Chapter 45: The Mountain and Sea Routes

Whether it was the Ming or the Qing, both were well aware that the source of the Zheng clan’s power was the enormous profits from maritime trade. A major measure to strike at the Zheng clan was to blockade the export of mainland goods. Especially after Zheng Zhilong surrendered to the Qing and was killed, the Manchu Qing implemented a strong maritime ban, imposing a trade blockade on Zheng Chenggong, “not a single plank is allowed to go to sea,” and prohibiting the export of goods. However, relying on Taiwan and the two islands of Jinmen and Xiamen, Zheng Chenggong was still able to continuously obtain a large number of goods for overseas trade from the mainland. This was all thanks to the commercial-intelligence network established by the Zheng clan on the mainland, the so-called “mountain and sea two routes, five merchants and five firms” system.

The operation of this system was very successful. It not only continuously provided the Zheng clan with various goods from the mainland, but also provided intelligence and logistical support for Zheng Chenggong’s military operations on the mainland. In 1659, when Zheng’s army attacked Zhenjiang, the Zheng clan’s merchants had purchased and stored a large amount of rice in the Jinshan Temple at the mouth of the river in advance. When Zheng’s ships arrived, they could immediately supply military grain on the spot. It was only after Zheng Chenggong’s general, Huang Wu, defected to the Manchu Qing that this system was exposed. However, throughout the Shunzhi reign, only twelve so-called cases of Zheng’s spies were uncovered, and most of them were vague, involving only five or six people. It was clear that this system had not been seriously damaged.

Zheng Chenggong’s system operated commerce through the mountain route and transported materials through the sea route. Each route had five trading firms responsible for it, with no contact between them.

The system that Jiang Shan, Si Kaide, and the others were now planning to establish was basically an imitation of its operation.

The mountain route was responsible for the transmigrator group’s mainland trade and procurement of materials. The five merchants were codenamed “Gold, Wood, Water, Fire, and Earth.” Wanyou took the “Gold” designation; “Wood” was reserved for the Runshitang system, and the rest were for future use.

The several “Zi” character enterprises in Guangzhou and the South China Sugar Company in Leizhou were considered too important to the transmigrator group by the intelligence bureau and the Ministry of Colonial Trade. It was best to keep them as they were for the time being.

The sea route established five firms, engaged in the transportation of goods and people, inns, and finance, equivalent to a logistics and financial services industry. They were codenamed “Benevolence, Righteousness, Propriety, Wisdom, and Trust.” Among them, the “Benevolence” designation was for the Qiwei Escort Agency system, and the “Righteousness” designation was for the Delong Bank system.

The five merchants and five firms of the mountain and sea routes were all under vertical management. They only had business contact with each other, not intelligence contact. Their actions were kept secret from each other. Except for a few key figures, most of the clerks and managers in the shops were unaware of their secret mission.

The five merchants and five firms were mainly responsible for collecting local public intelligence, as well as providing support in logistics, transportation, and communication.

Besides the personnel of the mountain and sea routes, there was the “Black Dragon Society” system, which was directly under the Foreign Intelligence Bureau. This system was entirely composed of intelligence personnel, who would deploy and conduct reconnaissance in important locations in the model of an investigation network. These personnel would use various identities as cover, including landlords, peddlers, small merchants, clerks, monks, and Daoists. If necessary, they could also operate as small-scale local armed forces by becoming mountain kings or organizing village braves, serving as future armed work teams on the mainland.

The Black Dragon Society and the mountain and sea routes had no horizontal contact. They were mainly responsible for more dangerous illegal activities, carrying out undercover, infiltration, and subversion work. Members of the Black Dragon Society were not allowed to hold positions in the shops of the mountain and sea routes to avoid being implicated if they were arrested. When they needed cooperation or support from the other side, they had to present special tokens or instructions in coded letters.

Establishing a large-scale commercial network on the mainland was a large-scale investment project. This project not only required a large investment, but also a considerable number of personnel. It caused a major controversy during the three readings in the Yuanlaoyuan, and a hearing was held for this purpose.

At the meeting, personnel from the finance and economics, trade, and industrial departments each explained their current situation and the problems they faced.

Currently, the scale of investment in Lingao’s industry, civil administration, and infrastructure was constantly expanding. The expansion of production capacity and population had greatly stimulated imports. And the self-sufficiency rate of raw materials in Lingao was very low. The result was that Lingao’s dependence on foreign trade was constantly deepening. The finance and economics department of Lingao finally began to encounter a difficult problem: a shortage of foreign exchange.

The so-called foreign exchange was, of course, the most widely used hard currency in this era: silver.

The ever-expanding industrial and mining enterprises, administrative agencies, and army and police employed a large number of personnel. The huge administrative expenses, coupled with industrial investment, had caused the physical silver reserves of the Finance and Economics Committee to drop to near the warning line by April 1630.

Judging from the book figures, Lingao’s trade had always been in a surplus, and the number of silver reserves was also more than enough. However, most of the reserves were only on the accounts receivable of the Guangzhou Station. Similarly, the liabilities under the accounts payable for imported materials at the Guangzhou Station were also considerable. If it weren’t for the approaching first collection day of the Dragon Boat Festival in May, the silver reserve situation of the transmigrator group would have become very ugly by the end of summer.

And Leizhou, the transmigrator group’s largest source of silver, not only could not contribute financial resources, but also required a large amount of financial investment. The South China Sugar Company, relying on the Leizhou Sugar Industry Association, was organizing a “sugar industry combination” locally, similar to Japan’s “agricultural cooperative” system. It adopted a model of unified supply of seeds, fertilizers, and pesticides; unified planting guidance, and unified procurement. The most crucial part of this system was to provide a large number of small, low-interest loans to farmers, so that they would not be controlled by local rural usury. This system was currently only being carried out in Xuwen, but the capital required was at least fifty thousand taels. In addition, another two to three hundred thousand taels of silver would be needed for procurement in the autumn to meet the demand. This made the financial situation in the second half of the year very severe.

“Since the financial situation is so severe, why increase investment in the mainland?” Qian Shuixie, a standing committee member of the Yuanlaoyuan, questioned. “The funds invested now cannot be recovered in the same year, let alone generate enough profit.”

“First of all, this system is a gradual construction process, not a one-step process,” Si Kaide, sitting alone in the chair in the middle of the horseshoe-shaped table, said. Although this system was a dual system of commerce and intelligence, it was mainly for commercial services. According to the principle that whoever benefits the most should answer the questions, he was the only one who could be on the stage.

“This system mainly uses existing mature industrial and commercial enterprises, and we guide them to make expansionary investments.” Si Kaide pointed out that whether it was the upcoming “Wanyou” or the Runshitang pharmacy that was preparing to create a “Great Ming Watsons,” they were all private joint-stock enterprises, and the funds for their external expansion were also mainly borne by them.

“But we also have investments, don’t we? And this investment is not a small amount.”

“Of course. Although our nominal investment amount is large, the actual investment of physical silver is limited…”

“Do you mean to say that our investment is just a bookkeeping act?”

Si Kaide hesitated for a moment, and after a few dozen seconds, he replied, “If you are talking about the way the funds are allocated, then yes, it is.” He quickly added, “But we also need to invest a portion of physical silver. It’s just that the amount is limited.”

“Anyway, the investment in Wanyou and Runshitang will not be less than fifty thousand taels, right? Let’s just say half of your contract investment amount. How long will it take to recover the cost of this investment—I’m not talking about profit.”

“I don’t think even Warren Buffett can say when he can definitely make a profit,” Si Kaide said. “But the payback period is very fast. For example, the business of goods from the north and south of Wanyou.”

According to historical records, the navy’s calculations, and the commercial department’s estimates, using a traditional sand boat to transport goods from the north and south between Shanghai and Tianjin, a round trip could be completed in about two months. With a capital of fifty thousand taels of silver, after deducting expenses, the net profit would be between three thousand and six thousand taels, which was very considerable.

“The profit can’t be immediately withdrawn to Lingao for use, right? Since you want to expand your business, you need to accumulate capital.”

“Yes, that’s right,” Si Kaide said. “But the initial investment is relatively large. Later on, no additional investment will be needed—even if there is, it will be limited. It can be sustained and developed by the enterprise’s own profits. In terms of our investment, it is still quite cost-effective.”

A stir went through the standing committee members, who seemed not very satisfied with this answer.

Si Kaide continued, “Regarding the funds, there is another channel to supplement them. Everyone knows where the deposits of Delong Bank in Guangzhou come from, right? It’s mainly from the deposits of local rich people absorbed by the Zi character enterprises. After our mainland commercial network system is established, we can also use the same method to absorb funds.”

“In addition, the Colonial and Trade Directorate requests that Yu E’shui, a first-class historical materials researcher from the Great Library’s historical materials research group, be our witness.”

“Agreed.”

Yu E’shui submitted a testimony. According to historical records, next year, which was the fourth year of Chongzhen, the Ming army would blockade Guangzhou Bay and prohibit the Portuguese from entering and leaving for trade. This abolished the long-standing practice of the Portuguese being able to come to Guangzhou city twice a year to purchase goods.

“Since the Portuguese can no longer directly purchase Chinese goods, they will inevitably look for Chinese agents to buy goods. The Guangzhou Station can use this opportunity to directly sell a large number of Chinese goods to the Portuguese, and we can obtain a huge amount of silver foreign exchange reserves. If we can establish a mainland commercial network before next year, we can purchase goods cheaply through this network and then export them—whether it’s selling them directly to the Portuguese in Macau or shipping them to Southeast Asia.”

The Portuguese’s favorite commodity—raw silk—was mainly produced in Jiangnan. The first-grade variety of exported raw silk, “Lankij n” (Nanjing), was produced in Jiangnan.

The proposal to establish a mainland commercial network was finally passed by the Yuanlaoyuan in three readings. However, the standing committee members added a condition to it, that is, any additional appropriation to these enterprises must be approved by the Yuanlaoyuan.

In addition, the Yuanlaoyuan also approved the Colonial and Trade Directorate to conduct one or two exploratory trade missions to Southeast Asia and Liaodong to see if it was possible to establish trading posts or agencies there.

At the same time, the Yuanlaoyuan also instructed the General Manufacturing Directorate to develop more export products as soon as possible to ensure a trade surplus in the foreign trade sector, increase foreign exchange reserves, and ensure the continuous import of production raw materials and population.

The Ministry of Colonial Trade got all the authorization they wanted. The General Manufacturing Directorate, however, was not very happy—they had not gained anything from this hearing, but instead had been put under more pressure. Developing new export products was easier said than done.

Most of the products of the various departments and enterprises under the General Manufacturing Directorate could not be exported—even if they were willing to export, Lingao itself did not have enough. The orders for machinery and equipment, which accounted for the majority of the General Manufacturing Directorate’s production capacity, were already scheduled until 1633. These were all to be supplied to various industrial, mining, and agricultural uses in Lingao and the future Sanya area. The production capacity of the clothing factory had reached a figure that the natives found incredible, 5,000 sets of various clothing per month, yet it was still unable to cope with the growing population. Sometimes, the purified immigrants could not even get the standard two sets of clothing per person and had to be given clothing coupons to be redeemed later. As for shoes, the demand had never been truly met. The army had to rely on “advanced straw sandals” mixed with rags to barely keep the soldiers from training barefoot—formal leather-soled cloth boots were only worn during inspections, exercises, and when going out.

Even the production capacity of many light industrial products was consumed internally—for example, soap. The production capacity itself was affected by the shortage of oil, and the large internal demand for soap meant that most of it was consumed locally in Lingao. Only a small amount of high-grade scented soap and transparent soap was exported as luxury goods.

“Mo Xiao’an, this matter is up to you to consider,” Zhan Wuya said. “As we all know, the only possibility for the heavy industry department to export is arms and machinery. Now the Executive Committee disagrees with both, so the heavy task of exporting industrial products falls on your light industry department.”

He sighed, “I know you are in a difficult position. The raw materials for many products are ‘controlled’ materials. Even if they could sell well in the market, you can’t mass-produce them. But you should still try your best.”

“I’ll do my best to find a way,” Mo Xiao’an said with a bitter face. “Can we submit a report to the Executive Committee? To allow the export of a portion of the grain? This way, I can at least develop a large number of sweet potato products.”

“That’s basically impossible, but I’ll try again. You’d better pray for a super bumper harvest of sweet potatoes this year, so much that they’re about to rot. Maybe then there’s a chance.”

Mo Xiao’an thought the problem was that the food factory’s comprehensive utilization of sweet potatoes was too powerful, with almost no possibility of waste.

He went back to his office and racked his brains for a long time, but still couldn’t think of anything to expand exports. He now had quite a few products that could be exported, from non-staple foods, snacks, medicines, cosmetics, bathroom ceramics, paper… all in all, after removing the varieties with too low production capacity that could only be consumed locally and the varieties on the Executive Committee’s export control list, there were probably more than forty varieties left.

Among them, the largest sales were MSG and pickles from Tianchu, as well as needles and paper products. These four accounted for half of the total value of Lingao’s bulk export commodities.

The export of Chinese patent medicine from Runshitang was growing very fast, but the production capacity of handmade medicine was not high. Coupled with the large amount of self-use in Lingao, the export value was still relatively low. This situation could only be changed after the new mechanized pharmaceutical factory was put into operation.

Because MSG required sweet potatoes as a raw material, the production quantity was greatly limited. Pickles, on the other hand, could be expanded in production—the output of vegetables was always considerable, especially in a climate like Lingao’s, where all vegetables could grow year-round.

Unfortunately, his plan for rice noodle jerky could not be realized—rice noodles mixed with a large amount of sweet potato flour had been on the market in Lingao for a long time, and both the transmigrators and the natives had eaten a lot of it. He had always hoped to sell this thing to the mainland, but the Executive Committee had never agreed to its export.

Mo Xiao’an thought and thought, but couldn’t come up with any new products. There were many ideas for new products, and the trial sales results in Guangzhou were also acceptable. But what he needed were new products that could be shipped in large quantities. In the end, he called for Xun Suji and Zhou Dongtian.

Xun Suji had not been very attentive to his work recently. Liu Youren had given up on the possibility of him proposing marriage and simply had Liu Guangbiao propose to him directly: he was willing to marry his “grandniece” Liu Meilan to him. Not only was the Liu family willing to marry their daughter to him, but they would also give Liu Meilan a generous dowry. As for Jin Xishan, the “woman in the house” by Xun’s side, Liu Guangbiao said that Liu Meilan was definitely not a girl who couldn’t tolerate others.

This sudden good news made Xun Suji dizzy. He actually had some thoughts about this tall girl, but they were just thoughts. He had never thought about how to make them a reality.

But marrying a native woman, the Executive Committee had never given a specific statement. Now that he already had a maid and secretary, he wondered if they would agree if he suddenly proposed to get married.

Xun Suji went to see Wu Nanhai, who expressed his full support:

“We should have integrated with the local natives as soon as possible. If you marry Liu Youren’s grandniece, the Liu family will be on our boat, and they will be basic masses in the future—is this girl good-looking?”

“She’s okay, with a good figure,” Xun Suji said.

“Then seize the opportunity,” Wu Nanhai said. “I’ll arrange a few more agricultural technology promotion activities for the Liu family for you.”

But Mo Xiao’an had a different opinion:

“Suji, it’s fine for you to have a native woman as a maid or servant. But to have a daughter of the Liu family as your wife, isn’t that a bit too much?” Mo Xiao’an said. “It seems that many people in the Yuanlaoyuan are very wary of private collusion between natives and council members. If you marry into the Liu family, I’m afraid there will be many things that are hard to explain in the future.”

Mo Xiao’an was not being an alarmist. This was indeed the view of some council members—marrying into the local powerful native families would inevitably create a new privileged class attached to the council members. If this privileged class used this kind of marriage relationship to act lawlessly, it would be much more troublesome for the transmigrator group to deal with than in the past: everyone has a selfish desire to take care of their relatives, and sometimes it is purely out of consideration for face.