Chapter 1764 - Methods of Issuance
The Senatorial Council had originally toyed with the idea of making the "Silver Reserve Vouchers" a kind of industrial-goods purchasing coupon—anyone wanting to buy Senatorial Council–produced merchandise would have to use the new currency. But Finance and Economic officials felt this approach had limited significance, since the Council's industrial output still didn't reach a broad enough population or range of use.
The Finance Department's view was that the Senatorial Council had to control Guangzhou's distribution channels for "rice," "salt," and "cloth"—the three basic consumer goods—to ensure the new currency could always purchase these necessities.
As long as banknotes could buy basic necessities, whether they could be redeemed for silver dollars would cease to matter. Otherwise, even if every yuan of Silver Reserve Vouchers in circulation had a silver dollar sitting in the bank as backing, it would do no good.
Back then, the Renminbi had managed to gain a foothold in a chaotic currency market not only through administrative force that pushed silver dollars off the stage, but crucially because the government controlled supply channels for "two whites and one black"—rice, cotton yarn, and coal—thereby upholding the paper currency's fundamental credibility.
The Finance Ministry now faced different circumstances from 1949, yet abolishing the tael system and replacing it with yuan—guaranteeing interconvertibility of silver and banknotes—was still a seismic event for financial markets. To ensure the new currency would be accepted and circulate freely, all the financial theory in the world couldn't match the most basic principle: you had to make money "worth something."
Gold and silver were not inherently "valuable." In places where precious metals were abundant while commodities were scarce, they suffered massive devaluation as well. Seventeenth-century China had a living example: the Manchu Qing.
Through multiple incursions across the Great Wall, the Manchus had accumulated—relative to their territory and population—an astronomical fortune. But pouring immense quantities of gold and silver onto that small, cold, barren land brought only hyperinflation. The Ming's trade embargo left the Qing with almost no one to trade with but the equally impoverished and hostile Joseon, conducting nearly coerced commerce; and the merchandise obtained from Shanxi merchants was a drop in the bucket.
Reports sent back by Huang Hua, dispatched to Shengjing for trade, were full of phrases like "everything is exorbitantly expensive" and "goods are scarce." Middle- and lower-ranking officials struggled to make ends meet; some had even been punished for selling imperial gifts they'd been forced to dispose of. The Qing kept demanding that the Senatorial Council ship in grain, offering prices as high as forty taels of silver per shi.
"So the question of how many silver coins to prepare is not the crux. Although our new currency is no longer rice-backed, its value still requires these basic commodities to underwrite it." Chen Ce added this coda after explaining the new currency issuance plan.
Liu Xiang said, "I'm not questioning Finance Ministry policy. But... the common folk have absolutely no fondness for paper money. If we try to pay wages and make purchases with banknotes now, I'm afraid... it won't be easy. Market acceptance is low. We can't very well force trade at gunpoint—there has to be a gradual process."
Chen Ce replied, "Naturally. Why else would Finance allocate an extra two hundred thousand yuan in silver coins for you? Precisely to reduce resistance to circulation."
Liu Xiang thought: That's confiscated war booty from right here in Guangzhou! The Enterprise Institute had ransacked the prefectural and county treasuries and the Guangdong Provincial Administration Commission's vaults, dredging up over two hundred thousand taels of silver to hand over to the national treasury. Allocating two hundred thousand yuan to Guangzhou was only fair. And even factoring in impurities and wear, they'd still skimmed off a sizeable margin!
But he had no say in how war booty was disposed of, so he could only adopt an earnest, grateful demeanor: "We do need your support. The confiscated silver from our raids here won't be inconsiderable, but I just hope Finance will give special consideration to our status as the experimental zone for the new currency."
Chen Ce said, "You may rest easy. The new monetary system is not just Guangzhou's affair—it concerns the great enterprise of the entire Senatorial Council."
Since the Finance Ministry had set the keynote, Liu Xiang could only "resolutely implement." Tonight's meeting was really about assigning tasks according to the Ministry's issuance plan.
Zheng Shangjie spoke up: "I have a question. If the new currency still needs rice to back it, doesn't that mean we have to fix how much rice one silver dollar buys?" She hesitated. "That would amount to a de facto rice standard."
"No, Director Zheng. What you're describing isn't a rice standard—it's a price-control policy," Chen Ce said. "Market prices for rice, salt, and cloth will be determined by the market. A certain range of rise or fall is permitted. What we must do is use market mechanisms to regulate prices and maintain price stability."
Zheng Shangjie suddenly grasped the magnitude of the task. "That means we'd have to control every rice shop and cloth shop in the city! Or open state-run stores on a massive scale?"
"No, it's not that extreme," Zhang Yikun said. "We only need to control the wholesale channels."
Lin Baiguang nodded. "Correct. Guangzhou's necessities all depend on inflows from elsewhere. Control the incoming wholesale channels, and you effectively control the market."
Chen Ce asked, "Is that feasible?"
Lin Baiguang smiled faintly. "Anything that touches vested-interest groups is never easy. The good news is that we're a new regime—and outsiders at that—with no tangled ties to local interests."
The "interest group" Lin Baiguang referred to was the ya hang—the licensed brokerages.
Guangzhou couldn't feed itself; it needed grain imports. But Ming-era trade was not free trade. Itinerant merchants couldn't sell their goods freely in the city; they had to go through licensed ya brokers who held official permits. The brokerage system had begun as a middleman's role, but by issuing permits, the government had effectively granted brokerages monopolies over certain trades.
Since the ya brokers were entrenched locals with government-granted "exclusive monopoly rights," they exploited itinerant merchants to the hilt. The ya firms had no capital, nor did they need any. They forced visiting merchants to deliver goods on credit, then resold the merchandise wholesale. In practice, visiting merchants often couldn't collect what they were owed, or suffered endless delays. And even when they did get paid on time, the amounts were heavily discounted. The Thirteen Hongs of Canton—which the British so despised and forced the Qing to abolish after the Opium War—were essentially another form of ya brokerage.
In Guangzhou, the grain trade was monopolized by ya brokers. Lin Baiguang knew this very well.
"How long will it take to eliminate the ya firms?"
"Not long." Lin Baiguang smiled. "I imagine, Mayor Liu, their calling cards have been piling up on your desk for quite a while."
"I'm waiting for the Legal Affairs Ministry to send judges to set up a provisional court," Liu Xiang said. "Convening military tribunals every time—first, it's irregular; second, it makes certain people green with envy. They've got all manner of high-sounding accusations ready for me, and I can't afford to wear that hat."
Zheng Shangjie understood that murderous intent lurked beneath these light remarks. The bosses of the brokerages that had monopolized Guangzhou trade for centuries were about to be wiped out in an instant!
She recalled that just a few days ago, a ya broker boss had approached her personal maid—no, "life secretary"—bearing lavish gifts, humbly requesting an audience with "Director Liu." He'd hinted that the brokerage would "make every exertion, public and private, to serve"—the meaning unmistakable. And here they sat, chatting and laughing about "slaughtering the pig"!
A chill ran through her. These men—tall, short, fat, thin—were all fundamentally no different from her own husband: ordinary petty bourgeois in their previous lives. Yet their conversation remained as bland and unremarkable as ever, carrying an undercurrent of cold cruelty. Even their smiles seemed to conceal something savage.
"Let's summarize," Chen Ce said. "To get the new currency circulating, we need police..."
"That's covered. A large batch will be on the streets soon," Liu Xiang said.
"A tax bureau."
"That will have to wait for the General Tax Bureau to send people. I don't even know who's coming yet."
"Why a tax bureau?" Zheng Shangjie asked. She had lived in America for many years and reflexively shuddered at any mention of the IRS.
Liu Xiang explained: "A currency's credibility depends largely on whether the state recognizes its value. Taxation is the clearest demonstration of that. Even if you issue bamboo sticks or wooden chips, if the tax collector accepts them, the people will acknowledge their value. The Ming Treasure Notes collapsed precisely because the emperor's wishful thinking went too far: spend them as if they were gold and silver, but when it came time to collect taxes, declare them worthless—only a few customs stations in the whole country actually treated them as money."
"A court."
"On its way soon."
"Supplies of rice, salt, and cloth."
Liu Xiang said, "Our other commercial channels in Guangzhou all handle high-end luxury goods. Even Zicheng Trading, which does wholesale daily industrial goods, doesn't touch rice or salt—though it does distribute cloth. Runshi Tang is a pharmacy; medicine is hardly a daily necessity."
"Salt is a bit complicated," Lin Baiguang said. "That's Monopoly Bureau business."
"Salt isn't a problem. As long as the Monopoly Bureau sets up a wholesale outlet, it's basically solved. For grain, we need a dedicated granary to serve as Guangzhou's main grain wholesaler," Zheng Shangjie said. "We could have the Dachang Guangzhou branch take that on."
Dachang hadn't originally established a Guangzhou branch for the grain trade. In essence, it was a front for the taxation authority, collecting "reasonable contributions" from the Pearl River Delta. The grain collected was mostly shipped to Hainan and Taiwan, rarely sold locally. But because of that history, the name, warehousing, and personnel were all ready-made. Repurposing it as a grain wholesale enterprise wouldn't be difficult.
"Dachang's local-tax-bureau role can be discontinued; we don't need that cover anymore. The tax functions and staff can be split off to the Tax Bureau. From now on, Dachang will be a state-owned commercial enterprise. Besides Dachang, we can also bring in the trading houses from both the Mountain and Sea Routes to open shops." Zheng Shangjie, eager to expand her own domain, had already been calculating how to grow the forces under her command. "Wanyou deals in miscellaneous goods from north and south—very eclectic. It can serve as another channel for currency reflux."
Chen Ce said, "That should cover it. Let me explain the specific issuance procedures."
He drew a sheet of paper from his briefcase and began expounding point by point.
(End of Chapter)