Chapter 64: Sweet Harbor Storm - New Fundraising Channels

At the same time, Ma Qianzhu looked at the newly received telegram. After reading the first line, he gasped. The words “Great Leap Forward” jumped into his mind. Deposits? Were they going to open a bank in Guangzhou? The matter in Leizhou was not yet resolved, and now they were going to start a financial storm in Guangzhou?

Reading on carefully, he found that it had nothing to do with banks, not even money houses. This idea was not conceived by the people of the Guangzhou station, but by Shen Fan, the head manager of the Zizhenzhai. The reason he proposed this suggestion was not because he had any advanced financial awareness, but because it was a traditional form of fundraising in business at the time.

People would deposit their idle money in a well-run shop and then collect interest annually. The shop obtained working capital, and the depositor earned a certain return on their idle money. This form of fundraising existed in China for a long time, even after the emergence of money houses and even banks, until the complete collapse of the legal tender’s credit in the 20th century. Not only large commercial firms and shops absorbed deposits, but even small cloth shops and oil and salt shops absorbed deposits from nearby residents on a smaller scale. Some shops with a long history and good reputation could even absorb deposits several times or even dozens of times their own capital. For example, the large dried fruit shops in Beijing from Shanxi had deposits of hundreds of thousands of taels before the Gengzi Uprising.

For the jewelry business, which was a capital-intensive industry, absorbing deposits from customers had long been a common practice. Seeing that the owner’s business was doing well and its reputation among peers and customers was growing, Shen Fan proposed this method.

The interest on such deposits was much lower than that of borrowing, with a monthly interest rate of only one and a half li, and an annual interest rate of 18%. By modern standards, this interest rate was not too high. Guo Yi still remembered that the one-year deposit interest rate of banks in his childhood had once reached 12%. For shops with a large turnover that often needed to borrow, it was tantamount to an interest-free loan.

“Who would be willing to make a deposit?” he wondered. He ran a jewelry store. Although Zichengji was a comprehensive trading firm, it did not operate in the financial industry. To suddenly announce that they were accepting deposits, who would become a customer?

“This is the advantage of our jewelry and curio business,” Shen Fan said. “We can reach the families in the inner quarters, and it’s easier to absorb their deposits. The wives, daughters, and concubines of large households, and even the favored maids, all have some private money that they want to earn interest on. The amount ranges from forty or fifty taels to several thousand or even tens of thousands.” He smiled. “Those who are bold and have power at home will lend money. But lending money requires a very reliable person to handle it, and it’s inevitable that they will be exploited by middlemen, and the matter can easily leak out. So most of them prefer to deposit it in the counting houses of large firms.”

After hearing Shen Fan’s suggestion, Guo Yi was a little undecided. It was certainly a good thing to have more silver on hand, but the Guangzhou station’s money supply was not tight. To suddenly absorb deposits now would mean an extra interest expense.

“Master, the benefit of absorbing deposits is not just for our own use,” Shen Fan continued. “The money supply in Guangzhou is sometimes tight and sometimes loose. When it’s tight, we can lend it out for a short period and make several times the interest!”

“For this kind of lending, for a merchant like us with no roots, it’s probably easy to lend out but hard to get back,” Guo Yi had been in Guangzhou for a few months and knew a little about this.

“This is the second benefit. The deposits are from the inner-quarter families of those officials and gentry,” Shen Fan hinted. “The private money of women may be limited,” he said, “but once the word gets out, people will look at Zizhenzhai’s resources and influence in a new light.”

At this point, Guo Yi understood. Absorbing these deposits would not only benefit his own turnover but also enhance the status of Zichengji in Guangzhou! Even if he didn’t use these deposits for lending, it would still provide a protective umbrella. From this perspective, an annual interest rate of eighteen percent was really not expensive.

Shen Fan took out a small stack of passbooks from his side and handed them to Guo Yi. He took them and saw that they were only written with some household names in neat regular script: “Su Ji,” “Jinyan Zhai,” “Run Ji,” and so on. There were about twenty of them.

“These are the passbooks of the families who have recently expressed their intention to open a deposit account at Zizhenzhai,” Shen Fan said. “Because I haven’t received your permission, Master, I haven’t agreed to it yet, but the account passbooks have already been prepared.”

“Who are these people?” Guo Yi looked for a long time but couldn’t find any names.

Shen Fan took out another small notebook, which was filled with symbols that only he could recognize. Guo Yi knew that this was a kind of commercial code, similar to the Suzhou numerals. It recorded things that couldn’t be “exposed to the sun,” such as account books, names of contacts, and the birthdays of which high official and his wife, concubines, sons, and daughters. He opened it and looked. “Most of them are the precious families of officials and gentry. I’ll copy a list later, but this list must be kept confidential—”

“I know this,” Guo Yi thought. Since it was private money, privacy was very important. He hadn’t expected that our country had anonymous deposits in the Ming Dynasty. It was truly at the forefront of the world.

“These twenty-odd passbooks can probably receive ten thousand taels of silver,” Shen Fan said. “This is a very good business. If there are no major changes, they will usually only withdraw the interest and not touch the principal.”

But this matter was too significant and also involved financial business. The three people at the Guangzhou station considered it for a long time and decided that it would be better to present this plan in person and get approval when they submitted their quarterly report to Lingao. But to refuse the silver that was being offered seemed unreasonable and might even offend the customers. So they agreed that Shen Fan would first absorb this batch of deposits, with an agreed annual interest rate of eighteen percent, with interest withdrawn monthly and the principal untouched.

The matter would have been put on hold if not for the recent “panic selling” in the Leizhou sugar industry, which had suddenly tightened the originally loose money supply. This project, which was originally just adding flowers to a brocade, suddenly had the significance of sending charcoal in snowy weather. Guo Yi felt that there was no time to lose and immediately brought it to the Executive Committee’s meeting table.

After reading the entire report, Wu De was finally relieved. He had originally thought that the Guangzhou station was planning to engage in some kind of financial business—Wu De had a natural fear of such things. Now it seemed that it was just a matter of the Guangzhou station preparing for “illegal fundraising.” The interest rate seemed a bit high, but it was a good way to alleviate the tight money supply and poor turnover of the foreign trade department. Although he inevitably thought of the risk of a “bank run” that was often seen in business war novels, after weighing the pros and cons, he decided to support the Guangzhou station’s approach on this issue.

After sending a telegram of his stance on the Dengyingzhou, the journey was uneventful. The ship finally arrived at Haian Port on the morning of the fifth day after departure. As soon as the ship entered the port, Wu De sent someone to the South China Sugar Factory to check the situation—without real-time communication, if the place was already in ruins, wouldn’t it be like sending a sheep into a tiger’s mouth to transport the silver over?

The person sent out returned shortly and said that the entrance of South China was still crowded with people, but it seemed that the business of selling sugar was still going on, and there was nothing unusual. Wu De knew that the South China’s capital chain had not yet broken, so he was slightly relieved. On the one hand, he instructed the people on the ship to be outwardly relaxed but inwardly vigilant, to prevent anyone from causing trouble or sabotage. On the other hand, he changed his clothes and prepared to go to South China in person to discuss the matter of transporting the silver.

Wu De’s estimation was correct. The funds of the South China Sugar Factory had not yet been exhausted, but it was not far from it. The night before the Dengyingzhou arrived, the silver inventory had been reduced to less than one thousand taels. At this rate, it was questionable whether they could survive the next day. Everyone at South China was like ants on a hot pan. The few of them discussed it over and over again but still couldn’t come up with a plan.

Wen Tong was anxiously hoping that Chang Shide, who had gone to Champa to sell rice, could come back soon. If he brought back a shipload of rice, he could get tens of thousands of taels of silver in an emergency. But the Great Whale was like a kite with a broken string, gone without a trace. After waiting for several days, someone from the Executive Committee finally arrived, but they didn’t bring the urgently needed silver, only a radio set. This made Wen Tong almost despair. What was the use of a radio? Fortunately, news came soon: a ship had been sent to the Guangzhou station to pick up the silver.

Fifty thousand taels was still a distance from a safe level, but for Wen Tong and the others, it was a matter of surviving day by day. Being able to mobilize fifty thousand would at least give them a buffer of more than ten days.

But when the silver would arrive became an unknown. The silver inventory was decreasing day by day. To be on the safe side, they also tried various methods. Liao Dahua and Liao Daxing both tried to go to the market to raise some funds, but the harvest season in Leizhou was always a time of tight money supply. All the shops could not spare a large amount of silver. The only ones with a large amount of ready cash were the sugar merchants under the Haiyitang. They had accumulated hundreds of thousands of taels of silver early on to purchase sugar. Borrowing money from them was tantamount to asking a tiger for its skin.

But their efforts to raise funds could not be hidden from anyone. For a time, rumors were everywhere that the newly opened South China Firm was short of silver and was about to go bankrupt. This news spread like wildfire. The cane farmers, who had calmed down a little, began to stir again. Some even traveled overnight to sell their sugar. The outflow of silver actually accelerated.

Wen Tong was filled with regret. If he had known this, he would not have let the Liao brothers go out to raise funds. He didn’t get the meat, but he got a lot of trouble. This was equivalent to showing all his cards. If the Dengyingzhou still didn’t arrive, the situation in South China would probably be difficult to handle!

As for Xiao Gui, Mei Lin, and the other business travelers, they were even more helpless. Seeing that the situation was about to deteriorate, Chen Tianxiong said, “In this situation, we can’t make an omelet without breaking eggs. I’m afraid that if we don’t use some extraordinary means, we will be squeezed out of here!”