Traveling through the late Ming Dynasty to promote Chinese civilization

Chapter 167 Fundraising

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Liang Xiaoming thought for a moment: "That seems to be the case. But why is there such a difference? I always thought that money shops were the primitive version of banks in ancient times."

“One of the main businesses of the money shops in the Ming Dynasty—called 'piaohao' in the north—was to provide intercity remittance services for merchants. Because transportation was inconvenient in ancient times, and precious metals such as gold and silver were used as currency, it was very inconvenient to carry silver around to do business. Money shops solved the problem of merchants carrying silver inconveniently by having branches in various places for deposit and withdrawal, so they charged a service fee.”

Liang Xiaoming nodded: "So instead of paying interest, we have to charge a fee."

"Banks do the exact opposite. They try every means to attract people's money and invest it, making a profit that far exceeds the service fee. So they give depositors interest, making people willing to deposit their money in banks."

Liang Xiaoming said thoughtfully, "I think I understand your line of thinking a little better now."

"Let me tell you another fact: In the Ming Dynasty, wealthy people rarely used their money for financial management or investment. Instead, they either bought land or had it cast into solid silver ingots and hid them in cellars—to prevent theft. Such enormous wealth remained hidden in places where it never saw the light of day, resulting in the Ming Dynasty possessing the world's largest reserves of silver that could not circulate. What a huge waste that was!"

Liang Xiaoming felt like he understood something, but also not quite: "Then what, what's the necessary connection between this and you opening a bank?"

"Let me finish. My initial plan is to streamline and close down the existing branches of the money exchange in various places, and only open branches in major cities like Guangzhou. We'll use interest to attract wealthy people to deposit their silver hidden in their cellars with us. In the future, as our influence expands, and provided we have the ability to protect it, we can gradually establish branches in cities like Beijing and Nanjing, slowly gathering the wealth currently held by a few powerful and wealthy individuals into our own hands, and using it to do what we want." Liu Ye explained, "They say truth is within the range of cannons. Concentrating resources in major cities within our sphere of influence can largely prevent officials from extorting and exploiting us, and the security issues you mentioned can be basically resolved."

"Okay, even if you solve the security issue, how will you make a profit? What will you use to pay the interest? Invest in real businesses?"

Liu Ye laughed and said, "Where in the Ming Dynasty could we find any real businesses to invest in? However, there are some highly profitable industries, such as maritime trade. Li Fu and the others have said that raw silk from Jiangnan can be sold to Japan and resold for five times the profit. But the raw silk industry is extremely capital-intensive. I can't even support the Qiongzhou camp by selling cotton cloth and liquor alone, let alone have the capital to get involved in the raw silk trade. But if I use high interest rates as bait to raise a huge amount of funds to invest in it, monopolize the raw silk supply in the Hangzhou and Suzhou areas, and resell it to Japan to obtain astronomical profits, I only need to pay some interest. Isn't that a very worthwhile deal?"

"Raising funds, high interest rates, investment... Why does this sound so familiar?" Liang Xiaoming thought for a long time before finally realizing, "Damn it, isn't this illegal fundraising? What's with this bank?"

Liu Ye laughed heartily: "From beginning to end, did I ever say I wanted to open a bank?" He then added, "At least not the kind of modern bank you're imagining."