Chapter 2551 - New Market Conditions
"If you'll excuse me for a moment, comrades." Li Qiwei cupped his hands to the two men.
"Please, attend to your business—commerce takes priority," Li Shan replied courteously. He watched as Li Qiwei approached the seller, unrolled the cloth, and launched into his usual routine: shaking his head, clucking his tongue, finding fault after fault. When the haggling finally concluded, he announced his price: "Two bolts of native cloth—three jiao, four fen, six wen total."
"Why has cotton cloth dropped?" The seller's face fell. "Just yesterday, my neighbor got two jiao per bolt!"
"Nothing to be done about it." Manager Li spread his hands in a helpless gesture. "Too much cloth flooding in this month, too many sellers. And yours is woven from native yarn—the worst market right now. Nobody wants the stuff anymore."
"Boss! Have mercy—can't you add just one fen? Even five wen would help!"
"Brother, do you think I'm running some grand enterprise here? There's rent to pay, workers to feed..." Li Qiwei put on his well-practiced "barely scraping by" expression. "I'm making porter's wages. If you want better prices, start buying machine yarn, or at least improved yarn for your weaving!"
"Machine yarn costs too much. Our village grows its own cotton—we spin and weave ourselves. Buying yarn just isn't worth it..." The weaver shook his head and shuffled away.
The next several cloth sellers met the same fate, each falling to Manager Li's blade and retreating in defeat.
"See that?" Zou Biao nudged Li Shan. "Doesn't it have that 'Paying More for Three and Five Dou' feeling?"
"This will probably become the norm going forward," Li Shan said quietly. He was privately puzzled—hadn't cotton cloth prices been climbing? From what he was witnessing, they were doing the opposite.
Li Qiwei finished with his customers and hurried back to attend to his guests. He offered tea and produced cigarettes—Li Shan noticed they were Shengchuan brand. This shopkeeper had taste.
Still confused about the cotton prices, Li Shan asked, "Has the cotton cloth market fallen? Yesterday I saw prices still rising."
"They were rising yesterday. Today, the market turned." Seeing that they had declined the cigarettes, Li Qiwei brought out a plate of betel nuts instead. Both men politely refused these as well.
"What happened?"
"Originally, a big buy order for cotton cloth came in every day. The quantities varied, but even the smallest order was too large for any single firm to handle—several of us had to split it." Li Qiwei leaned back in his chair. "But the day before yesterday, no order came. Not a single bolt purchased."
Zou Biao furrowed his brow. "Whose buy order?"
"Nanyang Company," Li Qiwei said. "From the very first day of trading, they've been buying continuously. Not only in large quantities, but specifically cheap coarse cloth. That immediately drove prices up. Everyone else saw the market was hot and piled in."
Li and Zou exchanged glances, both recalling the joint notice from the State Council and Enterprise Planning Institute: to promote a market economy and private manufacturing, materials that could be procured on the open market should be purchased through market channels.
"So why did they stop?"
"Who knows—probably bought enough." Li Qiwei shrugged. "When the order didn't come the day before yesterday, there were only a few scattered small purchases. Everyone assumed they'd put in orders the next day."
"But there were no orders yesterday either?"
"Exactly. So when the market opened this morning, coarse cloth prices plunged."
"How much?"
"For native cloth woven from native yarn, I was paying two jiao yesterday. Today it's one jiao, seven fen, three wen. That's a drop of two fen, seven wen."
Li Shan did a quick calculation—the decline already exceeded twenty percent. The figure stunned him.
In Guangzhou, two yuan was enough to cover basic living expenses for a family of four. Losing two fen seven wen per bolt was no trivial matter.
"Can you move the cloth you're buying now?"
"Yes, native cloth is cheap and sells easily," Li Qiwei said. "As long as the price is right, buyers will always come."
"Besides the missing orders, are there other factors?"
"When more cloth floods the market, prices naturally fall," Li Qiwei explained. "It's already late June. Next month the Portuguese merchant ships arrive in Guangzhou, bringing another large shipment of Indian cloth. Market prices will drop again then."
When Li Shan asked about machine yarn, Li Qiwei's eyes lit up. "Now that is truly quality yarn! Uniform, fine, strong—runs smooth on the loom without snapping. Many workshops and weavers are eager to buy it."
"Then why does everyone still use native yarn?"
Li Qiwei looked at him as if the answer were obvious. "Because it's expensive! Everyone knows machine yarn is superior, but the price is too steep."
So machine yarn and improved yarn hadn't yet disrupted the native cloth market. Production remained limited, stuck at the "premium quality, premium price" stage. Native yarn, with its near-zero labor costs, still dominated the low end.
"Is there separate trading in locally-made yarn?" Li Shan continued.
"Of course. Before machine yarn existed, all cotton yarn was home-spun. Families without looms would sell their yarn. Spinning requires almost no capital—just cotton and labor."
"Are there any large-scale yarn buyers locally?"
"Yes—the big cloth stores handle that. They have more capital, and backing from officials or gentry."
"And large-scale yarn sellers?"
"Haven't seen any. The Australians selling machine yarn in bulk are the first."
Just then, an assistant hurried in with the "Market Dynamics" bulletin. Li Qiwei scanned it and groaned. "Prices have dropped again! Even cotton yarn is down! Tomorrow's market is going to be brutal."
"Boss, should we stop buying cloth?" the assistant asked.
"Not yet." Li Qiwei thought for a moment. "From now on, all cloth—regardless of type—lower by five fen!"
"What? Another price cut?"
"That's right, and this time it's across the board!" Li Qiwei handed the market report to Li Shan. "Not just cotton cloth falling—cotton yarn is falling, even raw cotton is starting to slide." He called another assistant over. "Get back to the city immediately. Tell my father-in-law to sell all the paper cotton he's holding—right now, whatever the price!"
Li Shan studied the report. Sure enough, every cotton-related price had fallen. Both visitors tensed. Hearing the manager's urgent order to sell, Li Shan asked, "Wait—you bought paper cotton too?"
"Not me—my father-in-law!" Anxiety creased Li Qiwei's face. "And my wife probably put her private savings into it as well."
"I've heard paper cotton prices have been climbing daily. Selling now would still mean a profit."
"True enough, comrades." Some of the tension left Li Qiwei's shoulders. "But I'm worried he'll get greedy and miss the window. Paper cotton has dipped before and bounced back—he might think this is the same."
"How do you know it won't bounce back this time?"
"Isn't it obvious?" Li Qiwei's voice rose. "Right now cotton cloth and yarn prices are falling across the board. How can paper cotton—for cotton that won't even be delivered for months—not follow? Once the Portuguese ships arrive and Indian cloth hits the market, cloth prices will crater. At that point, this paper cotton will be nothing but worthless paper!"
(End of Chapter)