Chapter 2642: Storm over Xiaoyao Market (Part 2)

With that, the apprentice produced several coins from his pocket.

Li Guangyuan accepted one and turned it over in his fingers. The coin was noticeably smaller than a Yongle Tongbao and lighter too. It gleamed with a silvery sheen and carried a satisfying heft, yet it was clearly not silver. He had previously examined the Australians' One Yuan, Half Yuan, and Twenty Cent silver coins with considerable care; this felt entirely different in size, texture, and weight.

He raised it toward the light for closer inspection. One face bore the characters "One Wen" (Yi Wen) in Song typeface, rendered in convex relief. Beneath them curved a wreath of wheat ears, accompanied by Tashik numerals and Western script. The reverse featured a large Tashik numeral "1" at its center, with a pointed-prowed vessel as the background—unmistakably one of the Kun Thieves' great iron ships.

The Senate had previously issued Yuan and Fen denominations, with one Yuan exchanging for one hundred Fen. In practice, however, even the Fen proved too large for everyday transactions. The populace continued using whatever miscellaneous bronze coins still circulated, sometimes resorting to direct barter. These bronze coins varied wildly in type, weight, and quality, resulting in exchange rates that shifted from place to place—five wen to one Fen here, ten there, sixteen elsewhere. Such chaos hampered the Senate's internal economic activities and commodity circulation while impeding their efforts to recover copper from old coinage. Issuing subsidiary currency in denominations smaller than the Fen had thus become a pressing priority.

The unit for this subsidiary currency was designated "Wen," accommodating the common people's established habits and colloquial usage. The question of what material to use, however, proved contentious. Ordinary bronze was out of the question. Since landing on these shores, the Senate had always suffered from copper shortages. Trade with Japan and mining operations had provided some relief, but copper prices remained stubbornly high. Minting bronze coins would yield no seigniorage whatsoever and might even invite private melting as people sought to profit from the metal content.

Steel coins seemed the optimal solution, but the Senate lacked the capability to produce stainless steel. Carbon steel coins would corrode rapidly in circulation, severely undermining the currency's credibility.

As for nickel—the most common material for small-denomination subsidiary currency in the Old Time Space—this supposedly cheap non-ferrous metal was unfortunately scarce under Senate control. The same applied to aluminum.

The final compromise was paper money. Since the existing Yuan and Fen already circulated as paper currency with acceptable public acceptance, the Wen debuted entirely as paper notes, exchanging at ten Wen per Fen.

Both Li and Luo were well-accustomed to the Kun Thieves' Fen and Wen paper currency. The sudden appearance of hard coinage naturally took them by surprise.

This deserves careful examination, Li Guangyuan thought.

Judging by its texture and weight, this new "Wen" shared the refined characteristics of the Australian Silver Dollar. The material was smooth and lustrous, the pattern exquisitely rendered. The outer rim featured the raised edge typical of coins, beautifully finished—though it lacked the fine milled grooves found on silver dollars. Yet when he tilted it toward the light, he discovered minuscule foreign characters along the raised rim, so tiny they resembled mosquito legs. How they had managed to engrave such fine detail remained a mystery.

"This is a One Wen coin?!" Luo Heying exclaimed in disbelief. The coin was clearly neither silver nor copper, yet such exquisite craftsmanship could not have come cheap. And it represented the smallest possible denomination?

"Shall we cut it open to check the interior?" Li Guangyuan suggested.

"It truly is a One Wen coin," the apprentice confirmed. "The shopkeeper tried cutting it with metal shears but couldn't break through. He filed at it next. That silvery outer layer is some kind of coating—no idea how they did it—wrapped around an iron core."

"Iron money!" Luo Heying scoffed. "Since ancient times, what court has ever issued iron currency?"

His words held truth. From Qin Shi Huang's casting of the Half Tael (Ban Liang) onward, Chinese coinage had always been copper. Across the rise and fall of dynasties, the copper content might vary and the size and weight might fluctuate, but apart from certain Tang Dynasty regional warlords and minor local regimes, no legitimate government had formally minted iron currency.

Seeing the Kun Thieves resort to iron coinage, Luo Heying felt a surge of excitement. To his mind, this signaled a treasury running dry—the first steps down a dead-end road to ruin.

Li Guangyuan knew better. The Australians now issued paper money across all denominations, and it circulated freely throughout the Two Guangs. Merchants, travelers, and common folk alike accepted it without question. What material they used for their coins was ultimately inconsequential.

What neither Li Guangyuan nor Luo Heying realized was that the "One Wen" coin in their hands represented the first batch of small-denomination hard currency manufactured by the Hong Kong Mint. It had only just arrived from the Central Reserve Bank in Guangzhou, dispatched to Dongguan to begin circulation. The coin was still pristine, never yet exchanged.

Manufacturing subsidiary hard currency was not a sudden whim but a necessary improvement compelled by the practical realities of currency circulation.

Paper money certainly offered convenience in printing, usage, transport, and storage. However, actual implementation had generated considerable complaints from Senators in both the Finance and Financial Departments. While currency at various denominations did circulate normally as paper notes, problems grew more apparent with each passing day.

Yuan and Half Yuan notes caused the fewest issues, primarily because they circulated only in Guangzhou and Hainan. People in outlying areas rarely handled such large denominations and lacked the confidence to entrust their family's livelihood to a mere slip of paper.

In Guangzhou and Hainan, where Senate policy had penetrated deepest, everyone from ninety-year-old elders to young children had attended lectures on counterfeit prevention and seen anti-counterfeiting propaganda posters. They had handled genuine notes countless times. Even the most skilled forger could not replicate the authentic look and feel.

Consequently, although counterfeit cases did occasionally surface, large-scale circulation of fake currency never took hold in these regions.

Moreover, people treated high-denomination notes with care, storing them in dedicated wallets and handling them gently. Such bills could pass through many hands and still appear nearly new.

The problems lay with small-denomination currency, particularly Fen and Wen notes. On one hand, cost considerations had led the Senate to forgo sophisticated anti-counterfeiting measures for low-value currency, relying solely on special paper and steel-plate printing. The consequence was a wave of currency alteration cases in the areas surrounding Guangzhou. Steel-plate printing techniques were not difficult to master; counterfeiters carved tin plates and devised methods to wash away printed denominations on small notes before reprinting them with higher values. Some even repurposed defunct Grain Circulation Coupons as base material. While such forgeries were easily detected upon careful examination, they proved highly effective at deceiving those unfamiliar with anti-counterfeiting features. This type of altered currency had already become the dominant form of counterfeit.

The other problem was the severe deterioration of small-denomination paper money.

At Tax Bureau branches and Delong Bank outlets, window clerks had taken to presenting stacks of tattered, filthy scraps to their superiors while voicing their complaints. Several thousand One Fen notes, wrinkled like used toilet paper, had to be painstakingly smoothed out one by one, authenticated, and counted. For the clerks manning the windows, it was an ordeal.

And these departments typically had to recount everything again after closing.

At branches where small-denomination paper money predominated, high-volume business days frequently produced long queues at exchange windows. Clearing operations often stretched past midnight.

Subsequent calculations revealed that One Wen paper notes required recycling after no more than thirty exchanges—yet their circulation cost far exceeded that of Ten Fen hard coins made from silver-copper alloy.

Thus, Wudaokou Senators who had initially hoped to profit from paper money seigniorage increasingly pushed for converting small denominations to hard currency.

Following consultation and discussion with the Industrial Department, the final plan called for four types of silver coins: One Yuan, Half Yuan, Twenty Fen, and Ten Fen. The latter two would use silver-copper alloy. Corresponding silver coin exchange coupons would also be issued in all four denominations.

Additionally, two Fen coin denominations—Five Fen and One Fen—would be minted. Like the silver coins, these would circulate alongside equivalent paper notes, with hard currency taking precedence. The One Fen coin would use zinc alloy with copper plating, a method widely employed for small-denomination coins in the Old Time Space—the famous Lincoln Head Cent being a prime example.

Elemental zinc had a relatively short smelting history. Only during the late Ming Dynasty was pure zinc successfully refined; prior to that, zinc had only been obtained as brass through combined smelting with copper ore. Consequently, zinc in the Ming era remained a high-value metal comparable to tin—sufficient to support its role as Fen currency.

Zinc was not scarce in the Senate's metal inventory. After securing Guangdong, they had significantly expanded their sources. The supply should prove adequate for secondary subsidiary currency.

The Five Fen coin's material, however, presented difficulties. A Five Fen piece needed to be demonstrably worth five One Fens—merely enlarging the coin slightly and changing the pattern would not suffice. It required obvious differentiation from the One Fen to justify its face value and increase public acceptance while simultaneously making forgery more difficult, since these coins would circulate widely in rural areas where anti-counterfeiting awareness was minimal.

The Mint's solution was bimetallic currency. Many ancient governments had attempted such designs, only to abandon them due to manufacturing difficulties. Not until the twentieth century was bimetallic coinage successfully used in circulating currency. The Senators therefore had full confidence in its anti-counterfeiting properties.

The initial plan called for a purple copper (pure copper) inner core with a brass outer ring. However, the soft inner core failed to bond securely with the outer ring and tended to fall out. Additionally, the color difference between purple copper and brass was too subtle before corrosion set in, making authentication difficult.

The improved design used brass overlaying a white copper (cupronickel) or silver-copper inner core, with brass forming the outer ring. This configuration bonded well, and the inner core displayed an attractive silvery luster.

The major drawback was the nickel requirement. Currently, the Senate controlled only a few small nickel mines in Guangxi that had yet to see large-scale exploitation. Industrial demand for nickel remained high, driving its price under Senate rule above that of silver. White copper similarly cost more than the s800 silver used in jewelry. However, considering the complications of changing the currency plan and the imminent development of larger nickel deposits, the brass-over-white-copper design was ultimately adopted. Due to insufficient raw materials, only limited quantities would be minted initially, with One Fen coins taking priority.

As for Wen currency, it would be issued exclusively as hard coinage. Existing paper notes would be gradually phased out through recycling. Only one denomination would exist: One Wen.

The Senate had entertained various unconventional ideas for this subsidiary currency's material, including glass coins, ceramic coins, and even bamboo tokens. But the final consensus settled on iron. The primary material would be wrought iron, pressed into precisely shaped coins and then hot-dip galvanized. This process would not only prevent corrosion but also endow the currency with a gleaming, silver-bright luster.

(End of Chapter)