Chapter 242: 241, A Fortuitous Mistake, Guangzhou Gold Firm Sniper Attack On Japanese Silver, Seaplane Route Expansion
On the second floor of the Guangzhou Gold Exchange, Fang Wen stated what he knew.
“The National Government plans to issue legal tender by the end of the year.”
Those present were not surprised.
Chen Hengyuan of Henglong Yin Lou spoke up: “It’s all because of the Americans making trouble. They collect gold and also silver, causing silver prices to rise. Our domestic silver price is lower than abroad, so it’s smuggled out for a steady 10% profit. We use silver as money, and with less silver domestically, there’s no money circulating, so issuing paper currency is inevitable.”
Everyone nodded in agreement with this judgment.
Zhou Jinxiu of Jinxiu Tang continued: “My Jinxiu Tang has silver ornaments business and knows the silver market best. Now silver is in short supply. Last year alone, domestic silver decreased by more than 250 million ounces, causing a silver dollar shortage. Now my family’s silver ornaments business can only stagnate.”
Sun Yaozong of Baoguang Ge sighed: “Guangzhou is still doing well. In Shanghai, due to silver shortage and poor circulation, factories closed, banks faced runs, even housing prices fell, the securities exchange crashed, many enterprises went bankrupt, and Shili Yangchang is full of unemployed people drowning their sorrows.”
Zhao Ruide of Furui Xiang slammed the table: “Not just that, the Japanese in the Northeast and Shanghai are also massively acquiring silver dollars and shipping them back home on warships.”
The situations described by the gold firm bosses had a specific financial term in the future: deflation.
The massive outflow of silver-standard Republic of China silver was simply a monetary contraction due to reduced currency.
With less money, economic circulation slows, affecting enterprises and people’s livelihoods.
But the actual situation was more complex than these gold firm bosses knew.
Fang Wen spoke to explain:
“In March this year, the Shanghai General Chamber of Commerce jointly petitioned the National Government, requesting currency reform and paper currency issuance. This was just a pretext; the top had long wanted to replace silver dollars with paper currency. But issuing paper currency requires reserves. Lacking sufficient gold and silver reserves, they wanted to use a relatively strong international currency as substitute reserves.”
Fang Wen’s words pierced the surface, revealing the essence to the gold firm bosses, who fell silent and listened attentively.
“The National Government originally wanted to peg to the British pound, as British colonies spanned the globe with strong economic power. But this time, with Americans aggressively collecting gold, global gold flowed to the US. Backed by massive gold reserves, the US dollar became the world’s strongest currency. The National Government then wanted to use US dollars as reserves, selling 180 million ounces of silver to the US for 100 million US dollars in foreign exchange reserves.”
Hearing this, someone interrupted.
Li Changsheng of Changsheng Jin Hao spoke up: “They don’t have that much silver to exchange for US dollars. The national treasury’s reserves are far from enough; otherwise, they wouldn’t be borrowing from Peter to pay Paul year after year.”
Fang Wen nodded: “Not enough, so the plan became partly exchanging silver for US dollars, partly using national treasury gold, and partly borrowing US debt for dollars. But the US side refused to bear the risk. So the currency now being issued lacks full reserves; part of it is fictitious.”
Father-in-law Kuang Shanming finally spoke: “Fang Wen, what exactly do you mean by all this?”
“I mean legal tender has big problems and will inevitably depreciate continuously. Father-in-law and everyone, best not to hold legal tender.”
Everyone nodded repeatedly. A currency with credit issues from the very start should indeed be avoided.
There was another layer no one mentioned: if this money-printing game starts unfair, there will be more loopholes later for those at the top to profit.
Everyone was about to thank Fang Wen for the reminder, but he wasn’t finished.
“Besides this, there’s another related matter. Everyone, sell off your silver holdings if possible, and stock up on gold as much as you can.”
Everyone was puzzled, not understanding Fang Wen’s intent.
Kuang Shanming asked on their behalf: “Fang Wen, silver prices are rising steadily, while gold holds steady at 35 US dollars per ounce. Why sell silver to buy gold?”
Fang Wen analyzed for his father-in-law and the gold firm bosses from a future broad perspective:
“The Americans want gold; silver is just a bonus. Do you know where the silver is flowing now?”
Kuang Shanming and the gold firm bosses, being in the trade, were very concerned. Kuang Shanming hurriedly asked: “Son-in-law, tell us quickly; you can’t keep this to yourself.”
Fang Wen nodded and continued: “Domestic silver is flowing out massively now, but it’s not actually going to the US. The US prohibits transactions outside the Ministry of Finance, imposing a 50% transaction tax if found, and the Ministry is the sole buyer of silver, only for US domestic silver. Silver from outside the US can’t easily enter for arbitrage. These continually rising-priced silvers are actually concentrating in regions outside China but not the US. Once the US announces it stops buying silver, silver prices will crash.”
Fang Wen explained to his father-in-law and the gold firm bosses what he learned while selling silver in the US. In reality, this silver price surge was not as simple as outsiders thought.
Outsiders hyped it up greatly.
Li Changsheng of Changsheng Jin Hao agreed: “I see it that way now. Everyone is bullish on silver because there’s always a buyer at high prices. Those willing to buy high bet on continued rises. Once the US stops buying silver, the bubble bursts, and prices crash immediately. I think it’s time to sell silver and acquire gold.”
The other gold firm bosses nodded, endorsing Fang Wen’s advice.
At this point, Kuang Shanming interjected again.
“Hold on, there’s still one issue here.”
Including Fang Wen, everyone looked at Kuang Shanming.
Under everyone’s gaze, Kuang Shanming said thoughtfully: “If the Americans aren’t buying silver, then who’s buying?”
“British people, French, Japanese, and South Asia business circles,” analyzed Zhou Jinxiu of Jinxiu Tang.
Hearing the lady’s words, Kuang Shanming suddenly stood up: “The biggest player must be the Japanese. They want to disrupt our country’s monetary system and profit from silver too. I bet they’ve hoarded a lot of silver domestically now.”
Kuang Shanming’s words sparked the gold firm bosses’ imaginations, leading to heated discussion, while Fang Wen became a listener.
“Japan has always been a silver exporter; they don’t need silver. Hoarding it now means only two paths: back to China or sell to the US.”
“Per General Manager Fang’s analysis, the US won’t take their silver, so Japanese-hoarded silver will only have the path back to China.”
“By then, China will have switched from silver dollars to legal tender, reducing silver demand. Their dumped silver will crash the market price.”
“Then, pricing power will be in our hands, and the Japanese will suffer heavy losses.”
In the discussion, Kuang Shanming grew excited.
He said loudly: “A once-in-a-thousand-years opportunity. Though we can’t fight Japan on the battlefield, we can disrupt their economy this way and make a fortune.”
Things took a turn beyond Fang Wen’s expectations.
He had only wanted to remind his father-in-law to avoid losses and earn favors from the gold firm bosses.
But now, it became a different scene.
Kuang Shanming wanted to unite major southern gold firms to snipe the Japanese silver hoarding.
His proposal was based on Fang Wen’s silver market judgment.
But the whole matter was logical and well-argued, with high feasibility after repeated scrutiny.
They contacted peers in Guangzhou’s gold and silver business circles for a secret meeting.
For this, Fang Wen was asked by his father-in-law Kuang Shanming to stay.
Cantonese merchants’ roots are mainly in South Asia, with little Japanese ties. After Kuang Shanming’s persuasion and the promise of profits, they formed a temporary financial alliance.
They devised a plan.
Before legal tender issuance at year-end, massively sell silver to the Japanese.
Simultaneously acquire gold at flat prices.
After legal tender issuance, with China’s reduced silver demand and the US not taking silver, Japanese-hoarded silver can only be dumped in China.
Then, the southern silver merchant alliance refuses to buy, forcing Japanese silver to drop prices.
This way, they can repurchase silver cheaply, earn huge spreads, and make Japan suffer heavy losses.
The plan to snipe Japanese silver was set, with over twenty strong gold and silver firms participating.
During the silver price rise, they jointly sold silver.
Massive silver appeared on the market but didn’t suppress prices; it was all absorbed.
Only the Japanese could absorb so much silver. The gold and silver merchant alliance was pleased and continued selling silver while acquiring gold at flat prices.
At this time, gold, due to US aggressive stockpiling, stayed at 35 US dollars per ounce with no spread for profit. To fund silver purchases, the Japanese side sold gold for silver.
Thus, the Japanese side hoarded over 50 million Chinese silver dollars, becoming the second-largest silver reserve holder outside China.
The silver sniping plan continued; the Japanese side was still aggressively buying silver, with months until year-end. Fang Wen couldn’t stay in Guangzhou forever.
He bid farewell to his father-in-law and returned to Yangon.
It was now early July.
Half the year had passed again.
For the aircraft manufacturing plant’s expansion, Fang Wen busied himself again.
For smooth expansion, not only must the aircraft manufacturing plant’s production capacity rise, but sales must also increase simultaneously.
Only with booming production and sales can China’s aircraft market and manufacturing industry grow together.
For this, Fang Wen felt it was time to expand the market.
After the Northern Water System, he opened the Yellow River System route.
The Yellow River is China’s Mother River, with complex terrain known as the nine-bend Yellow River.
It spans many regions, very complex.
In the past, Taishan Airlines Domestic Branch couldn’t have done it.
But this time, there was backing from above.
Quan Yuncai took full responsibility and got it done.
Local areas all approved seaplane route landings and takeoffs for passenger and cargo services.
Immediately, Yellow River seaplane airport site selection began.
Pan Jiafeng and five pilots batch-selected sites on the upper, middle, and lower Yellow River sections.
Yellow River water comes from heaven, flowing to the sea without return.
Choosing seaplane airports along this route was somewhat dangerous.
Many river sections were unsuitable for landing and takeoff; only calm-flow areas would work.
After much searching, the entire route was finalized.
Along the route: 13 seaplane airports at Lanzhou, Zhongwei, Yinchuan, Wuhai, Bayannur, Baotou, Hequ, Jiaxian, Hancheng, Tongguan, Xiaolangdi, Zhengzhou, Jinan.
10 Shuiyun Type 1 seaplanes distributed at upper, middle, and lower Yellow River nodes.
Forming a cross-Northern China branch seaplane flight network.
This could be called the world’s longest seaplane route.
At this time, even the Mississippi River in the US had no seaplane route open.
With the Yellow River route set without needing large-scale land airport construction, opening was soon completed.
On opening day, the first seaplane departed Lanzhou for endpoint Jinan, full length 2200 kilometers.
Bold local wealthy merchants and reporters from Lanzhou boarded to witness the moment.
40 minutes later, the plane reached the first stop, Zhongwei.
This speed astonished passengers. In the past, from Lanzhou to Zhongwei by boat took 10 hours from morning to afternoon; now it arrived in under an hour.
Such rapid travel upended the perception of long-distance travel for passengers unfamiliar with planes.
Subsequently, passengers boarding along the route also experienced the wonder of high speed.
From upstream Lanzhou to downstream Jinan, with 11 intermediate stops, total time including stops was only 9 hours.
Too fast.
The one-day-reach miracle of Taishan Airlines’ Yellow River route spread along the Yellow River shores. People gathered at seaplane airports to watch this wondrous transport, and more chose this convenient travel mode.
Wealthy merchants, soldiers, local government personnel all abandoned previous boat and car travel for seaplanes.
10 seaplanes on staggered flights couldn’t meet the explosive demand growth.
Taishan Airlines’ Yellow River seaplane route was built in one month and soon became the most popular travel mode.
This greatly attracted attention from various domestic parties.
With newspaper reports, word-of-mouth, and personal experiences, people began accepting this new travel change.
Simultaneously, seeing the huge profits, various powerful figures wanted a piece.
If they wanted in, Taishan Airlines Domestic Branch couldn’t monopolize.
Even with backing from above, it wouldn’t work.
Thus, development of other water system routes was popular but rife with arguments.
Ultimately, the Nanjing Government held a meeting.
After the meeting, it was decided that Taishan Airlines Domestic Branch would lead with local interest parties to form a Joint Shipping Subsidiary.
This subsidiary would cover seaplane routes on the four major water systems: Huai River System, Yangtze River System, Nu River Lancang River System, Pearl River System.
Taishan Aircraft Manufacturing Plant’s capacity would prioritize supplying the Joint Shipping Subsidiary for opening these four water system seaplane routes.
The sudden demand surge massively increased production pressure on Taishan Aircraft Manufacturing Plant. Even continuously adding capacity, it would take three months to reach 8 planes per month.
Even so, Fang Wen didn’t stop expansion.
Riding this production-sales boom, Fang Wen planned to scale the aircraft assembly plant’s technicians to 800, pushing toward a monthly capacity limit of 10 planes.
That was a massive plan; managing 800 technicians without computers brought huge pressure.
Simultaneously, Fang Wen planned to recruit more highly educated talent to form his own aircraft research institution.
Time was tight, but necessary organizational structure must be in place. Perhaps after war breaks out, his self-trained aircraft research institution could contribute more.
Besides ongoing aircraft plant expansion and aircraft research institution, Fang Wen also began R&D and manufacturing of trans-Pacific aircraft to compete with Pan American Airways’ Pacific shipping route; he didn’t want to lose.
Meanwhile, base area tobacco harvest season arrived again.
Bai Yunfei, thought not to appear, brought this year’s tobacco to Xiangxi Airport.
