Chapter 101: Meng Xian

The inventory accounts of the prefecture and county warehouses, prepared by the Senate’s special search team alone, had over forty detailed categories. If you included the accounts of confiscated private property from officials and yamen runners, the number of categories would be in the hundreds. Just browsing through them was enough to give Liu Xiang a headache.

Hainan was originally a poor and remote region, a place of official and private exile, a “distant and harsh military prefecture.” The circulation of metal currency was very small, and commercial economic activity was backward. Therefore, after the takeover of the various counties, they were directly incorporated into the Lin’gao industrial economic system with its circulation coupons. Guangzhou Prefecture, on the other hand, was one of the most prosperous places in all of South China. The richness of its treasury and the complexity of its system were incompatible with the modern government and industrialized economic model, which made it difficult for the Senate members who came to Guangzhou to adapt.

“My biggest headache right now is how to pay the cadres’ salaries,” Liu Xiang finally got to the point after a long rant. It had been over half a month since they landed. Currently, their sporadic administrative expenses were all paid for with various materials from the “financial return”: food from the warehouses, clothes from the stored cloth, office furniture from confiscated furniture… In short, they wouldn’t buy anything from the market if they could find it in the inventory. Only when they really needed to buy something from the market would they use a small amount of silver fragments and copper coins.

Before the new currency was issued, any matter involving money had to be handled with caution. He knew that the Senate attached great importance to the issuance of the new currency—he had already received a notice from the General Office that several finance-related Senate members would be coming to Guangzhou on “official business” soon. What official business could a group of finance-related Senate members have in Guangzhou? It had to be about the issuance of the “Aoyang” (Australian dollar)!

When Liu Xiang was tired from his rant and stopped to drink water, Meng Xian finally spoke slowly, “The inventory and accounting of the treasury silver and miscellaneous silver are almost done. They will soon be shipped to the Hong Kong mint. Premier Cheng has already said that the new coins minted from this batch of silver will all be placed in a special financial account, called the Guangdong Special Expense Account. This money will be used exclusively to support the financial expenditures of the entire Guangdong province. As for the copper coins, they can only be recycled as industrial resources—the Planning and Development Council naturally can’t give you any compensation…”

Liu Xiang nodded. “I know that. What kind of place is the Planning and Development Council? It’s a place where they’d scrape the meat off a mosquito’s leg.”

Meng Xian smiled and continued, “As for the other things, the Planning and Development Council has also communicated with us. The consensus is to sell them locally. The funds obtained will be placed in the special expense account, mainly for Guangzhou’s use. Of course, as the most economically developed city in Guangdong, Guangzhou Municipal Government should also take care of the other smaller cities in the province.”

Liu Xiang quickly expressed his support. “I am fully supportive of this.” He added, “But for the local sale, it would be best if the Planning and Development Council handled it. There’s too much junk in there. According to the account books, it’s a mountain of gold and silver, but when you take it out, it’s just garbage. A considerable part needs to be written off and scrapped. I’m afraid if our municipal government does it ourselves, it will be hard to explain later.”

“Of course, our Finance and Economics Department will also participate at that time. All three parties will be involved. The specific work will still be handled by the municipal government. After all, you are the local authority, and all the merchants in Guangzhou have to listen to you.” Meng Xian picked up the Venetian carved glass in front of him and took a sip of the Senate’s special supply of “Xue Ziliang” brand fruit brandy. “You don’t have to worry about paying the cadres’ salaries. This is a great opportunity for the new currency issuance. We can use this opportunity to push out the money.”

“My biggest worry right now is the credibility of the paper currency,” Liu Xiang finally voiced his concern. “Guangzhou is a purely silver-based region. We are now issuing a new currency. In theory, banknotes and silver dollars will be used together and circulate at equal value, with free exchange and deposit. I’m worried that the common people won’t trust the paper currency and that there will be a run on silver dollars.”

Guangzhou was the place where silver was most frequently used in all of South China. The circulation of silver was extremely large. Due to the shortage of copper coins, merchants even privately minted silver beans as subsidiary currency. Paper currency, thanks to the Ming Dynasty’s bizarre monetary policy, had a very bad reputation. Even the grain circulation coupons that were widely used in Hainan rarely circulated in the Guangzhou market. They were basically only used in a limited way among the “Kun merchants.” Guo Yi and Meng Xian had tried several times to expand the use of circulation coupons in Guangzhou, but the merchants and common people of Guangzhou were not buying it.

“The Ministry of Finance has allocated one million in paper currency, but only two hundred thousand in silver coins. I can’t just hoard these two hundred thousand silver coins and not use them. I don’t know how fast the silver coins will be returned to circulation, but I know that the common people won’t trust the paper currency at first. They will exchange it for silver dollars or purchase goods as soon as they get it. We’ve said there will be free exchange and use. What if we don’t have enough silver dollars in stock? This would be a huge blow to the credibility of the paper currency!”

Meng Xian put down his glass and said, “Old Liu, your worries are justified. Currency reform is a very difficult matter. The financial department has specific financial means to deal with the things you are worried about, and the Planning and Development Council also has economic contingency plans. But it’s impossible to replace silver’s monetary status with paper currency just by relying on market financial operations.”

His expression became very serious. “Establishing a legal tender system requires the push of administrative power. We will have to use force. In the final analysis, the circulation of modern currency relies on the government’s credit—in other words, the government’s power. The free exchange and use we are promoting now is actually a placebo, just to reduce the resistance to the issuance of paper currency. We must be credible, but we can’t fool ourselves.”

Liu Xiang didn’t expect him to be so blunt. He said with difficulty, “So you’re saying…”

“How much money can the common people have?” Meng Xian smiled. “I’ve been in Guangzhou for many years. Under the rule of the Great Ming, the vast majority of the people can only be considered to be at a subsistence level. ‘No grain stored for the next day’ is the best description of their economic capacity. A senior clerk in a large shop earns only one or two taels of silver a month. And that’s already considered the more affluent class among the citizens. The so-called exchange pressure is mainly concentrated among the merchants and gentry who hold large amounts of silver. If you can handle them, the rest will be easy.”

“What are the specific measures?” Liu Xiang asked.

“The implementation plan has not yet been finalized. But Chen Ce will be in Guangzhou soon, and he will bring a complete implementation plan. To be more specific, the tax department will definitely be used. Although it’s not appropriate to interfere with your administrative work, it would be best if the tax department could be established as soon as possible.”

“I have indeed considered this. After all, taxation is the normal source of financial revenue. We can’t always rely on confiscations and appropriations.”

“Confiscation is a fortune we must make, and when we make it is up to you. But taxation is indeed an urgent matter,” Meng Xian said. “Agricultural tax involves more complex issues. I think we can start with commercial tax. After you entered the city, you abolished all kinds of customary fees, and the merchants only have to pay the official tax—the amount of this tax is simply ridiculous. We must quickly adjust the tax rates and introduce new types of taxes. Otherwise, if they get used to low taxes, it will not be so harmonious to implement them later.”

Zeng Juan woke up very late today—he had been helping his family make incense and candles until the fourth watch of the night. Since the Kun people entered the city, the once lukewarm incense and candle business had suddenly picked up. In this turbulent and changing world, the sense of instability from the changing flags over the city walls made many people seek the protection of gods and Buddhas. They rushed to buy incense and candles to pray, and upon returning, they would inevitably light incense and pray before the ancestral tablets in their ancestral halls, asking their ancestors to bless their descendants.

Thanks to the Kun people’s entry into the city, Zeng Juan’s family was finally able to pay off part of their debt to the spice shop and the oil and wax shop. When Zeng Juan went to pick up goods, the owner’s face was a little more pleasant. His mother also promised to buy him the new hat he had wanted for a long time.

But the dark clouds hanging over Zeng Juan’s family had not dispersed. Also because of the Kun people’s entry into the city, the owner of the spice shop said that foreign ships were not coming now, and the supply of spices was tight. The prices of all the spices they used were going to rise.

He knew this was just an excuse, but a small workshop like Zeng Juan’s family had no bargaining power at all.

Zeng Juan’s father calculated that the profit from the improved business this month would be completely offset by the increased cost of goods next month. So, Zeng Juan’s new hat had to be postponed again.

“A small craftsman like us can never get ahead in life.” Zeng Juan came down the simple wooden stairs from the upper floor and saw his father, who had gone to bed later than him last night, already dipping candles by the stove—repeatedly dipping the peeled rush wicks into the melted wax until they reached the right thickness and length.

This work was not only tiring, but also required being by the melted wax all day. Even in winter, you could only wear a single shirt. In summer, you didn’t even have to get close to the pot; just being near that corner would make you feel an unbearable wave of heat. His father had to soak his feet in cold water to be able to work.

Besides the heat, there was also the stench of the grease. The wax used for making candles was often the rendered fat of cattle and sheep, and the stench it gave off when melted was unbearable even for Zeng Juan, who was born here.

Looking at his father’s busy back and the finished candles beside him, he must have been working for a long time—he really didn’t know how his parents had endured it.

Zeng Juan had an older sister who was married to the owner of a small teahouse on the street in front of their house. The teahouse business was good, and Zeng Juan’s sister had some money, so she supported Zeng Juan’s education. Therefore, Zeng Juan had not suffered much as a child. However, last year his sister died in childbirth, and his brother-in-law quickly remarried. The money for his education was naturally gone. Zeng Juan knew that his parents were now gritting their teeth to support his education, hoping that he could achieve a better life through his studies, not necessarily to become famous, but at least to live a slightly more decent and comfortable life.

Now that the Kun people had come, the community school was closed. In fact, even if it wasn’t closed, what was the point of studying the eight-legged essay every day and practicing the turns of phrase? He had long known that the Australians did not hold imperial examinations.

Moreover, Zeng Juan was also well aware that even if the Australians hadn’t come, it would be as difficult as climbing to the sky for him to pass the xiucai examination with his essays, which were always heavily criticized by his teachers!

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