Chapter 226: Smuggling Salt

At least now he was a high-ranking official—a full member of the Council of Elders. Guo Yi actually valued the latter more. Being a high-ranking official sounded impressive now, but it wouldn’t be so rare in the future. Even the most useless Elder could probably become a colonial governor someday. In comparison, being an Elder was the most valuable identity.

“Those are two different things,” Guo Yi skipped over this sad topic. “I know your plan, you’re trying to achieve a peaceful evolution.” As he spoke, he pulled the rope with the bell, and the carriage immediately started moving.

This carriage was a luxurious vehicle specially made for Guo Yi by the Vehicle Factory. It had a four-wheel structure, leaf spring suspension, and a lavishly decorated interior. The moment it appeared on the road, everyone knew that Master Guo had arrived.

Hong Huangnan’s enthusiastic plan to use a carriage 4S shop as a cover to establish pre-positioned logistical supply points in enemy territory had been aborted due to fierce opposition from the Planning Commission and the military. However, its commercial part was picked up by Si Kaide.

Si Kaide had equipped Guo Yi with this carriage to use him as a living advertisement.

The carriage soon left the bustling city and headed towards the “Guo Residence” on Huifu Street.

Along the way, they could occasionally see well-dressed people of all kinds standing respectfully by the roadside, welcoming Master Guo’s carriage as it passed. Si Kaide knew that these people were employees and partners of the various affiliated enterprises under the Zi’s Group of the Guangzhou Station. He felt that Guo Yi was becoming more and more like a Japanese zaibatsu figure.

The residence on Huifu Street had been renovated since their return to Guangzhou. To fully embody “Master Guo’s” power and wealth, Zheng Shangjie had renovated the Huifu Street residence to be magnificent. Not only were all the building materials, plumbing, and hardware ordered from Lin’gao, but they also did not hesitate to use all kinds of high-quality building materials that could be obtained locally.

The two sat down in the lavishly decorated “smoking room.” This was where Guo Yi entertained “distinguished guests.” It was very secluded. He took out two bottles of chilled kvass from the cabinet, and the two continued their conversation while smoking cigars.

The core topic was silver and grain, and it was for these two things that Si Kaide had made a special trip to Guangzhou.

A Southeast Asian trade delegation from the Colonial and Trade Department had recently left Lin’gao. Their mission was to explore the shipping routes and trade conditions in Siam, Cambodia, Vietnam, and other places, and to see if there were any local partners. The rice from Southeast Asia had always been a coveted target of the Planning Commission.

“…Sir Guo, although we have sent a trade delegation to Southeast Asia, establishing a grain channel is not something that can be done overnight,” Si Kaide said. “Since we made an agreement, the Dutch have indeed transported a lot of Southeast Asian rice to us, but this all has to be bought with real gold and silver…”

The trade between the Elders and the Dutch was, on the whole, a surplus. The Council of Elders used Guangzhou as a window to purchase a large amount of various specialties from the Ming Dynasty and then resell them to the Dutch. The types of goods the Dutch sold to the Council of Elders were relatively limited. Besides spices, the Council of Elders was mainly interested in bulk commodities, namely rice, timber, and industrial raw materials. These were far from enough to offset the payment for the Council of Elders’ export goods, so the Dutch had to pay a large amount of precious metal currency.

It was thanks to the large amount of silver paid by the Dutch that Lin’gao was currently able to finance large-scale operations like the Engine Project. But the financial income from exports alone was always limited. Compared to the huge appetite of the Engine Project and industrialization, the payments made by the Dutch and the British for Chinese goods were far from enough.

To export to the Dutch and the British, the Colonial and Trade Department had to establish a commercial network on the mainland, and operating this network consumed a large amount of funds. In Leizhou alone, the working capital occupied at its peak was as high as 300,000 taels. And as Wen Tong continued to expand the sugarcane planting area and increase sugar production capacity in Leizhou, the amount and duration of capital occupation by the Leizhou sugar industry were constantly increasing. This further exacerbated the funding gap.

If the Council of Elders currently had a trade surplus with European merchants, then it was in a complete trade deficit with the Ming Dynasty.

Undoubtedly, the goods currently exported by Lin’gao to Guangdong, except for a small portion of re-exported goods from Southeast Asia, were all self-produced industrial products, while the goods imported from the Ming Dynasty were almost all industrial raw materials and agricultural products—primary products. Judging from the types of goods and profits of the trade between the two sides, the Lin’gao-Guangdong trade was a typical “post-colonial trade system,” with an astonishingly large price scissors.

The problem was that the industrial system and new social system being built in Lin’gao had a huge appetite for primary products, so large that it completely swallowed the huge profits brought by the price scissors.

Lin’gao’s industrial production capacity was still relatively small, and its own demand was too large. It could not produce enough capacity to produce cheap consumer goods for export, and the market demand in the Ming Dynasty was very distorted, with overall demand being small. This all limited the further expansion of exports to the Ming Dynasty. Overall, the revenue growth of the Guangzhou Station had become sluggish.

“Do we need to further expand the scale of imports and exports?” Guo Yi expressed his concern. “We’ve almost reached the limit now. If we can’t set up factories directly in Guangzhou to produce, I’m afraid it will be difficult to have much room for expansion.”

Not setting up factories locally meant that goods and production raw materials still had to be transported over long distances in both directions, which meant that production costs could not be further reduced.

“Of course, of course. The diffusion of light industrial enterprises to Guangdong is something that must be done, but not now,” Si Kaide nodded. “You also know that all departments are now working in 24-hour shifts, and even so, the production tasks assigned are still overwhelming. It’s impossible to manufacture additional machinery and equipment.”

“Then what other growth points are there?” Guo Yi asked. The smokeless industry was very profitable: the profit margin of the Ziminglou was the highest among all the enterprises directly under the Council of Elders, but this kind of enterprise could not be opened everywhere—the consumer group was fixed.

“Salt.”

Guo Yi was somewhat unconvinced. It was true that salt was the main source of funds for the Council of Elders at the beginning. At that time, it was through seizing the salt fields of Maniao that they opened up the channel for exporting bulk commodities and obtained a stable economic income. To this day, Lin’gao’s salt exports are still a major source of income for the Ministry of Finance.

Since the salt trade was managed by the Monopoly Bureau, the salt merchants who dealt with Lin’gao also went directly to Lin’gao for transactions. The Guangzhou Station only handled some sporadic business, so he knew very little about the entire salt trade.

Currently, all the salt sold by Lin’gao was smuggled salt, and the profits were considerable. But they were hampered by a lack of sales channels. Currently, besides Hainan, sales were limited to Guangdong province. A portion also flowed into Guangxi. Unfortunately, both the north and south of Hainan had suitable natural conditions for many salt fields, and the competition in smuggled salt was also fierce.

After the victory in the second anti-encirclement campaign, the navy took advantage of the victory to actually control the Qiongzhou Strait, bringing the Leizhou Peninsula and other coastal areas of the strait into their sphere of influence, effectively controlling the two main salt-producing areas of Guangdong, Haibei and Hainan. In this way, controlling the production and sales of salt in Guangdong became possible.

A few months ago, the Colonial and Trade Department had made salt sales an important breakthrough for increasing exports. After some investigation, they decided to export on a large scale to Guangxi and Fujian. Both of these provinces were salt-deficient, and salt smuggling was already rampant. It would be easy to enter these two markets and obtain high profits.

“Our salt quality is much better than other places,” Si Kaide said. “The profit from salt is very high. And now we have more than just the Maniao salt fields.”

According to the calculations of the Ministry of Finance, once the channels were opened, using the existing salt field facilities, an annual income of 300,000 taels could be guaranteed. If the various salt fields were further improved, with more labor and equipment, and new salt fields were developed, an annual income of one million taels from salt would not be a dream.

The famous Jiuda Refined Salt Factory in Tianjin in the history of old China, with a capital of 50,000 silver dollars and 2,000 mu of salt fields as production facilities, used modern salt-making methods to produce 5 tons of refined salt per day, with an annual profit of more than 500,000 to 600,000 yuan. The initial capital of 50,000 yuan could pay dividends of 10,000 to 15,000 yuan per year. The profit was very considerable.

The production level and technology of the salt factory in Maniao were even more advanced than those of the Jiuda Refined Salt Factory in 1911. The salt and soda produced were of high quality.

The opinion of the Colonial and Trade Department was to set up a salt sales center in Guangzhou to sell the salt from Hainan Island and Leizhou. Through Guangzhou’s port advantages, it could be distributed throughout Guangdong and Fujian.

Limited by the production scale of the Maniao salt factory, it was impossible to refine and reprocess all the sea salt produced by the salt fields under their control, but this could also create a product differentiation.

“You know that the so-called Monopoly Bureau under the Ministry of Finance is just an empty shell, with only one Elder in charge. The specific sales in Guangzhou will still be handled by the Guangzhou Station.”

Guo Yi said, “But if it’s set up in Guangzhou, openly wholesaling smuggled salt might be a bit too much. Besides, salt requires a large warehouse—it’s impossible to hide.”

“It can be set up on Hong Kong Island or a closer island. The government can’t and won’t dare to interfere. You just collect the money and issue the invoices here. The salt smugglers take the invoices to Hong Kong to pick up the goods—they can be loaded directly onto ships, and we can even handle the logistics…”

“What about the government and other salt smugglers? I don’t think they’ll just leave the market willingly.”

Si Kaide was confident. “The salt smugglers are no problem. They are our customers and distribution channels, not our enemies. As long as we control the salt fields, they have no choice but to obey—otherwise, if we cut off their supply, what smuggled salt can they sell? If we encounter any disobedient troublemakers, we can just eliminate them.”