Chapter 1008: No Trade Surplus (Please Subscribe)

Ever since the Age of Discovery began, China's foreign trade had run a long-term surplus, and historically this continued all the way to the late Qing, when the import of opium finally caused silver to flow out of the country.

But Zhu Cilang was not one of those Celestial Empire rulers who single-mindedly pursued a trade surplus. In fact, he did not want a surplus at all!

Not in the slightest!

What would the Great Ming do with a surplus? Trade ought to be a two-way exchange. If one side always ran a surplus, its trading partners would grow unhappy, and might even start a trade war or something. That would be far too discordant.

So Zhu Cilang did not want a surplus. He only wanted to seize all the world's future most valuable sources of gold and other important resources and turn them into Celestial Empire territory. Then there would be no need for a surplus — how wonderful would that be? Who would still want a surplus?

Besides, developing the Great Ming's domestic "import demand" had another obvious benefit: it would keep merchant ships from making empty return voyages.

A merchant ship was most efficient when it departed fully laden and returned fully laden.

And high efficiency meant competitiveness, which meant profit!

If the Great Ming wanted to build up, in this Age of Discovery, a merchant fleet capable of holding its own against English and Dutch merchant ships, then it could not single-mindedly pursue a surplus and let its own fleet sail home empty.

But Huang Jiang and Lin Yihu were stumped by Zhu Cilang's demand. The Celestial Empire was vast in territory and rich in resources; it had everything it could want, and if it lacked something, it simply went and took it. What could it possibly buy from Europe?

The two crafty merchants exchanged glances, at a loss for words, when the little foreign filly Mary Mancini returned, having changed into a red silk gown that set off her pearl necklace. The gown was slightly close-fitting, molding her figure into a striking silhouette — truly a feast for the eyes.

Huang Jiang and Lin Yihu both watched with a touch of longing. The little foreign filly really was beautiful. How about buying a few little foreign fillies like her? Though who knew whether they were for sale?

"Mary, you've come at just the right moment," Zhu Cilang said with a smile. "Tell Us, what special products does Europe have that our Middle Kingdom lacks?"

Mary first curtsied to Zhu Cilang, then sat down beside him and said with a smile, "Europe has quite a few special products. For example, French wine, Venetian glass and olive oil, English woolens, steel from Sweden, Germany, and Milan, furs from Russia — oh, and butter, cheese, and all sorts of leather goods are quite good too."

"There are indeed quite a few good things!" Zhu Cilang nodded with a smile and said to Lin Yihu, "We can buy French wine, then rebottle it in fine glass bottles and drink it from European-style goblets. That should be quite excellent!"

"Your Majesty, we can't make good-looking glass bottles," Huang Jiang reminded him.

The Great Ming already had quite a few glass factories, but their products were mainly low-quality flat glass for windows. The stuff was truly nothing special, yet demand outstripped supply — after all, it was better than papering over windows!

"That's because there's no demand!" Zhu Cilang said. "As long as we buy French wine in large quantities, we can require the great French wine houses to send people to help us set up bottle factories! That way our glassmaking technology should advance more quickly."

Buy wine and get a glass factory thrown in? Huang Jiang nodded. That was actually not a bad idea!

"Butter and cheese can also be bought in some quantity," Zhu Cilang continued. "These can be used to make Western-style pastries. There should be a certain market for them. And then there are woolens — that's Western cloth. Though coarse, it makes a person look upright and vigorous when worn, and it's fairly sturdy and keeps out wind and cold, so it would be good for making military uniforms and winter coats."

At present, the Ming army's uniforms were made mainly of cotton cloth and silk. They did not look smart, and they wore out easily.

The Zhu Emperor had long wanted to switch the troops to woolen uniforms, but within the Great Ming, only Xining under Wu Sangui's governance had a passable wool textile industry, and its output was very limited, consisting mainly of woolen blankets.

So when conditions permitted, importing some European woolens for making military uniforms was perfectly acceptable — create the demand first, then gradually build up the domestic industry!

With trade matters mostly settled, Zhu Cilang turned the conversation to finance.

"Old Huang, you've been in banking for about eleven or twelve years now, haven't you?"

Huang Jiang said with a smile, "Your Majesty, this subject has worked at the Maritime Merchant Bank for over twelve years now!"

He was, in fact, one of the founders of the Maritime Merchant Bank.

"You've done very well!" Zhu Cilang said with a smile. "It's time for you to go out and start your own venture. Do you have the confidence to do it well?"

"I do!" Huang Jiang nodded. "With Your Majesty guiding this subject, this subject has confidence."

He was not flattering the Zhu Emperor. In truth, he and Su Sheng, also known as Old Su, who ran the Salt Merchant Bank, were both puppets manipulated by Zhu Cilang. Without the various regulations and business strategies that Zhu Cilang had provided, the two great banks could never have developed to where they were today.

And sending Huang Jiang out to start a new venture — opening a bank in Europe that could borrow the credit of the Celestial Empire — was something the Zhu Emperor had carefully considered.

It would not work for the Maritime Merchant Bank or the Salt Merchant Bank to open branches in Europe, because a head office had to bear unlimited liability for the actions of its branches, and European branches were impossible for a head office to control effectively. It was precisely because of this characteristic of banking that, in this era, banking was a regionally segmented industry.

A bank opened in Europe had to operate independently, had to have ample capital, had to borrow the credit of the Celestial Empire, and had to have experienced and responsible management — so the management had to hold a large stake in the bank, in order to bind their interests completely to the bank's.

Zhu Cilang added a few more instructions: "Let Us say a few more words. First, your bank must bring in the Dutch East India Company. Let them buy shares, and give them twenty to thirty percent equity. Otherwise the business cannot get off the ground."

This bank would mainly raise funds through remittances and earn interest and fees. The Dutch East India Company was its largest target client. If they were not tied in, how could the business be done?

"Second, you must not bring Cromwell's government into the arrangement. Mary will write to her sister Hortense to help you make contact with Charles II." Zhu Cilang paused. "After the Anglo-French allied forces capture Dunkirk, give Charles II a sum of money — a few tens of thousands of taels will do."

Zhu Cilang knew Cromwell did not have many years left to live, so there was no need for the bank to accept investment from Cromwell's government. It could wait until Charles II came to power.

And Charles II would be restored to the throne after Cromwell's death, so going to tend a cold stove at his most difficult moment would surely bring benefits.

Zhu Cilang continued, "The bank must lend to the three countries of England, France, and Portugal. Though they very likely will not be able to repay, these loans must be made! If you do not lend, you will not win the trust of the Europeans."

"Your Majesty, but the silver lent out may never be recovered..."

"No problem," Zhu Cilang said with a smile. "Collecting interest every year is enough. But you must offer a preferential rate — seven to eight percent will do. Once your bank has credit, it can absorb zero-cost silver through remittances, and European nobles and magnates will be willing to deposit money at low interest. So earning seven to eight percent interest will still be profitable."

An annual interest rate of seven to eight percentage points was extremely low in the Europe of this era, especially for countries like France, England, and Portugal, which frequently defaulted and fell into arrears.

Ordinary usurers would almost never lend to them at such a rate, but Huang Jiang's bank had to. If it did not, it would have no hope of opening for business in France, England, or Portugal, let alone gaining the support of those countries' governments.

Zhu Cilang said, "Also, the location of the bank's head office must be chosen with great care. If possible, place it in the town of Versailles — west of Paris. It is a fine spot."

"Lastly, you must do everything possible to make the Ming tael a common, standard unit of currency! Silver lent out must be denominated in Ming taels, and deposits received must also be converted into Ming taels for bookkeeping."

This was the first step toward seizing the world's right to issue currency!

Such a thing could not be accomplished overnight; it had to be done step by step, and the first step, of course, was to establish a standard currency with public credibility!

(End of Chapter)