Chapter 27: Deepening Cooperation

Of course, this “settle in three festivals” system wasn’t an unlimited line of credit. The Ministry of Finance and Delong Bank intended it as a form of export credit with a specific limit. The limit would be adjusted based on the import and export situation, but the credit itself would be interest-free.

As for the settlement currency, it was designated as the Lingao Circulation Voucher.

This put Li Luoyou in a difficult position and left his Master Han completely bewildered. Why refuse perfectly good silver in favor of some “circulation vouchers”? Besides, where else could one even find this currency outside of Lingao?

Li Luoyou said, “I have no circulation vouchers. Does your esteemed group not accept silver?”

“The settlement currency here is the circulation voucher. Silver and gold are just commodities,” Chen Ce explained. “It’s no problem if you don’t have any. Just ship goods from the mainland to sell in Lingao, and we’ll pay you in circulation vouchers.”

This former employee of a bank’s credit review department had recommended himself for the position of Director of the Banking Planning Office after Delong was reorganized. With seven years of experience in credit review, he was more than qualified to be the head of credit management. However, he was tired of the endless paperwork and had applied for the planning position instead.

“Well…” This was a novel idea. Refusing shiny silver for goods. What kind of business sense was that? Business was all about real gold and silver. Having precious metals was always best—they didn’t take up much space, wouldn’t rot, and were convenient for spending or hoarding.

Those who didn’t accept cash either had access to more profitable bartering opportunities locally or were in a place with no cash at all. The Australians’ way of thinking was truly strange.

“So, what you mean is,” Li Luoyou organized his thoughts, “I ship goods to Lingao for sale, and then use the circulation vouchers I earn to buy your goods?”

“Precisely.”

“Isn’t that just making things unnecessarily complicated?” Li Luoyou shook his head. “We could just trade goods for goods directly!”

“Alright, then tell me, how many catties of ginseng for one mirror?”

He was instantly at a loss for words. Without a currency as a medium of exchange, it was impossible to calculate value!

“If that’s the case, I’ll need to set up a firm and build warehouses here,” Li Luoyou said hesitantly. “The extra expense—”

“We will provide the land for your firm. If you provide the money for construction, we can build it for you,” Li Mei said generously. “Furthermore, we have a catalog of goods we guarantee to purchase. As long as you ship them here, we will buy them all, graded and priced accordingly, regardless of the quantity.”

She handed him the latest version of the purchase catalog, which listed thirty-one types of goods and their purchase prices.

“These thirty-one items are exempt from all import duties, and we will purchase them all at the listed guide price.”

Li Luoyou glanced at the list. Coal was number one, followed by many metals: pig iron, wrought iron, copper, lead, zinc, tin, and so on. Then came livelihood materials like grain, cloth, cotton, oil, and timber… As he reached the end, his eyes widened—horses and donkeys. What did they need horses and donkeys for in a place like Hainan?

“Most of these goods are bulky and have low value. Transporting and selling them is extremely troublesome,” Li Luoyou said, still thinking like a traditional maritime merchant who preferred high-value, low-volume items.

“The profit margin isn’t huge, but your costs aren’t high either, Proprietor,” Li Mei continued her analysis. “Most of these goods can be bought throughout the south. You make money just by shipping them here. Besides, the volume is large. Even if you only make a few cents per package, it adds up to a substantial sum. Isn’t a guaranteed-profit business good enough? We’ve set the guide prices based on Guangzhou market rates, with an added ten percent gross margin for you.”

Calculated this way, his profits weren’t low at all. And the goods only had to be shipped to Lingao, which could be done dozens of times a year, even with smaller boats. It was much better than sailing to the South China Sea or the West, which required waiting for the right winds, using large, storm-resistant ships, and hiring expensive pilots and helmsmen.

“As for goods not on the guaranteed purchase list, you are free to ship and sell them here. Currently, customs exempts most goods from import taxes,” Li Mei said.

Thus, the general trade agreement between the two parties was settled. It was also confirmed that Li Luoyou would open a branch of his Liaohai Trading Company in Lingao to handle local business.

“In addition, we will provide you with export credit.”

“Export credit?”

“In case your credit limit is insufficient and you’re short on cash, but you need to purchase a large quantity of goods, we can provide an additional export loan at a favorable interest rate. However, goods on the restricted export list are not eligible for this loan.”

With Li Luoyou’s resources, he could mobilize over a hundred thousand taels of silver in Guangdong with just a single note. He would normally scoff at such convoluted things as “credit limits,” but since this place only accepted so-called “circulation vouchers,” this system suddenly became very useful to him.

The two sides then negotiated the specific details of the Liaohai Trading Company’s branch. Li Luoyou believed that besides being a liaison office, the branch could also engage in some retail business. Given Lingao’s current situation, retail had great future potential, and this was a good time to lay the foundation.

Through his negotiations with Li Mei and the others, Li Luoyou had come to understand the Australians’ business customs. When they talked business, there was no room for sentiment, only rules. They didn’t deal in hints; everything had to be stated clearly and put in writing. Therefore, during the negotiations, every detail about the branch had to be discussed and settled.

He had already learned that the best commercial location in Lingao was Dongmen Market, so he explicitly requested that the land be there.

“That’s possible, but there’s a limit on the area,” Li Mei agreed immediately. “We can only give you 200 square meters of land for construction.”

“How big is that?”

“About a third of a mu.”

“How am I supposed to build a proper office with that?” Li Luoyou was very dissatisfied. He didn’t want a three or four-story “pigeon coop” with no courtyard. “I’ll pay for it.”

Li Mei said, “The land price in Dongmen Market is very high…”

“How much per mu? I’ll buy ten mu!”

“It depends on which plot you want.”

“What?” Li Luoyou thought this group of Australians were truly cunning merchants.

“Dongmen Market is currently a Class A district in Lingao. The land prices are the highest,” Li Mei opportunistically spread out a planning map of Dongmen Market. “Look, these few streets are Grade A within the Class A district, with the highest land prices. The plots are generally small, so you won’t find a ten-mu plot here.” Her finger pointed around the map. “If you want a large plot, you’d be better off buying over here. The road has just been completed. It’s a bit quiet now, but it will be bustling in a few months. It has great potential for appreciation.”

“Appreciation?” In Li Luoyou’s mind, aside from rent-collecting fields and profitable forests, ordinary land didn’t experience major price fluctuations. Besides, he was buying land to build a branch, so what did it matter if the price soared to tens of thousands of taels per mu? Was he going to sell the branch?

After some haggling, Li Luoyou bought a ten-mu plot on a newly developed street in Dongmen Market. One mu was considered a complimentary gift from Li Mei on behalf of the Commerce Department.

Chen Ce then proposed the idea of establishing a joint remittance business.

Li Luoyou pondered for a moment. The bank drafts issued by Delong Bank in Guangzhou had recently become quite popular in Guangdong. Their method was simply a network of affiliated businesses, allowing merchants who needed to transfer large sums of money to redeem drafts with each other. It was indeed very convenient for users.

However, this kind of joint remittance carried significant risks. A bank draft, Li Luoyou thought, was ultimately just a piece of paper that could be used for capital flow. There was already a trend of merchants not cashing the drafts they received but instead transferring them as payment. While convenient, someone would inevitably think of using fraudulent drafts to increase their liquid capital—a hundred taels of silver in principal could be used like a thousand. This game of pass-the-parcel was built on credit. Once a single issuing or accepting firm had a problem, it could trigger a catastrophic collapse.

This was a matter that required caution. After careful consideration, he decided to refuse. His reason was not just the financial risk, but also the immense political risk. The Australians could protect themselves in Lingao—he was fairly certain of that—but their businesses on the mainland were another story. If the government turned hostile and decided to seize their assets, the losses for an affiliated firm like his would be devastating.

Of course, whether the government would turn hostile, and to what extent, was another matter. After all, neither Delong nor Guo Yi’s businesses had ever claimed to be Australian ventures. If the Australians did their homework and spent their money wisely, it was possible the government would either turn a blind eye or make a big show of cracking down while privately letting them off.

But since the future was uncertain, there was no need for him to rush into it.

So, he tactfully expressed his refusal.

This response surprised Chen Ce. In his view, while joint remittance had risks, the benefits for Li Luoyou were far greater. It was a classic “win-win.”

However, no matter how much he explained the risk control measures and potential profits of the business, Li Luoyou remained unmoved, deflecting the conversation to other topics.

“This sly fox!” Liu San thought, growing anxious. They had reached a consensus on the other three of the four main objectives. Only this one, the most important to Delong Bank, was rejected! Wouldn’t this reflect poorly on his negotiation skills? He repeatedly made eye contact with Li Mei, urging her to join the fray.

Li Mei, a veteran of the business world, saw the situation and knew that pressing further would be useless. It would only reveal their own weakness, making the other party suspicious that Delong had problems and was desperately seeking a strong partner for a capital injection.

If the great Proprietor Li thought that, he might not just reconsider cooperating with Delong, but the entire trade agreement.

So, Li Mei interjected, slowly shifting the topic to doing business with Quark.

Quark also received a trade agreement: he had the right to ship and sell any kind of Indian and European goods in Lingao, enjoying the same tariff exemptions on certain goods as other merchants.

The transmigrator group stipulated that every ship he brought to Lingao must carry at least one-third of its total cargo capacity in Indian saltpeter and shellac. In addition, he had to bring unlimited quantities of woolen cloth, combed and processed wool, tanned sheep and cow hides, cotton cloth, raw cotton, and jute. He was also to deliver five hundred chests of Indian opium annually, packaged to a standard of 20 pounds per chest, for a total of 10,000 pounds.

“No more opium than that. Exactly five hundred chests. Any excess will be confiscated,” Li Mei said. “Also, opium is not exempt from import duties.”

“No problem,” Quark thought. Opium wasn’t exactly a hot commodity. British merchants had been selling it to the Ming for decades, with annual sales rarely exceeding two or three hundred chests.

“Additionally, there are a few other deals to be made with Mr. Quark, but the time is not yet right,” Li Mei said.

“Fine, we can discuss them later,” Quark said, very excited.

The trade terms invigorated Quark. As an Englishman, he had struggled to find goods that the Ming Dynasty needed. What he could sell were mostly spices, marine products, and some exotic treasures from India and Southeast Asia. His attempts to sell English woolens and Indian cottons had all ended in miserable failure. Now, he finally had the possibility of exporting bulk commodities.

His only dissatisfaction was the requirement to settle accounts in circulation vouchers. However, when Li Mei told him he could use the vouchers to purchase white sugar at the commercial office, the Englishman was so excited he couldn’t stop rubbing his hands together. White sugar was an extremely sought-after commodity, and he wouldn’t need to ship it all the way back to England. He could sell it for a profit in Surat. Besides shipping it back to Europe, British merchants could also sell it in Persia and the Arab regions.

That night, Li Luoyou was busy with his abacus, constantly calculating which goods would yield the greatest profit. From a conservative standpoint, the thirty-one guaranteed-purchase goods were the most suitable. Although the profit margin was not high, the other party would buy as much as he could supply, making the profit very stable.

Unfortunately, the goods he sold best and that were most profitable—ginseng, deer antler, and other Manchurian products—were of little interest to the Australians, despite being highly sought after on the mainland.

And most critically, they seemed reluctant to sell him cannons. In his mind, money from weapons was the easiest to make. The Portuguese were unwilling to sell because…

“Does Runshitang have any interest in these goods?” Yang Shixiang should. He knew he had previously sold such goods to Yang Shixiang. He suddenly thought that since this Australian named Liu San was the second proprietor of Runshitang, he had a share in its profits. He could use him to open a breach.

However, this was a long-term project, and he couldn’t stay in Lingao for long. As he pondered, an idea came to him. He summoned Master Han and Gu Baocheng. As for Quark, there were some things he naturally didn’t need to know.

“Alright, gentlemen, you’ve seen it. The Australians are not like the other red-haired barbarians, and they are not like us Ming,” Li Luoyou said. “Baocheng, have a seat. Tell me, what do you think of these Australians?”

“The Australians are profit-driven,” Gu Baocheng hesitated for a moment, “but from what I’ve seen, though they are profit-driven, they also value credit.”

“Correct,” Li Luoyou said. “The Australians are indeed profit-driven. But this group is different from the usual Westerners.”

Master Han added, “If they were entirely profit-driven, they wouldn’t have refused to sell us cannons today.”

“Whether they are willing to sell or not is still unknown,” Li Luoyou said. “But from the looks of it today, buying cannons might not be possible. This group of Australians probably has other plans for Lingao.”

“The Australians seem to have the intention of carving out Lingao for themselves,” Gu Baocheng blurted out.

Li Luoyou gently tapped his palm with his fan. After a long while, he nodded. “We can’t guess their thoughts for now. But it seems the Australians will be staying here for a long time. There’s a lot of business to be done.” He suddenly asked Gu Baocheng, “Baocheng, how would you like to be the manager of the Lingao branch?”

Gu Baocheng was clearly not expecting this question from his uncle. He was stunned into silence for a long time before saying:

“Since uncle is cultivating me, I will naturally do my best to serve!”

Master Han knew the young master’s status in Li Luoyou’s heart. He was more important than a son, the sole heir to his wife’s family line. To place him in a remote place like Lingao, on Australian territory? He quickly advised:

“Master, please reconsider. This place is not like the mainland—”

“It’s no matter,” Li Luoyou said. “In fact, it’s easier to do business here than on the mainland.”

The business and social environment in Lingao was relatively simple. The only party to deal with was the Australians. It wasn’t like the mainland, where a manager needed to be a smooth operator, capable of handling all sorts of people to keep the business afloat. And while the Australians were profit-driven, they were by no means unreasonable or without rules, and they were much better than the Westerners.

“You will be the manager here, with all the authority a manager should have,” Li Luoyou said, thinking to himself that the boy had been by his side for a long time. Although he was worldly, it was hard to say how capable he was of handling matters independently. This couldn’t go on forever; he needed a place to gain experience on his own. Over the past two days, he had become quite satisfied with the social environment in Lingao.

“Yes, I will be diligent and conscientious.”

“Good. You’ve never been in charge on your own before. You’ll be getting married and starting a family soon; you can’t always be under my wing. The environment here in Lingao is cleaner than on the mainland, with fewer shady dealings. I’ll be more at ease with you managing things alone here,” Li Luoyou sighed. “Just maintain a good relationship with the Australians and handle the business matters, and that will be enough.”

He glanced at his nephew. “I will give this branch an additional one thousand taels of silver as capital. Besides liaising with the Australians, you are free to conduct whatever business you see fit. As long as it’s not something immoral or criminal, I will support you completely. It doesn’t matter if you lose money.”

“Yes,” Gu Baocheng said respectfully. “But I will still need Master to assign capable stewards and assistants to help me.”

“Don’t worry about that. You can pick anyone from my staff—choose them yourself. Whoever you choose, it will be.” Li Luoyou said, “It’s alright if you choose wrong, as long as you know you’re wrong and can correct it.”

Master Han understood Li Luoyou’s intentions and stopped trying to dissuade him. It was, of course, a good thing for the young master to gain experience. However, he felt it was necessary to offer a reminder. “Master,” he said in a low voice, “this group of Australians has the ambition to rule Lingao. If the imperial court sends troops to suppress them, Lingao will become a living hell…”