Chapter 330: A Lu Xiangsheng Unknown to Fame

"No need for excessive modesty." Lu Xiangsheng smiled. "That scheme of yours for matching north-south silver flows — Eunuch Gao gave me a brief account of it yesterday before we left duty. It is indeed an excellent method, far better than the Ministry of Revenue's original plan of official escort and official transport."

He looked at Wu Cheng'en and said, "More crucially, this scheme, bundled together with the bank that has been so long in preparation, is nothing short of perfect." Wu Cheng'en inclined his body slightly, assuming an attitude of attentive listening.

Lu Xiangsheng continued, "When we received His Majesty's assignment and began formulating policy around the bank, there were many problems that proved difficult to handle." "The hardest of them all was the matter of 'profit.'"

"Compared with the internal remittance notes currently used by the various merchant associations, a bank that allows mutual exchange and withdrawal is indeed far more convenient."

"But for the court to levy an additional tax on the discount generated when a remittance note changes hands… that is, in the end, a negative factor."

"You were once a merchant, so you can surely grasp the problem here better than most."

Wu Cheng'en nodded and picked up the thread:

"That is indeed the case."

"Not all inter-regional remittance notes carry a discount."

"If it is someone within one's own association, or a powerful personage redeeming a note, there is in fact no such thing as a discount."

"But if the court establishes a bank and promotes official remittance notes, a discount will naturally apply in every case."

"In this respect, official remittance notes would not necessarily be able to compete with private association notes."

"And what is more…"

Wu Cheng'en hesitated, as though weighing his words.

Lu Xiangsheng, however, smiled without the slightest concern and tore away that thin window-paper for him:

"What is more, the court's credibility is utterly wretched."

"Even if the tax is initially set at three percent, should the frontier grow urgent and fiscal revenues run dry, who can say the tax will not be raised further?"

"To say nothing of all manner of corrupt officials and venal underlings manipulating the process, turning a three-percent tax into a five-percent tax, or a ten-percent tax."

"The nominal tax rate and the effective tax rate — in this Great Ming, they have always been two entirely different things."

When Wu Cheng'en heard this, his heart gave a violent leap.

The moment the word "profit" was spoken, he understood what his scheme meant for the bank policy.

But what astounded him even more was that this secretary, who hardly ever appeared in the newspapers, could see through it all so thoroughly!

He had reached this judgment barely a day after receiving the scheme Wu Cheng'en had submitted.

Serving under a superior like this — truly a mixed blessing.

Just as expected, Lu Xiangsheng's expression grew faintly solemn as he continued:

"At the end of a dynasty, reducing taxes is invariably better than raising them."

"Precisely because raising taxes does not merely raise the nominal tax — those below will pile on layer after layer, driving up the effective rate; but reducing taxes can always bring the effective rate down along with it."

"This is why so many ministers in times past have repeatedly called for tax and levy reductions, to give the people respite."

"For this method, when there is no sudden surge in demand for silver, is in fact the most direct way to ease the people's hardship." "But…"

Lu Xiangsheng shifted his tone, his gaze sharpening.

"What the new policies seek to do is precisely this: to raise the nominal tax rate on one hand, while reducing the effective tax rate on the other!"

"To ceaselessly wrest back, from the hands of corrupt officials, overbearing gentry, and princely and noble houses, the sources of wealth they ought never to have possessed — and restore them to the hands of those who deserve to hold wealth!"

"Such people are the court, the officials and officers marked in red, and all those who embrace the new policies and identify with the new policies."

"And then to concentrate our strength, accomplish great things, do real work, and little by little clarify the realm anew."

"Therefore, the bank must be established, and the tax on bank remittance-note discounts must be levied — this is a fundamental principle that cannot be altered." At this point, Lu Xiangsheng looked at Wu Cheng'en, with a scrutiny barely perceptible:

"Having said all this, you should now understand what your scheme means for the bank, should you not?"

Could this… be the legendary interview?

A flash of insight blazed through Wu Cheng'en's mind, and he suddenly grasped the crux of this question.

The subordinates of a fine general must, at the very least, be crack troops themselves.

Although he had caught the Emperor's eye and entered the Secretariat as a mere commoner,

if he could not prove his mettle before this "training mentor," he feared he might not secure much of a future after all.

He drew a deep breath and began to speak, slowly and deliberately.

"It was only thanks to Secretary Lu's guidance that this humble officer was able to glimpse this deeper meaning."

After this brief word of deference, and having used that moment to set his thoughts in perfect order, Wu Cheng'en laid out the significance of his scheme as though enumerating his own family treasures:

"This word 'profit' applies not only to the government, but still more to the people."

"Without this large-scale matching of north-south silver flows, let us suppose that in ordinary north-south commerce, the private silver flow between the two regions is ten million taels." "Suppose a uniform discount of three percent is applied at the average market rate — the discount levy would then be three hundred thousand taels."

"Suppose the dynasty then taxes that discount income at the standard commercial tax rate of three percent — that would be nine thousand taels."

"For the government, a paltry nine thousand taels in tax silver would be less worthwhile than setting up one more customs post or apportioning a bit more salt-tax quota — why go to all this trouble?" "For the merchants, three hundred thousand taels in discount is, to a single merchant, certainly an enormous sum — but spread across fourteen banks, how much would remain?" "Still less when these matched silver flows are scattered across the various periods of a single year — the profits are meager, the affairs tediously complex, making it all the harder to accept."

"Thus, if this 'profit' does not flow freely, the bank, though it may come into being, will assuredly do so with extreme slowness and torpor."

Wu Cheng'en's voice was firm:

"However, a large-scale matched silver flow of four million taels — if it can be carried out —"

"is an entirely different matter from the scattered remittances spread piecemeal across a year."

"In commerce, large-scale capital turnover, if accelerated by a single month, can yield, out of thin air, a profit of at least one point two percent!"

"And on the government side, if the Ministry of Revenue can receive the southern military-pay silver ahead of time, it can deploy silver flows with far greater ease — the profit therein cannot even be measured in simple silver taels."

"Thus this scheme, once launched in combination with the bank, will make the people glad to comply and the government gain the profit."

"The bank's advance will then be like a wildfire sweeping the plains — impossible to stop!"

Wu Cheng'en's words laid bare the subtle mystery of why the silver-flow matching scheme had earned such high praise.

The key here was not the sheer size of the overall silver flow.

However large the silver flow, the discount cost would still be higher than most discounts within the present merchant associations, and the tax levied on that discount would not amount to much either. What mattered most was the temporal and spatial advantage, the liquidity advantage, that the mutual matching of silver flows brought.

It was precisely because it combined these three elements — "short time frame," "large scale," and "government-merchant silver flow" — that it could be called the perfect breakthrough method for the bank policy.

Lu Xiangsheng heard this and clapped his hands with a great laugh.

"Exactly so!"

"This scheme of matched buying and selling with four million in coin and silver is, frankly, far more effective than the many methods we ourselves designed."

"Amending the statutes is coercion; procurement in Northern Zhili is enticement by profit."

"As for future tax payments being made by remittance note, that is still the moon in a well, a pavilion in the air — in truth, it remains very far off."

"Only this method of yours, once put into practice, will make the bank's rollout nearly impossible to obstruct."

"And based on such an ironclad, crystal-clear prospect, the auction price of the bank charters will rise with the tide, and the speed of the rollout will quicken as well." Lu Xiangsheng concluded: "This is what is meant by threading the needle — move one point, and every point moves, until the whole situation is in motion."

Wu Cheng'en listened, utterly elated.

He was proud that his own proposal could actually fit into such a vast system, and stirred that the superior officer before him could see his worth at a single glance. Impressive! This truly was the Secretariat, where the elite of the New Policies gathered. Even an ordinary secretary could possess such insight.

And he himself — he was about to become a member of this very institution!

Yet however pleased Wu Cheng'en was inwardly, he dared not show the slightest trace of self-satisfaction on his face. He merely cupped his hands repeatedly, his manner exceedingly humble:

"A view from one corner. This humble officer never imagined it could connect to so grand a design. Had Secretary Lu not looked far ahead, grasped the whole, and discerned the crux of it, this humble officer's petty merchant trick would have been no more than a clay ox vanishing into the sea."

After this brief exchange, Lu Xiangsheng had gauged the man's caliber and was thoroughly satisfied.

Excellent.

His Majesty's eye for talent had indeed been unerring.

Being able to draft a proposal was a small matter; being able to extrapolate from one instance and discern the connecting threads among all the various affairs — that was true ability.

It seemed that having a secretary of merchant background in the Policy Group was a very fine thing indeed.

The smile on Lu Xiangsheng's face grew considerably more genuine. He patted the thick stack of volumes on the desk, his tone turning a shade more casual:

"His Majesty has ordered me to be your training mentor, so there are certain matters I must explain to you as a matter of routine."

At this point, he suddenly recalled something and digressed:

"Ah, yes — Jiye is also in the Policy Group. He left the capital yesterday with Yang Sichang to go to Zhangjia to investigate the note laws."

— Wu Jiye, Wu Cheng'en's eldest son. Previously, on account of Wu Cheng'en's donation of silver for road-building, he had been granted the post of Secretary of the Grand Secretariat and assigned to the Secretariat as an intern. "There is one matter here that I should tell you in advance."

Wu Cheng'en hastily sat up straight, his expression solemn.

Lu Xiangsheng began:

"Interns of the Secretariat are supernumerary personnel, and their treatment is one grade lower than that of full secretaries."

"Furthermore, each person has a three-month probationary period. At its conclusion, you must independently propose and complete a project."

"This project must pass three reviews: by the secretaries of this group, by the Committee, and by His Majesty."

"If you fail to pass, you cannot be promoted to full secretary."

Lu Xiangsheng looked at him and explained: "You and your son are now both in the Policy Group. At the review stage by this group's secretaries, there would be the suspicion of favoritism toward kin, which requires recusal. Therefore, once he returns from Zhangjia, Jiye will be transferred to another group."

Wu Cheng'en, without the slightest hesitation, hurriedly replied:

"No matter, no matter. Wherever one serves, one serves His Majesty. Everything shall follow the arrangements."

Lu Xiangsheng nodded, and only then continued:

"Returning to the main subject — let me first tell you about the Secretariat's compensation and benefits."

He drew a thin booklet from the pile of volumes beside him and handed it over.

Wu Cheng'en received it with both hands and looked. On the cover were printed several upright regular-script characters: Secretariat Rules and Regulations, Second Edition.

Lu Xiangsheng said:

"Salary, leave, benefits, and so forth — you may read through those on your own later."

"I shall only tell you a few important points, lest you blunder in these matters."

"The first is the confidentiality regulations."

"A full secretary's document authority permits access to official correspondence graded First Class and below."

"However, you are still in your probationary period, so you may only view documents graded Second Class and below. If anything exceeds that grade, I will apply for it on your behalf. Moreover, all official correspondence may only be checked out while on duty at the Secretariat. It absolutely may not be taken home, nor may a single word of it be divulged to outsiders."

"Should any leak occur, once discovered, the punishment shall range from a salary fine to decapitation, depending on the severity of the impact!"

Wu Cheng'en nodded obediently, not uttering a sound. Lu Xiangsheng's expression eased slightly, and he continued:

"The second is drill rotation duty."

"Within the Secretariat, all full secretaries who are not away on assignment shall, every five days, serve one day of rotation duty accompanying His Majesty in military drill and martial exercise. The location is the encampment of the Valiant Guard Camp at the north gate."

"For this matter, punctuality is stricter than on ordinary days."

"Anyone not present after the third drum at the hour of Mao shall receive ten strokes of the military rod according to martial law."

"You must pay particular attention to this. Later, I will take you to the Logistics Office to familiarize yourself with the route. Remember to note your own shift schedule."

Wu Cheng'en was dumbstruck.

As a merchant, he did not fear rising early and retiring late, but this business of brandishing spears and staves — and being subject to military law, no less — truly exceeded his understanding. Still, he nodded vigorously to show he had committed it to memory.

Lu Xiangsheng glanced at him and suddenly smiled:

"If you are skilled in archery and mounted archery, you may put on a fine display."

"His Majesty holds a contest with all the secretaries and officers at the end of every month."

"Those whose performance surpasses His Majesty's shall be rewarded; those whose performance falls short of His Majesty's shall be punished."

At these words, Lu Xiangsheng could not help stroking his beard with a smug smile.

That smile — it came from recalling the story of how he had shot an arrow straight through the target.

But then... such past exploits, if told by oneself, would be beneath one's dignity.

Let this newcomer slowly inquire after this officer's legend on his own in the days to come.

Wu Cheng'en observed Lu Xiangsheng's expression, then looked down and patted his own slightly protruding belly. He could not help but smile wryly:

"Then it seems this humble officer is fated to be among those punished."

Lu Xiangsheng laughed heartily:

"No need to be alarmed."

"They call them punishments, but they're all things like drinking wine, singing, and dancing — just a bit of shared enjoyment between sovereign and subject, nothing that offends good taste."

His laughter subsiding, Lu Xiangsheng continued:

"As for the third matter, it's a small thing, but I should mention it to you first."

"The Secretariat provides meals for both the midday and evening meals."

"You may tell the eunuch in charge about your tastes or preferred dishes."

"The Directorate of Imperial Meals will prepare a separate stove for each person's request, keep it warm in a food box, and deliver it on time."

"So you'll need to go to the logistics office shortly and mention this in advance, lest you go without lunch."

Wu Cheng'en was taken aback, then promptly cupped his hands in thanks, his heart filled with both gratitude and surprise.

He had never seen an official, when assigning work, go out of his way to mention such a trivial matter as meals.

Yet Lu Xiangsheng merely nodded lightly and responded with a couple of casual words, entirely as if it were a passing reminder, something he was thoroughly accustomed to.

But it was precisely this matter-of-fact, utterly unselfconscious frankness that struck Wu Cheng'en as strange.

Only now did he truly perceive that the officials of the Secretariat seemed genuinely different in some way from the officials he had dealt with before.

Having said this, Lu Xiangsheng straightened his posture, and his tone turned serious once more:

"As for the rest — salary, benefits, and leave — you can read the booklet yourself. Given your family wealth, I doubt you'll care overmuch about these things, so I won't dwell on them."

"The key point now is your evaluation."