Chapter 167: Circulation

The transmigrator regime’s first currency was thus established. With the issuance of the new money, all other forms of coupons and tickets were to be abolished. The work-point coupons, widely used in the communes, were to be recalled and exchanged for grain at a set ratio.

“Should we set up a bank to handle this?”

“Of course,” Cheng Dong said. “But for now, it won’t be called a bank or a traditional money house.”

The Finance and Treasury Committee’s plan was to establish a grain company to be responsible for issuing, recalling, and exchanging the currency. Since grain was the backing for the currency, a “grain company” would be more easily understood by the common people than a “bank,” and it would also provide the camouflage of a “merchant-issued currency.”

At Wen Desi’s suggestion, the grain company was named “Delong Grain Company.” Its headquarters was established in the East Gate Market. To project an image of a large, trustworthy business, the Executive Committee approved the construction of a new two-story building to serve as its place of operation.

The new banknotes were printed by the Propaganda Department’s printing factory, managed by Zhou Dongtian. As this was the transmigrators’ first set of banknotes, they couldn’t be as simple as the previously printed work-point coupons, rice tickets, or salt tickets. They had to be not only aesthetically pleasing and durable but also possess some anti-counterfeiting features.

Zhou Dongtian brought in Bai Duolu and Tan Ming to work on this problem. One had experience in printing, and the other had operated a three-color printing press; both were considered professionals. When it came to printing, they were even more skilled than the jack-of-all-trades Zhou Laomao.

Of course, there was no special paper for printing banknotes. The transmigrators’ small paper workshop could currently only mass-produce rough-edged paper made from local rice straw, which was so coarse it was only suitable for use as toilet paper. The small amount of writing paper they produced also did not meet the requirements for banknotes. Cheng Dong mentioned that there were some heavy-duty colored card stocks in their inventory. This paper was firm and of a quality and color that local workshops of this era could not replicate. The Lingao Grain Coupon was issued in three different denominations: 10 yuan, 5 yuan, and 1 yuan. The 10-yuan note used yellow paper, the 5-yuan note used red paper, and the 1-yuan note was green. Subsidiary coins were also issued in denominations of 50 fen, 20 fen, 5 fen, and 1 fen. All were printed on blue paper and distinguished by size.

The banknotes’ designs were primarily agricultural-themed, featuring images of oxen, farmers, wheat ears, and rice paddies. The issuing authority was the “Delong Grain Company,” with its name printed in seal script and accompanied by Cheng Dong’s signature. The back of the banknote also had a line of regular script: “Each yuan is exchangeable for one market jin of rice.”

All these designs were printed by Bai Duolu using lithographic color printing. Although Zhou Dongtian initially wanted to use the four-color printing press in the factory, the ink inventory was running low, and there were no immediate means of replenishment. When they saw the sample notes, everyone felt they were rather ugly—the images lacked any sense of three-dimensionality.

“This will have to do,” Cheng Dong said after reviewing the samples, knowing the printing factory’s limitations. It was obviously impossible for them to produce banknotes identical to modern ones. Even these current notes were beyond the counterfeiting capabilities of the locals.

The largest user of the new coupons was Wu De. The monthly settlement of work-points was a major expenditure. According to Wu De’s plan, the Bairen Commune would completely abolish the supply system and implement a monetized wage system. Each commune member would be paid in coupons based on the work-points earned from their labor. The food provided by the commune canteens would also be purchased by the members using these coupons.

The external laborers, who were part of the labor teams but not registered residents of the Bairen Commune, would continue to receive free meals based on their labor intensity. However, their wages would also be paid in coupons. In fact, for some time now, the transmigrators had been using rice and salt tickets to pay these workers, and they had accepted them.

The locals recruited by the transmigrators’ enterprises and departments, the so-called “employees,” were also registered as part of the Bairen Commune, but their wages were paid by their respective departments, not the commune. Like the regular commune members, their meals would now have to be paid for by themselves.

Finally, there was the military. The army had always been paid in silver. The officers were against rashly replacing silver with paper money, as it would give the soldiers a sense of being deprived. Shiny silver turning into paper slips would not please anyone.

Thus, it was decided that the basic treatment for the army would remain unchanged. They would continue to receive free meals, and their military pay would still be in silver.

To encourage the soldiers to use paper money, Cheng Dong proposed a “military discount” policy in all transmigrator-owned shops in the East Gate Market. Any soldier using coupons for purchases would receive a 5% discount. To facilitate this, the Delong Grain Company set up a special exchange counter in the military barracks to buy the silver from the soldiers. This policy was exclusive to the soldiers of the New Army.

“Why not just open a branch office in the barracks?” Xi Yazhou suggested to Cheng Dong. “For the past two months, the soldiers have been getting silver and hiding it all over the place. There have even been cases of loss and theft recently. These soldiers are all alone and have no safe place to keep their money. If you start a deposit service, they’d be willing to use it even without interest.”

Soon, “Delong Grain Company” offices were established in both the Bairen and Bopu military camps. These “offices” were simply designated rooms within the barracks, furnished with a wooden counter and stocked with pens, paper, and ledgers. The Finance and Treasury Committee, of course, did not have enough staff to keep these offices open daily. Therefore, it was stipulated that they would be open only on Mondays and on payday. The services offered were currency exchange (silver for coupons), savings deposits, and a safe deposit for valuables. However, the “savings” service currently offered did not pay any interest; it was more like a money storage service.

As expected, this service was extremely popular among the soldiers, though not many came to exchange their silver for coupons. Most soldiers, upon receiving their pay, would immediately deposit it at the Delong office, receiving a passbook in return, which they kept on their person. Only those soldiers with families nearby would exchange some of their pay for coupons to buy goods to take home when on leave.

The initial distribution of the coupons did not cause any major reaction in the market. After all, the merchants doing business in the East Gate Market over the past few months had grown accustomed to the transmigrators’ various tickets. Although the types of tickets varied, they all knew one thing for certain: every ticket issued by the “kūnzéi ones” could be exchanged for real goods, and the exchange was always honored for the stated amount, without any ambiguity. Dongmen Chuiyu also posted numerous notices in the market, requiring all merchants to accept the new coupons and assuring them that they could exchange the coupons for grain at the Delong Grain Company at any time.

To build up the credibility of the coupons, every evening before the market closed, Dongmen Chuiyu and the Delong staff would go from stall to stall with carts full of rice, offering to redeem the coupons. For the first few days, almost every merchant would exchange all the coupons they had received. But after half a month, this practice became rare. Traveling merchants and peddlers, finding it inconvenient to carry bulky grain on their journeys, chose to spend their coupons directly in the East Gate Market, buying various goods. The established shopkeepers, who had initially converted their coupons into grain or other goods as a precaution, gradually started to hold onto some of the coupons after seeing that the Delong Grain Company continued to honor exchanges at any time. After all, paper money was much more convenient to carry and use than heavy copper coins and silver that often needed to be weighed due to inconsistent purity. The chaotic mix of copper coins and the hassle of weighing silver had long been a source of complaint for the merchants.

However, the circulation of the coupons was still largely confined to the areas controlled by the transmigrators. Even in the nearby county town market, they were not widely accepted. Most shopkeepers there adopted a wait-and-see attitude towards this new paper money.

Cheng Dong considered this a normal situation. The value of paper money is largely supported by the credit of the government. Most modern currencies are fiat money, issued without any collateral, which in a way makes them less sound than the grain-backed Lingao coupon. The value of the coupon would only be recognized as far as the transmigrators’ power extended. Until they had sufficient political and economic influence, people outside their sphere of control would naturally not accept it.

The final issue to be sorted out was the transmigrators’ own internal currency: the “point-coupon,” the unit of benefit distribution stipulated in the Transmigration Compact.

Although the point-coupon had entered a form of circulation as capital in the Women’s Cooperative enterprises and had been used for consumption, it was still a virtual currency. When transmigrators made purchases at the welfare cooperative, they paid by signing a chit, which recorded the date and amount of the transaction. On settlement days, accountants from the finance department would manually deduct the points from each individual’s account on the computer. This process was not only cumbersome but also prone to errors.

Cheng Dong now proposed to materialize a portion of the point-coupons, so they would no longer be just a bookkeeping currency on a computer. Transmigrators’ salaries, allowances for hazardous jobs, and bonuses could all be paid in physical point-coupons. These coupons would be restricted to purchasing special goods and services and were not allowed to circulate externally. The designated places for using point-coupons were currently limited to the transmigrators’ canteen, the Women’s Cooperative, and the South Sea Demonstration Farm. The point-coupon had no direct relationship or exchange rate with any other currency. It was to be uniformly issued and recalled by the Finance and Treasury Committee.

Someone suggested that since the point-coupon was being materialized, the supply system for the transmigrators could be abolished and replaced with a salary system. However, after discussion, the Executive Committee decided to maintain the supply system for all transmigrators. The Committee would continue to provide free housing, medicine, food, basic weapons and ammunition, and clothing to all transmigrators. However, transmigrators would be allowed to use point-coupons to purchase additional consumer goods from the three designated outlets, including alcohol, tobacco, and other non-essential items. If the canteen had sufficient supplies, they could also buy extra chicken, duck, fish, and meat.

The point-coupon was the only currency that transmigrators could legally possess. Except for public funds issued for official tasks, transmigrators were not allowed to privately own Lingao coupons, gold, or silver.