldn't divert them to other uses. This prevented scenarios where an impulsive leader might overspend on a whim and then find themselves unable to meet payroll at month's end.

Compiling the recurring expenditure table had proven no simple task. No one possessed clear knowledge of how much administrative expenditure a seventeenth-century county actually required each month. And Lingao's own fiscal records offered no useful reference whatsoever—the system had always operated on lump-sum accounting. Particularly vexing was the question of personnel: which institutions to establish in each county, how many staff positions to create, what ranks and salaries to assign—none of these questions had been definitively resolved. For now, management remained rough by necessity. Cheng Dong had issued standing instructions that temporary budgets should err on the side of stringency rather than generosity, lest they establish an overly loose baseline that would prove painful to tighten later.

Expenditures beyond the recurring categories were left to county office directors to cover from their monthly allocations, with the strict requirement that they could only save, never overspend.

As for county revenues—taxes, fines, seizures, and the like—all were to be remitted in full to the Planning Commission and Finance Supervisory Department.

This policy of unified collection and expenditure was admittedly quite inappropriate, most notably in its complete elimination of county-level fiscal autonomy. In essence, it differed little from the Great Ming's local fiscal arrangements—and was arguably even more rigid. But for the present moment, no better alternative existed. The Executive Committee's directive to local governments was "stability"—maintain public order while extracting local resources to sustain the Senate's operations. Economic development was emphatically not among the county office directors' primary responsibilities.

This system had been formally implemented since the end of the previous year—over a year now—and every county on Hainan Island had more or less established its fiscal operations accordingly. The machinery ran reasonably smoothly.

Yet during his fiscal inspection tour around Hainan, Chen Ce had detected murmurs of resistance. The county office directors—particularly those governing counties with historically strong agricultural production and relatively robust economies, such as Qiongshan, Chengmai, Wenchang, and Ding'an—harbored considerable discontent with the unified collection system. They ardently desired reform.

Chen Ce largely understood their thinking. Becoming a county office director meant ruling as lord of a hundred li. Most people possessed at least some measure of career ambition. Even governing a poor small county town with only tens of thousands of residents, they still yearned to leave their mark. The eternal popularity of management simulation games testified to this basic human impulse. Moreover, each of Hainan's counties was rich in untapped resources, with far too many projects crying out for development. Chen Ce had visited Changhua Fort—a small fortress garrisoned by only a dozen men, surrounded by barren beach and possessing no real resources to speak of. Yet even before the Spring Awakening campaign, merely raising goats on those sandy expanses had achieved remarkable success—by the autumn of 1630, Changhua Fort had shipped three hundred sheep to Lingao.

Investment and construction couldn't rely solely on direct funding from the Planning Commission—the Commission was already drowning in projects demanding attention. Given the Lingao regime's stretched manpower and limited materials, simply managing "central enterprises" consumed all available capacity. Developing local industry was beyond their bandwidth. The chronic personnel shortage made the Planning Commission indifferent to expanding its already overwhelming portfolio.

Chen Ce knew that just last month the Executive Committee had exploited the disaster to conscript a large batch of laborers from Qiongshan, provoking Liu Xiang's displeasure. On Hainan Island, accomplishing anything at all required people. Though Liu Xiang had ultimately fulfilled his quota, the friction between center and periphery had already begun to show.

Hopefully the tensions will ease once the Shandong refugees arrive, Chen Ce thought. With additional population, and given the Elders' talents, each demonstrating their abilities to develop local industry shouldn't prove too difficult—though the fiscal system would certainly require reform as well.

Chen Ce smiled. "Once the Shandong refugees arrive, raising your fish will become much easier. After all, didn't Lingao itself only prosper after importing large numbers of people from Guangdong?"

"Waiting for Shandong refugees—that'll be at least until year's end, won't it?" Liu Xiang, unaware of Chen Ce's private calculations, was speaking with enthusiasm. "I already have some ideas—they don't require much investment, just manpower to execute." He proceeded to describe the small county industries he and Tang Menglong had conceived, centered around coal from Jiazi Mine.

Chen Ce deflected with vague pleasantries, offering no direct response. Then he steered the conversation back to summer tax collection.

The moment Qiongshan County posted its summer tax proclamation, it sparked an uproar. This was the first year the Australians would be collecting taxes directly, and everyone—poor and rich, commoner and scholar alike—watched with intense interest.

In teahouses and informal gatherings beneath shady trees throughout Qiongshan, most people assumed the Australians would likely "follow precedent" and continue collecting according to Great Ming methods. For hundreds of years, imperial grain and national taxes had been collected just so. Besides, hadn't the Australians collected grain levies in Lingao last year using the old Ming framework? They had merely improved collection methods and surveyed the land, making the process fairer than before. Everyone figured that since Qiongshan's land had been surveyed too, the Australians would naturally follow Lingao's model. For powerless commoners, being able to pay taxes according to regulation without mysteriously incurring additional burdens would represent the best possible outcome.

When the summer tax proclamation finally appeared, however, the shock was palpable. The concept of "apportioning corvée into land" alone was astonishing enough—but the strange progressive system created an even greater sensation.

For days, whispered discussions filled every lane and alleyway, every courtyard and residence. Among the common people, though most couldn't read, they found others to read the proclamation to them and listened to the propaganda team's explanations. One by one, smiles spread across their faces—though some wore expressions of disbelief.

"So doesn't this mean we don't have to pay taxes?" Several farmer-looking men had gathered before the proclamation to debate its meaning. "My family only has six mu—whether it's 'standard' or not, we're definitely first tier."

"Then I don't qualify either."

"We can finally catch our breath. Between the disaster and the replanting of sweet potatoes, we've been run ragged. If we had to pay taxes on top of all that, we'd be stretched past breaking..."

(End of Chapter)