Republic of China: Ace Pilot

Chapter 242, Section 241: A Twist of Fate – Guangzhou Gold Merchants Target Japanese Silver, Expanding Sea Freight Routes
On the second floor of the Guangzhou Gold Exchange, Fang Wen revealed what he knew.

"The Nationalist government is preparing to issue legal tender by the end of the year."

Those present were not surprised.

Chen Hengyuan of Henglong Jewelry Store spoke up: "It's all because of the Americans' bad deeds. Not only do they collect gold, but they also collect silver, causing the price of silver to rise. The price of silver in our country is lower than that abroad. If they sell it abroad, they can make a guaranteed 10% profit. It's inevitable that some people will try to smuggle silver abroad. We use silver as currency. If there is less silver, there will be no money for circulation in the country, so issuing paper money is inevitable."

Everyone nodded in agreement with this judgment.

Zhou Jinxiu of Jinxiutang continued, "My Jinxiutang has a silver jewelry business, so I know the silver market best. There is a shortage of silver now. Last year, the domestic silver supply decreased by more than 2.5 million yuan, which caused a shortage of silver coins. Now my silver jewelry business has to be suspended."

Sun Yaozong of Baoguang Pavilion sighed: "We in Guangzhou are considered to be doing well. In Shanghai, due to a shortage of money and poor cash flow, factories have closed down, banks have run on deposits, even housing prices are falling, the stock exchange has collapsed, many companies have gone bankrupt, and the Bund is full of unemployed people who are drinking themselves into oblivion."

Zhao Ruide of Fu Ruixiang slammed his fist on the table: "Not only that, the Japanese in the Northeast and Shanghai are also buying up large amounts of silver dollars and transporting them back to their homeland by warships."

The situation described by several gold shop owners will one day be referred to by a specific financial term: deflation.

The massive outflow of silver during the Republic of China era, which was based on the silver standard, was essentially a form of deflation due to a decrease in the money supply.

When there is less money, the speed of economic circulation slows down, which affects businesses and people's livelihoods.

But the reality is more complicated than these gold shop owners knew.

Fang Wen explained aloud:
"In March of this year, the Shanghai General Chamber of Commerce jointly wrote to the Nationalist government, requesting that the government take the lead in currency reform and issue paper money. This was just a pretext; the government had long wanted to replace silver dollars with paper money. However, issuing paper money requires reserves, and since they did not have enough gold and silver as reserves, they wanted to use a relatively strong international currency as a substitute for reserves."

Fang Wen's words stripped away the surface, allowing the gold shop owner to see the essence of the matter. Everyone fell silent and listened attentively.

"The Nationalist government originally intended to peg the currency to the British pound, given that Britain had colonies all over the world and a strong economy. However, this time, the Americans aggressively bought up gold, and all the gold in the world flowed to the United States. With a large amount of gold reserves to support it, the US dollar became the strongest currency in the world. The Nationalist government then wanted to use the US dollar as its reserve, so it sold 1.8 million ounces of silver to the United States in exchange for US$1 million in foreign exchange reserves."

Upon hearing this, someone interrupted.

Li Changsheng of Changsheng Gold Shop said, "They don't have that much silver to exchange for US dollars. The national treasury's resources are simply not enough, otherwise they wouldn't be robbing Peter to pay Paul every year."

Fang Wen nodded: "It's not enough, so the plan changed to using part of the silver to exchange for US dollars, part of the national treasury's gold reserves, and part of borrowing US debt to exchange for US dollars. But the US was unwilling to take this risk and refused. So the currency issued now does not have sufficient reserves; some of it is fictitious."

At this point, his father-in-law, Kuang Shanming, spoke up: "Fang Wen, what exactly do you mean by all this?"

"I want to say that there is a big problem with the legal tender. It will inevitably continue to depreciate in the future. Father-in-law and everyone else would be better off not keeping legal tender in their hands."

Everyone nodded in agreement. A currency with credibility issues from its very inception should indeed be avoided.

There's another layer that no one has mentioned: if this money-printing game is unfair from the start, there will be more loopholes in the future, allowing those in power to profit from it.

Just as everyone was about to thank Fang Wen for the reminder, Fang Wen didn't finish speaking.

"Besides this, there is another matter that is related to it. If you have any silver in your hands, please sell it and try to save gold."

Everyone was bewildered, not understanding what Fang Wen meant.

Kuang Shanming asked on their behalf, "Fang Wen, silver prices have been rising, while gold has remained stable at $35 an ounce. Why sell silver and buy gold?"

Fang Wen analyzed the situation for his father-in-law and the gold shop owners from a broader, future-oriented perspective:

"Americans want gold; silver is just an add-on. Do you know where the silver is flowing to these days?"

Kuang Shanming and the gold shop owners were in the business and were very nervous about this. Kuang Shanming quickly asked, "Son-in-law, tell us quickly, we can't keep this to ourselves."

Fang Wen nodded and continued, "Currently, a large amount of silver is flowing out of China, but it's not actually flowing into the United States. The US prohibits transactions outside the Treasury Department, and any such transactions will be subject to a 50% transaction tax. The Treasury Department is the only department that decides to purchase silver, and they only buy silver from within the US. In reality, it's very difficult for silver from outside the US to flow into the US for arbitrage. This silver, whose price is constantly rising, is actually concentrated in regions outside of China, but not in the US. Once the US announces a halt to silver purchases, the price of silver will collapse."

Fang Wen explained to his father-in-law and the gold shop owner what he had learned when he sold silver in the United States. In fact, the rise in silver prices was not as simple as outsiders thought.

However, this has been widely publicized by the outside world.

Li Changsheng of Changsheng Gold Shop agreed, saying, "I think this is the situation now. Everyone is optimistic about silver because there will always be a buyer willing to pay a high price. Those who are willing to take over at a high price are optimistic about the continued rise in silver prices. Once the United States stops buying silver, this bubble will burst, and the price will immediately collapse. I think it's time to sell silver and buy gold."

The other gold shop owners nodded in agreement, approving of Fang Wen's suggestion.

At this moment, Kuang Shanming interjected.

"Wait, there's another problem here."

Everyone, including Fang Wen, looked towards the mine.

Under everyone's watchful eyes, Kuang Shanming said thoughtfully, "If the Americans weren't collecting silver, then who was?"

“British, French, Japanese, and Southeast Asian businesspeople,” Zhou Jinxiu of Jinxiutang analyzed.

Hearing Ms. Zhou's words, Kuang Shanming suddenly stood up: "The biggest culprits are definitely the Japanese. They want to use this to disrupt our country's monetary system and also make a profit from silver. I bet they've already stockpiled a lot of silver in the country."

Kuang Shanming's words sparked the imaginations of the gold shop owners, who began to discuss the matter, while Fang Wen became the audience.

“Japan has always been a silver exporter. They don’t need silver. If they hoard silver now, there are only two options: to return it to China or to sell it to the United States.”

"If we follow General Manager Fang's analysis, the United States will not accept their silver. In the future, the only way for the silver that the Japanese have hoarded will be to flow back to China."

"At that time, China had already changed from silver dollars to legal tender, so the demand for silver was relatively reduced. The silver they sold on the market would definitely plummet in price."

"At that time, the bargaining power will be in our hands, and the Japanese will definitely suffer huge losses as a result."

During the discussion, Kwong Shan Ming was extremely excited.

He shouted, "This is a once-in-a-lifetime opportunity! Although we can't go to the battlefield to fight Japan, we can take this opportunity to damage the Japanese economy and make a fortune along the way."

Things took an unexpected turn for Fang Wen.

He originally just wanted to remind his father-in-law to avoid losses and, incidentally, gain favors from several gold shop owners.

But now, the scene is quite different.

Kuang Shanming actually wanted to join forces with major gold banks in the south to counter Japan's hoarding of silver.

His proposal was based on Fang Wen's assessment of the silver market.

However, the whole matter is well-founded and, after repeated verification, it is indeed highly probable.

They contacted their counterparts in the Guangzhou gold and silver trade and held a secret meeting.

Therefore, Fang Wen was asked to stay by his father-in-law, Kuang Shanming.

The Cantonese merchants' roots were mainly in South Asia, and they had little contact with Japan. After Kuang Shanming's explanation, and because it was profitable, they actually formed a temporary financial alliance.

They came up with a plan.

Before the issuance of legal tender at the end of this year, a large amount of silver was sold to the Japanese.

At the same time, it will purchase gold at a fair price.

After the issuance of the legal tender, China's demand for silver decreased, and the United States stopped accepting silver. As a result, Japan's stockpiled silver could only be sold off in China.

At that time, the Southern Silver Merchants Alliance refused to acquire the silver, forcing Japan to lower its silver prices.

This way, they can buy back silver at a low price, earn huge profits from the price difference, and incidentally cause Japan to suffer huge losses.

The plan to target Japanese silver was finalized, and more than twenty powerful gold and silver trading companies participated.

They collectively sold off silver during the price surge.

A large amount of silver appeared on the market, but instead of suppressing prices, it was all bought up. Only the Japanese could absorb so much silver. The gold and silver trading alliance was happy to see this happen and continued to sell silver while buying gold at the same price.

At this time, gold prices remained unchanged at $35 per ounce due to the United States' aggressive stockpiling. Without price differences, there were no profits. In order to raise funds to purchase silver, Japan sold its gold and exchanged it for silver.

By this time, Japan had stockpiled more than 5000 million Chinese silver dollars, becoming the second largest holder of silver reserves after China.

The silver snipe plan is still underway, and the Japanese are still aggressively buying up silver. There are still a few months left until the end of the year, and Fang Wen can't stay in Guangzhou forever.

He bid farewell to his father-in-law and returned to Yangon.

It was already early July.

Half of the year has passed.

Fang Wen continued to work hard to expand the aircraft manufacturing plant's production capacity.

For production expansion to proceed smoothly, it is not only necessary to increase the production capacity of aircraft manufacturing plants, but also to increase sales at the same time.

Only when production and sales are booming can China's aircraft market and manufacturing industry grow simultaneously.

Therefore, Fang Wen felt it was time to begin market expansion.

Following the northern water system, he also opened up the Yellow River water system route.

The Yellow River is the mother river of China. It has a complex topography and is known as the Yellow River with nine bends.

Furthermore, it spans numerous regions and is quite complex.

This wouldn't have been possible with the previous domestic branch of Taishan Airlines.

But this time, there are people in higher positions.

Quan Yuncai took on all the responsibilities and got it sorted out.

All regions have agreed to allow seaplanes to land and take off, and to conduct passenger and cargo transport services.

Subsequently, the site selection for the Yellow River waterway airport began.

Pan Jiafeng and five pilots began selecting sites in batches along the upper, middle, and lower reaches of the Yellow River.

The Yellow River's waters come from the sky, rushing to the sea never to return.

Choosing a seaplane airport along the way is somewhat dangerous.

Many sections of the river are unsuitable for landing and takeoff; it is necessary to choose areas with slow currents.

After some searching, the entire flight route was finally finalized.

There are a total of 13 seaplane airports along the route: Lanzhou, Zhongwei, Yinchuan, Wuhai, Bayannur, Baotou, Hequ, Jiaxian, Hancheng, Tongguan, Xiaolangdi, Zhengzhou, and Jinan.

Ten Shuiyun-10 seaplanes are deployed at key points along the upper, middle, and lower reaches of the Yellow River.

This has led to the formation of seaplane routes traversing northern China.

This can be considered the world's longest waterway.

At that time, there were no seaplane routes operating on the Mississippi River in the United States.

With the Yellow River waterway established, its opening could be completed quickly without requiring large-scale earthwork for airport construction.

On the day of its opening, the first seaplane departed from Lanzhou and flew to its destination, Jinan, a journey of 2200 kilometers.

Some of the bolder local wealthy businessmen from Lanzhou boarded the plane with local reporters to witness this moment.

Forty minutes later, the plane arrived at its first stop, Zhongwei.

This speed surprised the passengers greatly. In the past, it would take 10 hours to travel from Lanzhou to Zhongwei by boat, departing in the morning and arriving in the afternoon. Now, they arrived in less than an hour.

Such rapid travel has overturned the perceptions of long-distance travel held by some passengers who are unfamiliar with airplanes.

Passengers boarding the plane along the route also experienced the wonder of high speed.

From Lanzhou in the upper reaches of the Yellow River to Jinan in the lower reaches, there are 11 intermediate stops along the way. Even including the time spent at these stops, the total travel time is only 9 hours.

too fast.

The amazing one-day delivery service of Taishan Airlines' Yellow River route has spread along the Yellow River, attracting crowds to the seaplane airport to witness this incredible mode of transportation, and more people are choosing this convenient way to travel.

Wealthy businessmen, soldiers, and government officials from various regions abandoned their previous travel by boat and car and switched to seaplanes.

Even with 10 seaplanes flying at staggered times, it was still impossible to meet this explosive growth in demand.

Taishan Airlines' Yellow River seaplane route was completed within a month and subsequently became the most popular mode of transportation.

This has attracted great attention from various sectors of the country.

As newspapers reported on it, word of mouth spread, and people experienced it firsthand, they began to accept this new change in travel.

At the same time, seeing the enormous profits involved, powerful and influential people from all walks of life wanted to get a piece of it.

If they want it, then Taishan Airlines' domestic branch can no longer have it all to themselves.

Even if you have connections in higher places, it won't work.

Therefore, the development of routes on other waterways is popular, yet it is also subject to constant debate.

Finally, the Nanjing government held a meeting.

After the meeting, it was decided that Taishan Airlines' domestic branch would take the lead in establishing a joint shipping subsidiary with stakeholders from various regions.

This subsidiary will cover waterways in four major river systems: the Huai River system, the Yangtze River system, the Nujiang-Lancang River system, and the Pearl River system.

Taishan Aircraft Manufacturing Plant's production capacity will be prioritized for supplying United Shipping subsidiaries to develop waterways on the four major waterways.

The sudden surge in demand has put immense pressure on the production capacity of Taishan Aircraft Manufacturing Plant. Even with continuous capacity increases, it will take three months to reach a production rate of eight aircraft per month.

Even so, Fang Wen did not stop expanding production.

Taking advantage of this booming production and sales, Fang Wen plans to increase the number of skilled workers in the aircraft assembly plant to 800, aiming to reach a production capacity of 10 aircraft per month.

It was a massive project, with 800 skilled workers in an era without computers, creating immense management challenges.

At the same time, Fang Wen also plans to recruit more highly educated talents to establish his own aircraft research institution.

Although time is of the essence, the necessary organizational structure must be in place. Perhaps after the outbreak of war, the aircraft research institutions we have cultivated will be able to make a greater contribution.

In addition to the continued expansion of the aircraft factory and the Feixin research institute, Fang Wen also began to develop and manufacture aircraft that cross the Pacific Ocean, competing with Pan Am's trans-Pacific routes. Fang Wen did not want to lose.

Meanwhile, the tobacco harvest season had arrived in the base area.

Bai Yunfei, whom no one expected to show up, actually arrived at Xiangxi Airport with a new year's supply of tobacco.

(End of this chapter)