1905: Beer Hall Speaker

Page 80

Zhao Yan was furious: "This is my family matter, what are you babbling about, you old geezer? Be careful I don't send you to the frontier!"

Zhang Mingqi remained fearless. Having weathered many storms together, he spoke without much restraint: "Hmph, me an old codger? That's not what you said when you were fooling me at the governor's office. You praised me for being vigorous despite my age, like Lian Po in his prime. Now that things are done, you're complaining that I'm an old codger?"

"Moreover, Your Majesty, your family affairs are national affairs. You are already thirty-three years old this year. Most men your age are almost grandfathers. Are you still thinking about your little darling?"

"If you don't hurry up and have a son, will you be able to enter the Imperial Ancestral Temple in the future? I already have seven or eight grandsons, and in two years they'll almost be great-grandfathers. Aren't you worried?"

Upon hearing the words "national affairs," Zhao Yan's previously muddled mind finally returned to normal. He still retained many modern ideas, such as being accustomed to having children later in life and even understanding the concept of being childless.

But these days, talking about having children later in life is pure absurd. If you, Zhao Yan, dare to say something like "DINK" (double income, no kids), your subordinates will immediately become disloyal.

Once he came to his senses, Zhao Yan quickly ate his rice and stopped talking.

Zhang Mingqi added insult to injury: "Your Majesty, you shouldn't say things carelessly. Since you like little cotton-padded jackets, why not take a few more women into the palace and have a few sons? If you have seven or eight sons, then you can have as many little cotton-padded jackets as you want in the future, and we will not say a word!"

Zhao Yan remained silent. He was indeed in the wrong in this matter, so he simply buried his head in his food and let it go.

Zhang Mingqi also sighed. His eldest son was perfect in every way, a great administrator and a war god in military affairs, but he was always confused about trivial matters.

Finally, the meal was over, and Wu Xia, who had been suffering terribly, quickly took her food and went outside.

Zhao Yan casually wiped his mouth with his sleeve, a gesture that made Zhang Mingqi frown and want to speak again.

Zhao Yan quickly preemptively said, "Let's talk business, stop harping on trivial matters, okay?"

"What brings you two here this time? Speak up!"

Zhang Mingqi suppressed his urge to offer advice, and helplessly spread his hands, saying, "The national treasury is empty again. You'll have to figure out what to do!"

Zhao Yan was stunned for a moment after hearing this, then turned to Yu Jingqian, the Minister of Finance, and asked, "You're out of money again, you spendthrift! Didn't you just print two hundred million yuan? You've already spent it all? How long has it been? Huh!"

Yu Jingqian couldn't stand it anymore: "Head of State, speak from the heart, most of this money has been used to reward the three armies. Before the war, it was said that land would be used to offset military pay and rewards, but after the war, you want to make up for it with cash military pay and combat subsidies."

The remaining money hasn't even entered the national treasury yet, and it still needs to be used to pay back salaries and wages to central and local officials, settle interest on national debt, and allocate funds to disaster relief in various regions.

When it comes to calculating accounts, Finance Minister Yu Jingqian never stops, and Zhao Yan is getting a headache listening to him: "Stop, stop talking and send over a financial report later!"

"Also, if we run out of money, we should just stop spending it and wait for the summer tax to come in so we can make plans when we have more money."

Yu Jingqian said, "We can't wait for the summer tax. The interest on the domestic national bonds has been barely settled, but there is still a huge shortfall in funds for industrial development, infrastructure construction, people's livelihood allocations, and disaster relief funds in various regions!"

Furthermore, the interest on overseas debt hasn't even been factored in. While government bond interest rates are within a reasonable range, some loans have incredibly high interest rates, making even interest-only payments unsustainable.

“This interest is even more outrageous than the Boxer Indemnity. Don’t you know how much money you borrowed for the war? Foreigners don’t really recognize our Chinese Yuan. You might have to pay the interest in real gold and silver.”

"The national treasury simply doesn't have that much real gold and silver available right now, unless we use the last of our gold reserves to pay the interest!"

Zhao Yan's head was spinning as he listened, so he quickly reached out to stop and then his eyes darted around as he pondered the situation.

Zhang Mingqi and Yu Jingqian remained silent, knowing from Zhao Yan's state that he was up to some wicked idea again.

Nobody cares whether the idea is morally wrong or not; as long as the problem can be solved, that's all that matters.

After pondering for a long time, Zhao Yan finally spoke: "How about this, let's solve the domestic financial problems first, the old way, print money and flood the market."

"The market absorbed the two hundred million dollars printed earlier very well, and there are even signs of supply falling short of demand. This proves that our fiscal reforms and the issuance of new currency are very necessary."

"In such a vast country with a market of 400 million people, issuing an additional 1 billion yuan shouldn't be a problem. It would stimulate market development, bringing in a large amount of liquidity, and also alleviate the fiscal predicament—a win-win situation."

Yu Jingqian was speechless: "Huh? Just like that, they printed 1 billion without any investment? That's 500 million taels of silver! Can the country handle that?"

Zhao Yan said, "In the past, those landlords and rich people would mint silver into winter melons and hide them in their cellars, and the Chinese economy still didn't collapse, did it? Now I've released 500 million taels of silver, are you saying the economy will explode? I don't believe it!"

"Can a living person die from holding their pee? Besides, this money isn't for me, Zhao, to build a palace; it's for everyone. The central government has a share, the local governments have a share, the Ministry of Finance should do more to ensure fair allocation, and get more cooperation from the local governments."

Yu Jingqian felt something was off and asked doubtfully, "Things are valued for their scarcity. They gave out 200 million before, and now they're suddenly giving out 1 billion. That's three yuan per person. There's 1.2 billion in wealth out of thin air. What if the Han Yuan becomes worthless?"

Zhao Yan said, "You must be talking about inflation, right? That's easy to deal with, you've seen dough before, right?"

Zhang Mingqi couldn't stand it anymore: "Your Majesty, this is a matter of national importance. What do you mean by bringing up kneading dough?"

Zhao Yan said matter-of-factly, "The national economy is just like kneading dough. If there's too much dough, add water; if there's too much water, add more dough. You add as you knead."

"If there's too little flour and too much water, it'll be too runny. That means there's inflation, money is worthless, and the currency has depreciated. So we'll add more flour!"

"But if there's too much flour and too little water, and we can't knead it, that means deflation. Money is too valuable, the currency has appreciated too much. We need to add water!"

"Personally, I think the current state of China's domestic market is one of deflation—too much flour and too little water!"

"A market of 400 million people, with a labor force of over 100 million, but the market's circulating capital is pitifully small. Those wealthy gentry and rich households are all misers. The country's industrial development relies entirely on fiscal revenue. They would rather cast silver into winter melons and hide them underground than take them out."

The government's debt-based plundering strategy hasn't addressed their root causes. The current situation in China is that the rich don't spend money, while the poor have no way to make money.

Yu Jingqian asked, "So what do you mean?"

Zhao Yan slammed his fist on the table and said, "Let the poor have the opportunity to earn money and continue to consume. As for those wealthy people who hoard money and refuse to spend it, let their money become worthless! Let it depreciate and crush them!"

"The government will then print money and launch various large-scale projects to mobilize all the surplus labor force in the private sector, using national projects to flood the entire market."

We must fully popularize the circulation of Han Yuan, and then gradually abolish the trading and circulation of precious metal currencies, leaving those wealthy gentry with nowhere to use their hoarded gold and silver. If they turn to hoarding Han Yuan, then we will push for the devaluation of Han Yuan and continue to squeeze their wealth!

"In short, the government should take the lead in spending money, and then force the wealthy to follow suit and invest. Money can't reproduce; you can't eat or drink it if you just keep it. It has to circulate to have value!"

"Our domestic economic market may seem stagnant in the past, but it actually has huge and unfathomable potential. As long as our government fully develops the domestic market, we will reap the benefits for decades."

With nearly 400 million people living in poverty, what needs do they not have for clothing, food, housing, and transportation? The dumping market that foreigners are fighting tooth and nail for is something that is readily available to us.

If we tap into the potential of our domestic market, with 400 million people, if each person buys one pair of underwear a year, that's enough to keep sewing machines running non-stop! The country builds 10,000 kilometers of railways and tens of thousands of kilometers of highways every year, enough to support dozens of Hanyang Steel Plants! And then there are downstream industries like cement, timber, and sand and gravel.

Just think about how much labor these companies need, and how huge a consumer market that will be once these workers earn income through their labor.

Zhang Mingqi listened with a sense of awe and disbelief, while Yu Jingqian was also frantically digesting this pile of Zhao's economic theories.

Zhao Yan was getting anxious: "I've been so focused on giving Party lectures to Party members that I forgot to give you bureaucrats a make-up lesson!"

"In the end, silver, paper money, and gold are just symbols of market transactions, understand? As long as you can buy something, even if it's just a leaf, you can still call it money!"

“National wealth is not just these symbols. We cannot fight wars with gold and silver, much less defeat our opponents with paper money.”

"What truly represents national strength is the value and productivity of labor production. Only what we can directly utilize is what we create through our own hard work."

"Currency is merely a means for a country to control the value of labor production. Even if our entire country has not a single penny of currency, as long as we can produce hundreds of millions of tons of steel and countless guns, cannons, and grains, so what if we don't have money? Where can't we rob?"

"But if we only have money, but can't produce enough steel and guns, then no matter how much money we have, it belongs to our neighbors!"

Yu Jingqian was a little overwhelmed, but he understood the gist of Zhao Yan's words: "Your Excellency, do you mean that our current situation is that we have too much flour and too little water? The massive easing you mentioned means that the government is printing money like crazy and injecting it into the market, then mobilizing the labor force to produce value, and then we give them money?"

Zhao Yan said with a look of satisfaction, "Yes, you are a promising young man! You will definitely have a place in the future Federal Reserve!"

Zhang Mingqi, a former bureaucrat, felt increasingly uneasy as he listened: "Wait a minute, Your Majesty! Isn't this still a case of getting something for nothing? The government prints paper, and then the people actually work themselves to the bone. I feel like this scheme is even more outrageous than plundering the people's wealth!"

"Making ordinary people work like oxen and horses with just a few sheets of paper? Even Emperor Wu of Han would think we're heartless. If Emperor Yang of Sui heard this, he'd probably jump out of his grave!"

"This isn't kneading dough, it's pushing a millstone, putting the people inside the millstone to be stirred!"

Zhao Yan said helplessly, "Otherwise what? What do you think the government does? The government never produces any real value. The government has always played the role of controlling and using the value produced by the state's labor!"

"To put it another way, there are two concepts in the biosphere: producers and consumers. It doesn't matter if you don't understand this; to put it simply, on a grassland, the grass is the producer, and the cattle and sheep are the consumers!"

"Cattle and sheep must eat grass to grow meat, and grass grows continuously."

Zhang Mingqi said, "Is our government like cattle and sheep? Are the people like grass?"

Zhao Yan shook his head: "The common people at the bottom are grass, the wealthy and powerful in the middle class are cattle and sheep, and the government is the herdsman!"

"The people keep working, just like grass keeps growing. Then the cattle and sheep eat grass and grow meat, and keep defecating and making manure to fertilize the land so that the grass grows even faster."

"The faster the cattle and sheep grow, the richer the herders become!"

Yu Jingqian said thoughtfully, "There are wolves on the grasslands, how do we count that?"

Zhao Yan said, "Wolves are our enemies. They hunt our cattle and sheep without lifting a finger. As herdsmen, we also have our own sheepdogs—the army!"

"We must have more cattle and sheep and pasture to get more meat and feed more sheepdogs!"

Chapter 141 Foreign Debt

After leaving Zhao Yan, the Prime Minister's Office ordered the Ministry of Finance to begin implementing a massive monetary easing policy.

No one knows what the consequences of such a massive injection of funds will be, but the Prime Minister's Office still went ahead with it. It's better to be blown up by a future bomb than to starve to death now. Even if it's a desperate measure, it has to be done.

Domestic debt can be diluted and buffered by monetary easing, but foreign debt is much more difficult to handle. Foreigners do not recognize your Chinese Yuan. Without precious metal anchors, pure national credit and land guarantees, foreigners will never accept repayment of debts in Chinese Yuan, no matter how much they try.

The Prime Minister's Office and the Ministry of Finance borne the brunt of the domestic problems, but they couldn't possibly withstand the foreign ones. Zhao Yan had no choice but to promise to find a solution himself.

After abolishing the indemnities from previous unequal treaties and recovering the customs saltwater and concession areas, the Republic's fiscal revenue has surged. It is estimated that fiscal revenue will reach about 220 million taels of silver in 1908 after the war.

The main increases came from customs revenue and internal fixed asset tax and commercial tax revenue, which could increase by about 40 to 50 million taels of silver compared to 1907, but it was still insufficient in the face of huge international debt.

The Republic's government currently owes approximately 790 million taels of silver in international debt, which is a staggering 100 million pounds sterling. The annual interest payment on this debt is 55 million taels of silver.

The vast majority of the debt is government bonds, which are expected to mature and need to be repaid around 1911. There are also many loans that require a certain amount of principal to be repaid every year.

It is estimated that the Republic's finances will need to pay interest and repayments of 90 million taels of silver this year. This amount cannot be offset with Han Yuan and can only be repaid in real silver.

Zhao Yan couldn't possibly come up with so much real money to repay the debt; at least, he couldn't take it from the government's revenue, otherwise the national treasury would be completely ruined.

However, defaulting on debts is also unacceptable. National credibility is very important. If such a thing happens, Zhao Yan's plan to exchange market access for technology and attract foreign investment to develop the country's industry and economy will be completely ruined. Who would do business with a country that has no credibility?

Helpless, Zhao Yan could only spare time from his busy schedule to negotiate with the ambassadors of various countries, mainly Germany, the United States, Britain, France, the Netherlands and Italy. They lent the most, with the French being the most ruthless, lending China a total of 220 million taels of silver, with an average interest rate as high as 6% per year!

The British weren't bad either; that group of Jewish tycoons lent China over a hundred million, even saying it didn't matter if they couldn't repay it, and were willing to convert the money into an investment in the Central Bank of the Republic, which was under the Ministry of Finance. But Zhao Yan only had one thing to say: You're dreaming!

Zhao Yan was still thinking of using a divide-and-conquer strategy against these major creditor nations, but the six nations refused to play along this time and insisted on the principle of mutual support.

It doesn't matter if people die on the battlefield, since they are just ordinary soldiers, and the loss is only to the national interest.

But after the war, all the money that was lent out was actually taken from the pockets of the behind-the-scenes financiers. In Western politics, the interests of the people and the interests of the country are secondary; the interests of the behind-the-scenes financiers are at the very top!

Normally, the representatives of the six countries should have gone to the Ministry of Finance to negotiate this matter, but they insisted on going to Zhao Yan. They are not stupid; going to the Ministry of Finance would probably just be passing the buck, and even if they eventually reached an agreement, they would not get any benefits without Zhao Yan's approval.

Since that's the case, it's better to just talk to Zhao Yan directly. In China, for any major matter, as long as Zhao Yan nods, it's more effective than the emperor's edict.

Zhao Yan couldn't delay any longer and had no choice but to bite the bullet and go to talk, and as always, he wanted to resort to some tricks and schemes.

For example, the Ministry of Defense could deliberately leak secrets and create a fake war plan, claiming that the war was to reclaim Southeast Asian and European colonies, occupy European colonies, and then use the seized colonies to repay the loans.

Foreigners might have believed this trick before, but after being tricked by Zhao Yan in diplomatic fraud many times, they became harder to fool. They saw through it at a glance and knew it was another scam by Zhao Yan. They refused to fall for it.

Zhao Yan had deceived them too many times before. At the beginning of the Northern Expedition, Zhao Yan boasted everywhere that he was half British, half French, half Catholic, and half Protestant, and that even tearing him apart by five horses wouldn't be enough to divide him up.

Then Zhao Yan even deceived his own people, creating a fake strategy at the central ministerial meeting before the war, which was then leaked, causing the British and Japanese to fall into a terrible trap!

During the war, Zhao Yan's tactical deceptions were even more numerous, such as deliberately leaving loopholes for you to exploit, and pretending that he was still in Korea while secretly launching a long-distance raid on the northern desert.

During the negotiations, Zhao Yan continued to deceive, fabricating the North Korean Great Wall Project and spreading rumors that the head of state would soon tour the Northeast, giving people the illusion that China still had the strength to launch another strategic offensive. In reality, after the war, all countries immediately realized that they had been deceived. The Chinese were clearly already on the verge of collapse and were just putting on a brave face.

By now, the foreigners are no longer fooled no matter what they say. Everyone knows that Zhao Dapao's words cannot be trusted. Only by forcing him to sign in the name of the head of state will this guy keep his word.

Zhao Yan's personal credit is already considered a blacklisted and deadbeat by various countries. In later times, Zhao Yan's credit report wouldn't even be able to scan a power bank; a deposit would be required.

However, Zhao Yan's credibility as head of state remained rock solid. Whether domestically or internationally, all the promises and guarantees Zhao Yan made as head of state were fulfilled without any sign of breach of contract.

Even when the country was at its poorest and its finances were in ruins, Zhao Yan still did not touch the legal property of various countries on the Chinese mainland. Even the Russian railways were bought back by Zhao Yan after negotiations and spending money.

Both the Chinese people and foreigners had serious doubts about Zhao Yan's credibility, but they had complete trust in the head of state's credibility.

In this debt negotiation with Zhao Yan, the representatives of the six countries insisted on obtaining tangible benefits before they would budge. What was lost on the battlefield could not be recovered, but the benefits gained off the battlefield could not be let go.

Zhao Yan proposed converting the interest and principal from the six major creditor countries this year into Han Yuan (Chinese Yuan), using this money to invest in the Chinese market, establish factories and enterprises, and granting the six major creditor countries various investment incentives in accordance with the previously promised preferential policies for foreign investment.

As long as you don't make me spend any real money, everything is negotiable!

The representatives of the six countries agreed to half of the proposal, meaning that half of this year's interest and principal could be invested in China, but the other half still had to be repaid in real money.

These days, there really aren't any large-scale cross-border investments. The six creditor nations certainly wouldn't dare to go all in rashly. What if Zhao Yan is playing a trick to lure them into a trap? So, the only option is to test the waters gradually and proceed slowly.

The powers did not gain the benefits they did through war, but instead obtained them through loans after the war. They demanded interest on the loans they made, and they also demanded market profits from the borrowers.

This made Zhao Yan's face turn green. He had been wondering why the British were fighting him while also lending him money. It turned out they were putting their eggs in two baskets, so whether they won or lost, they would still make a profit.

He risked his life to lead the entire country in a series of battles, but aside from gaining international standing and the lost territory, he suffered a crushing defeat. It was a classic case of winning in appearance but losing in substance.

Taking advantage of this Far East war, the European devils made a fortune selling arms and buying government bonds with loans, which was a sure win.

The reason the British made such a clean break was that they realized they had actually won in terms of substance, even if they lost face. As for the army soldiers who died on the battlefield, most of them were Irish, so they just let them die.

Even if half of this year's 90 million taels of debt is reinvested domestically, Zhao Yan still won't be able to repay the remaining half.

Zhao Yan could only continue the negotiation at the table, proposing that he would establish opening up to the outside world as a basic national policy in the name of the central government, and at the same time put forward specific opening-up policies and guidelines, and ensure through legislation that the legitimate interests of foreign investment in China would not be infringed.

Furthermore, the central government will formally discuss and plan a five-year development plan to genuinely develop and tap into the domestic market, ensuring that foreign investment in China yields returns.

However, the conditions are that the six major creditor nations must invest at least two-thirds of all future debt and interest into the Chinese market, and the Chinese government must retain state-owned assets as the core asset and prohibit foreign investment from entering the market.

Zhao Yan made significant concessions and offered substantial incentives. His frank and direct approach won the appreciation of the creditor nations, with Germany, as the country with the best relationship with him, being the first to agree.

The United States then agreed. The British hesitated for a while, but after realizing that this was Zhao Yan's bottom line, they relented and agreed. The remaining three countries also went along with it.