Chapter 2555 - Paper Cotton Aftermath
These concerns weren't unique to Chu He and Ren Youzi—they reflected the prevailing sentiment within the Law Society. Many believed that current commercial law remained incomplete, and that rushing to implement entirely new systems and regulations would invite unforeseeable consequences. That said, this series of reforms had also garnered considerable support from Elders in the administrative departments.
"...The system is currently being piloted, but I don't expect promising results. Whether some clever opportunists will exploit the loopholes exposed by this paper cotton incident remains to be seen..."
"If this actually triggers some kind of financial storm..." Li Shan began.
"There won't be a financial storm," Chu He laughed. "Not unless something happens to the Nanyang Company. Private financial activity in Guangzhou is still quite limited, both in variety and volume. No massive waves are possible. You can rest easy. Someone will certainly throw themselves off a rooftop over the paper cotton affair, but there won't be systemic damage. What concerns me more is your cotton textile industry—this mess will definitely affect you."
"I had the same premonition," Zou Biao sighed. "The paper cotton incident has exposed a major vulnerability. To be honest, I'm beginning to lose confidence in our cotton textile plans..."
"The raw material supply issue won't be solved overnight," Li Shan replied with considerable confidence. "But when the British built their cotton textile industry, cotton plantations didn't exist either. Demand stimulates supply, not the reverse. As long as demand is strong enough, land capitalists—landlords, if you prefer—will establish plantations on their own. That doesn't worry me. The key is bringing down cotton spinning costs. Market cloth prices remain too high."
"Actually, based on your machine-woven cloth costs, once the major procurement sources contract, cotton cloth prices will plummet. Individual textile households will soon find no profit to be made. Whether you're willing to squeeze them all into bankruptcy depends on your specific policies going forward. But except for the enterprises you're focused on supporting, independent operators will probably all go under..."
That evening, Mu Min personally commanded the police raid on Qingyun Teahouse and the associated cotton-cloth merchants. Fifty-eight individuals were arrested.
According to final police statistics, the paper cotton affair involved nearly 170,000 yuan—an astonishing sum for Guangzhou.
Fortunately, as Chu He and the others had predicted, the absence of leverage meant no serious disruption to Guangzhou's financial order. But the victims were far more widespread than anyone had estimated. Many had caught wind that paper cotton could "make big money" and organized rotating credit groups to participate—essentially pooled investments. Preliminary counts identified over two thousand people involved, most with stakes of two or three yuan, some as little as one.
Most were poor, and many had bought in at the peak, left holding worthless paper. Their losses were devastating. The municipal bureau's courtyard overflowed with people registering claims. Wailing echoed through the compound. Some fainted where they stood. Then came reports of people throwing themselves into the river. The news made Mu Min grind her teeth in fury.
Surveying the chaos, she unleashed a thorough tongue-lashing on Chu He and Ren Youzi, who had come to help manage the aftermath, declaring that everyone in finance was a "rotten bunch." She even dragged Li Shan into the tirade.
"This—this has nothing to do with me! I didn't create paper cotton..."
"If you hadn't stirred up this International Market business, would any of this have happened!"
Li Shan protested his innocence, insisting he'd never conceived of anything so advanced as creating a futures market.
"I don't care whether you're advanced or backward. So cleaning up the mess isn't your department's responsibility either? Each of you excels at sitting around theorizing. If you don't help sort this out properly, don't bother coming to Guangzhou on 'official business' anymore. My office can't accommodate such esteemed Buddhas!"
Chu He's expression had gone rigid. No one enjoyed traveling all this way only to receive a dressing-down. But Ren Youzi kept a diplomatic smile fixed on his face. "Yes, yes, we'll definitely handle everything properly! Don't worry—we do have a concrete plan..."
He immediately outlined the relevant proposal.
"The 170,000 yuan case value isn't entirely fictitious. By my rough estimate, about 70,000 yuan worth of warehouse receipts can ultimately be honored. As long as we maintain control over the cotton-cloth merchant owners and prevent them from fleeing—the cotton-cloth merchants still need to keep operating..."
"Keep operating? I was thinking of confiscating their property to compensate the ordinary people!"
"Only if they keep operating will there be any chance of compensation. Otherwise they simply declare bankruptcy and wipe their debts clean."
Mu Min's eyebrows rose. She seemed about to retort but held back.
"Additionally, the personal assets of these fifty-eight individuals can cover part of the shortfall," Ren Youzi continued carefully. "Take this Qingyun Teahouse owner, Wu Yuanyin. He claims he wasn't involved, but in truth he operated like a casino owner—skimming a cut from every transaction. Apply some pressure and there'll be fat to squeeze. As for those who issued fictitious warehouse receipts, this batch is already on Political Security's internal watch list. None will escape. Once the stolen funds are recovered, most of the gap should be covered..."
"Even so, it won't be enough. Just look at this courtyard."
"We have a repayment proposal that prioritizes small and medium-sized victims. This should effectively stabilize the general public."
Mu Min reviewed the plan and calmed somewhat. "The final delivery will still be problematic, though. Many people who bought warehouse receipts have no connection to the cotton textile industry—they purchased purely to speculate. Even if the cotton-cloth merchants eventually make physical delivery, what use is cotton bought at inflated prices to them?"
"They can sell the spot cotton directly at the International Market. Prices might even be higher by then."
Mu Min shook her head. "That's not guaranteed. More likely they'll be even lower."
Chu He spread his hands. "That's beyond our control. Frankly, these outsiders who jumped into paper cotton trading were simply gambling on quick riches. 'If you gamble, accept your losses,' as the saying goes. Besides, we didn't create this scheme. Stepping forward to resolve it is already tremendous benevolence on our part." He sighed. "This is simply the tragedy of the petty bourgeoisie."
At the Temple of the Five Immortals in Guangzhou, a new sign had recently appeared: the Shen'ao Study Society.
Though the pronunciation was similar, this "Ao" wasn't the Olympic "Ao"—the "Shen" in Shen'ao meant "explaining, expounding." In other words, this was a place for conveying Australian conditions and Australian learning to the local population.
Its founder was Du Yibin, whom quite a few Elders teased for having a "notable person collecting habit." This civilian organization he'd established in Guangzhou served primarily to win over old-style literati receptive to certain new ideas.
However, Du Yibin wasn't stationed in Guangzhou, making it difficult to maintain ongoing attention to the institution. Running a society required funds, space, and staff—resources an Elder posted elsewhere couldn't readily provide. So he approached Cui Hantang, who shared similar inclinations, and requested his "assistance."
Elder Cui had been contemplating the same idea. The two hit it off immediately. The sign went up at the Temple of the Five Immortals, and Cui Yunhong now had a proper base for conducting united front work with local intellectuals—avoiding accusations from certain Elders of "spreading feudal superstition" under false pretenses.
The Shen'ao Study Society occupied a small side courtyard within the temple complex, newly redecorated and rearranged. The main hall had been converted into a teahouse for scholarly discussion. The east wing housed a reading room where visitors could borrow from the temple's substantial collection of Australian books. Many volumes couldn't leave the premises, particularly the extensive "civil service exam" preparation materials—favorites among failed examination candidates. The west wing served as an exhibition hall, displaying simple models, scientific instruments, and educational wall charts. The gatehouse functioned as the society's office and storeroom. Small as a sparrow, yet complete in all its vital organs.
After opening, the society gradually attracted a steady following. Beyond scholars hoping to find positions in the new government and system, many students came out of curiosity about the Australians and their learning. Daily visitors engaged in scholarly discussion and perused newspapers, magazines, and books. Because many here maintained direct or indirect connections with the Australians, the society became a primary channel for gathering insider information. Cui Hantang welcomed everyone without discrimination, treating all with equal warmth.
Today, the hottest topic at the Shen'ao Study Society was the paper cotton incident.
Most found this new phenomenon quite novel, generating lively discussion. The Yangcheng Express had devoted a full page of special reporting to the affair, analyzing causes, consequences, and key details thoroughly, right through to the final resolution plan. The coverage lent substance to the conversation and minimized wild speculation. Most scholars' views aligned: paper cotton was a vehicle for "opportunistic profiteering," a "source of endless trouble" for nation and people alike, and should be completely banned.
Those with broader knowledge invoked the "mulberry tree futures" practice in Jiangnan, arguing this was essentially the same thing. As long as government oversight remained strong and fictitious warehouse receipts were prohibited, trading in paper cotton wasn't necessarily harmful—it could even hedge against future raw material price increases.
As the debate continued, someone suddenly asked: "It's been a while since we've seen Zhang Jiayu. Does anyone know where he went?"
"Now that you mention it, he hasn't come in several days. He used to visit every two or three days!"
"I heard there was a family matter—he returned to his hometown in Dongguan."
"He's been gone so long—could something have happened at home?"
"I heard a close relative fell seriously ill, so he had to rush back," another offered. "I saw him leaving looking quite distraught—I fear something terrible may have happened!"
(End of Chapter)