Chapter 982 - Smuggling Salt

At least now he was a regional official—a formal member of the Senate. Guo Yi actually valued the latter more. Being a regional official sounded impressive now but wouldn't be special in the future. Even the most incompetent Elder could easily end up as a colonial governor someday. In comparison, Elder status was the truly valuable identity.

"Those are two different things." Guo Yi skipped over this painful subject. "I know your calculations—you're planning for peaceful evolution." As he spoke, he pulled a bell cord, and the carriage immediately set off.

This carriage was a high-end luxury vehicle specially manufactured by the Vehicle Factory for Guo Yi. It used a four-wheel structure with leaf-spring suspension, and the interior was lavishly appointed. Whenever it appeared on the road, everyone knew Director Guo was coming.

Hong Huangnan's scheme to use carriage 4S shops as cover for pre-positioned logistics points in enemy-occupied territory had been aborted due to fierce opposition from the Planning Commission and the military. But its commercial portion had been picked up by Si Kaide, who had equipped Guo Yi with this carriage precisely to use him as a living advertisement.

The carriage soon left the bustling district and headed toward the "Guo Residence" on Huifu Street.

Along the way, one could periodically see neatly dressed figures of various types standing respectfully by the roadside, greeting the passing of Director Guo's carriage. Si Kaide knew these were all employees and business partners of the Guangzhou Station's Purple Clan Group affiliated enterprises. He felt that Guo Yi was increasingly resembling a Japanese zaibatsu-style figure.

The Huifu Street residence had been thoroughly renovated since their return to Guangzhou. To fully embody "Director Guo's" power and wealth, Zheng Shangjie had renovated the residence to be resplendent. Not only were all building materials, plumbing, and hardware ordered from Lingao, but whatever quality materials could be obtained locally were also used without stint.

The two sat down in the ornately decorated "smoking room"—where Guo Yi received "distinguished guests," a very private space. He took out two bottles of chilled kvass from a cabinet, and they continued their earlier conversation while smoking cigars and drinking.

The core topics were silver and grain. It was precisely for these two things that Si Kaide had specially come to Guangzhou.

A Colonial Trade Department Southeast Asia trading delegation had recently departed from Lingao. Their mission was to explore shipping routes and trade conditions in Siam, Cambodia, Vietnam, and other places, while also seeking potential local partners. Southeast Asian rice had always been a target the Planning Commission coveted.

"...Director Guo, although we've sent a trading delegation to Southeast Asia, establishing grain channels isn't something that can be accomplished overnight," Si Kaide said. "Ever since we made that agreement, the Dutch have indeed shipped us quite a lot of Southeast Asian rice, but that all has to be bought with real gold and silver..."

Trade between the Elders and the Dutch was, on balance, favorable to the Elders. The Senate used Guangzhou as a window to massively purchase various Ming specialties for resale to the Dutch. Meanwhile, the variety of goods the Dutch sold to the Senate was relatively limited. Besides spices, the Senate was mainly interested in bulk commodities—rice, timber, and industrial raw materials. These were far from sufficient to offset the value of the Senate's exports, so the Dutch also had to pay a large sum in precious metal currency.

It was precisely through the large amounts of silver the Dutch paid that Lingao could currently afford the expenses required for large-scale operations like Operation Engine. But fiscal revenue from exports alone was always limited. Compared to the enormous appetite of Operation Engine and industrialization, what the Dutch and English paid for Chinese goods was still far from enough.

To export to the Dutch and English, the Colonial Trade Department had to establish a commercial network on the mainland. Operating this network also occupied large amounts of capital. In Leizhou alone, at peak times the working capital tied up reached as high as 300,000 taels. And as Wen Tong continued to expand sugarcane planting area in Leizhou and enlarge sugar production capacity, the capital tied up in the Leizhou sugar industry kept increasing in both amount and duration. This further exacerbated the funding gap.

If the Senate currently had a trade surplus with European merchants, then with the Ming, the Senate was completely in deficit.

Without question, the goods Lingao currently exported to Guangdong—apart from a small portion of re-exported Southeast Asian goods—were all domestically manufactured industrial products. Meanwhile, goods imported from the Ming were almost entirely industrial raw materials and agricultural products—primary products. Looking solely at the types of traded goods and profits between the two sides, the Lingao-Guangdong trade was practically a textbook "post-colonial trade system" with an enormous price scissors effect.

The problem was that the industrial system and new social system Lingao was building had an appetite for primary products that was simply too large—large enough to completely swallow the enormous profits from the price scissors.

Lingao's industrial capacity was still relatively small, while its own demand was too great. It couldn't produce enough export consumer goods, and the Ming market's demand was very distorted with overall demand being low. All this limited further expansion of exports to the Ming. Overall, the Guangzhou Station's revenue growth had already weakened in momentum.

"Do we need to further expand import-export scale?" Guo Yi expressed concern. "We're almost at the limit now. Without being able to set up factories directly in Guangzhou, it will be hard to make major progress."

Without establishing local factories, goods and raw materials would still have to travel great distances in both directions, making it impossible to further reduce production costs.

"Of course, of course. Moving light industrial enterprises to Guangdong is definitely something that will be done, but not now." Si Kaide nodded. "As you know, all departments are currently running 24-hour shifts, and even so, the production tasks are backed up. Manufacturing additional machinery and equipment is simply impossible."

"Then what other growth points are there?" Guo Yi asked. The "smokeless industry" segment was highly profitable—Ziming Tower had the highest profit margin of all Senate-run enterprises. But this type of business couldn't spring up everywhere—the consumer base was fixed.

"Table salt."

Guo Yi was somewhat dismissive. Admittedly, table salt had been one of the Senate's initial main revenue sources. Back then, it was precisely by seizing the Ma'ao salt fields that they had opened up bulk commodity export channels and gained stable economic income. Even now, Lingao's salt exports remained a major revenue source for the Finance Supervisor Department.

Since salt trade was managed by the Monopoly Bureau, and salt merchants who dealt with Lingao went directly to Lingao for transactions, the Guangzhou Station only handled some miscellaneous business. He knew little about the overall salt trade.

As things currently stood, all salt sold by Lingao was contraband salt, with quite considerable profits. But the sales channels were limited. Currently, besides Hainan, sales were restricted to Guangdong Province, with some also flowing into Guangxi. Unfortunately, both Hainan and the coast across the strait, due to their natural conditions, had many solar salt fields, making competition in the contraband salt market quite fierce.

After the victory in the Second Counter-Encirclement Campaign, the Navy had taken de facto control of the Qiongzhou Strait, bringing the Leizhou Peninsula and other coastal areas along the strait into their sphere of influence. They had essentially taken control of both Hainan and the opposite coast—Guangdong's two major salt-producing regions. Thus, controlling Guangdong's salt production and sales had become possible.

Starting a few months ago, the Colonial Trade Department had made salt sales an important breakthrough for increasing exports. After investigation, they decided to export on a large scale to Guangxi and Fujian. Both were salt-deficient provinces where contraband salt smuggling was already rampant. Breaking into these two markets could easily yield high profits.

"The quality of our salt is far superior to everywhere else," Si Kaide said. "Salt profits are very high. And now the salt fields we control aren't limited to just Ma'ao."

According to Finance Supervisor Department calculations, once channels were opened, using existing salt field facilities alone could guarantee annual revenue of 300,000 taels. If the various salt fields were further improved, with increased labor and equipment and development of new fields, annual salt revenues of a million taels weren't just a dream.

The famous Jiuda Refined Salt Factory in Tianjin in old China's history, with 50,000 silver dollars in capital and 2,000 mu of salt pans as production facilities, using modern salt-making methods produced 5 tons of refined salt daily, earning 500,000-600,000 dollars annually. The original 50,000 dollars in capital could pay 10,000 to 15,000 in annual dividends. The profits were quite impressive.

The salt-making plant at Ma'ao was technologically somewhat more advanced than the 1911 Jiuda Refined Salt Factory. The salt and soda it produced were of high quality.

The Colonial Trade Department's opinion was to establish a salt sales center in Guangzhou, shipping salt from Hainan and Leizhou there for sale. Using Guangzhou's port advantages, it could spread to all of Guangdong and Fujian.

Limited by the Ma'ao plant's production scale, it wasn't possible to refine and reprocess all the sea salt from the controlled salt fields. But even so, this could create product differentiation.

"As you know, the so-called Monopoly Bureau under the Finance Department is just an empty shell with only one Elder in charge. Actual sales in Guangzhou are still handled by the Guangzhou Station."

Guo Yi said: "But if it's based in Guangzhou, openly wholesaling contraband salt might be a bit too blatant. Besides, salt requires large warehouses—it can't be hidden."

"It can be based on Hong Kong Island or on islands closer by. Officials can't control it and won't dare. Here you just collect money and issue receipts. Contraband salt runners take the receipts to Hong Kong to pick up goods—loaded directly onto ships. We can even handle the logistics..."

"What about officials and other salt smugglers? They probably won't just willingly step aside."

Si Kaide was fully confident. "Contraband salt runners are no problem—they're our customers and distribution channels, not our enemies. We only need to control the salt fields, and they'll have no choice but to cooperate. Otherwise, cut off their supply and what salt can they smuggle? If we encounter any stubborn holdouts, just eliminate them and be done with it."

(End of Chapter)