Chapter 96

The price system for textiles in Colonia collapsed after a small-scale transaction between the East Bankers and the Rodrigues Chamber of Commerce. Upon hearing the news, the merchants from La Plata no longer intended to buy the expensive goods from the British. The local merchants who had joined the Rodrigues Chamber of Commerce were contentedly waiting for the allocation of quotas from the chamber, while the merchants from Santa Fe and even farther Asunción were anxiously awaiting the next arrival of the East Bankers. Some of the more impatient ones were even preparing to bypass the ears of the Rodrigues Chamber of Commerce and secretly travel inland to the East Bank Republic to purchase goods.

The English merchants watched this scene with dark faces, speechless for a long time.

"Cotton cloth is being sold for only 8 shillings (1 pound = 20 shillings ≈ 4 yuan) per bolt, and woolen cloth for only 6 pounds 5 shillings per bolt. Are these East Bankers crazy?!" George Hampton said angrily, "Can they still make a profit at these prices? It's impossible! Unless... they are selling stolen goods! Mr. Sheldon, Mr. Clifford, La Plata is our market, we cannot lose it here. I have paid the membership fee; this is our market."

"Yes, gentlemen," the wool merchant John Hill also shouted, "You all heard it just now. These East Bankers will continue to sell cotton and woolen cloth a month from now. They are preparing for a long-term competition with us. If we do not respond appropriately, we might lose this market completely."

Peter Sheldon and William Clifford fell silent, clearly the situation before them was beyond their expectations, and things had become very tricky.

"Mr. Clifford, has there been any recent loss of ships by the East India Company? I mean, those carrying cotton cloth," Peter Sheldon, a mid-level manager of the Merchant Adventurers Company and a wool merchant, turned to ask, "Perhaps we should try to find out where the cotton cloth sold by these East Bankers comes from, whether they produce it themselves or import it from elsewhere?"

"There's no need to make it so complicated, Hawk. Go to the dock, spend some money to get the La Plata people to let you into their warehouse, and take a close look at the quality of the East Bankers' cloth. Come back and tell me, quickly," William Clifford turned to one of his employees, who promptly left.

For a moment, everyone stood silently, waiting for the return of the East India Company employee. After a while, the employee named Hawk returned from the dock, nodded to William Clifford, and said, "The East Bankers' cotton cloth is light, breathable, and quite smooth, with very good quality. It is much better than the Indian cotton cloth we have. It indeed seems, as they claim, that they produce it themselves."

"What about the woolen cloth?" George Hampton asked nervously.

Hawk glanced at him and then confirmed, "The same. Their woolen cloth is strong and durable, yet has a very fine texture. The woolen cloth made from short wool combines the advantages of long wool. Gentlemen, I believe we should keep a close eye on the East Bankers. If they are not engaging in malicious low-price dumping, then their production costs must be very low, meaning they can still make some profit at the current price, which is already unprofitable for us."

Hawk's words sent a chill through the group of merchants, big and small. With inferior quality and much higher prices, how could they compete?

"Perhaps we can seek help from our 'Spanish relatives'①. After all, losing the La Plata market would also reduce their income. Through them, we might be able to pressure the La Plata officials through official channels to try to ban the East Bankers' trade privileges," Peter Sheldon tentatively suggested to Clifford.

"We can try, but don't expect too much," William Clifford nodded reservedly, "Additionally, I plan to report this matter to the East India Company as soon as possible. As for you, Mr. Sheldon, when you return to Hamburg or London, it would be best to report this to your company's upper management. Although the La Plata market is not significant, the nature of this matter is serious. We may have encountered a formidable competitor. Textiles account for more than 60% of the kingdom's total annual exports, and we must handle this matter with caution."

"What about these goods?" John Hill asked cautiously, "If we can't sell them this time, we'll have to wait another six months for the next trip. Oh, having such a large amount of goods in hand will cause problems with my cash flow."

"Go to Rio de Janeiro, São Paulo, Bahia, Cartagena, Veracruz... go to any port where you can sell these damned goods! In short, don't stay in Colonia any longer. Let's go, John, we shouldn't dawdle. Let's leave as soon as possible; I'm tired of this salty sea breeze!" George Hampton pulled John Hill's arm and headed towards the dock.

With the sales not going well, the British merchants were in low spirits. They quickly left and returned to their temporary warehouse. By around three in the afternoon, the British, having packed up their goods, boarded their merchant ships, raised the sails, and silently left the dock, heading east.

...

After seeing off the Alvaro father and son, Xu Xin, Xiao Baitu, and others sat in a circle, excitedly reviewing the results of their trip. They sold 500 military knives at a discounted price of 2 yuan each to the Rodrigues Chamber of Commerce, earning 1,000 yuan; additionally, 100,000 red bricks sold for 200 yuan; and the biggest gain was from the textiles, with 1,000 bolts of cotton cloth and 300 bolts of woolen cloth selling for 9,100 yuan at a "high" price, with a gross margin exceeding 50%. Although it was expected, it was still a pleasant surprise. After deducting the 2,575 yuan (25% tax rate) in taxes to the government, the East Bank Company netted 2,525 yuan, a substantial profit.

"Everything is good, except for one thing: the La Plata market is still a bit narrow," Tao Chenxi said with a sigh, somewhat regretfully, "It only consumes one or two thousand bolts of woolen cloth annually, plus at most ten thousand bolts of cotton cloth, providing us with a profit of about 30,000 yuan per year. Compared to our annual fiscal shortfall, this amount is negligible."

"Our textiles are priced low, which should encourage more ordinary people who previously couldn't afford them to start buying. The annual consumption should be much higher than it is now. After all, the people in the La Plata region, especially in Paraguay, are quite wealthy, and their purchasing power is significant. Additionally, we hope that the Rodrigues Chamber of Commerce is as powerful as Alvaro claims. If so, we might be able to sell our goods to Chile and Upper Peru through them. These regions have dense populations and strong consumer purchasing power, which should significantly boost our textile sales," Xu Xin analyzed. "Moreover, Brazil has several times the population of La Plata and a similar level of wealth, making it an ideal market for us to dump our products. Our competitors, of course, are still the British. The so-called 'Southern Common Market' will be dominated by our East Bank Republic alone; the British must be driven out!"

"Great speech!" Tao Chenxi was moved by the prospects Xu Xin described, "When we return, we'll add more machines, hire workers, and expand production. Damn it, let's take on the British this time. I don't believe that our mechanized industrial production can't outcompete their outdated rural wool production and handicraft workshops. If that happens, we might as well just find a block of tofu and bash our heads against it."

"Adding machines is easy; we can make them ourselves. But what about raw materials? How do we solve that?" Ming Hui, who had been silent, interjected, "Industrial production requires a steady supply of raw materials and a broad market for sales, both of which are essential. If we don't solve the raw material issue, we could easily be choked."

"This matter must be planned comprehensively," Xu Xin thought for a moment and said, "On one hand, we need to find ways to purchase externally, and on the other, we need to rely on ourselves. We need to expand our sheep population, raising both long-wool and short-wool sheep on a large scale to quickly form a large-scale grazing industry. Additionally, we should start planning for cotton cultivation. The climate in the northern part of Lake Duck is barely suitable for growing cotton. I'll report this to the Trade Department and the Executive Committee upon our return, and we need to implement it as soon as possible, aiming to achieve a certain scale of cultivation within a few years."

"Ultimately, we still need to rely on external purchases in the short term," Ming Hui continued to pour cold water, "Don't say I didn't warn you. Textile exports are the lifeline of the British economy, a national industry. By disrupting the market like this, the British might be driven to extreme measures."

"Are you saying the British will declare war on us? This... can't be, right?" Xiao Baitu said in surprise.

"War might not be direct, but given the example of the Spanish, it would be much more difficult for the British to launch a long-distance expedition. However, they have other means. Don't forget what kind of country Britain is. You're not unfamiliar with the famous Drake, right? It's a nation of pirates! When the time comes, the king might issue privateering licenses to his subjects, and you'll find many British ships swarming like wolves, attacking our transport ships, disrupting our raw material imports, and blockading our sales markets, even our coastlines. Can we withstand that?"

"You're right, there is a possibility," Xiao Baitu sighed, "Damn it, why is it so hard to make money? Who are we bothering?"

"Stop complaining," Xu Xin interrupted Xiao Baitu's lament, "No matter how difficult, we must do it! Do you think that if we give up on textiles, no one will come after us? Ha, that would only show how naive you are! Just a few days ago, the Internal Affairs Department caught two Spanish spies near the armory. Our cannons are superior to those of the Europeans, and it's no wonder they are envious. This is just the first wave; more will come, including the French, Dutch, and British, all coveting our technology. So, we must not be afraid and must face challenges head-on. Of course, sometimes we need to be strategic. I will report this to the Executive Committee for discussion. Alright, let's pack up and leave!"

① "Spanish relatives": At the time, many British merchants in Seville found so-called "Spanish relatives," who all had some influence in the Council of the Indies or the royal court. In exchange for benefits, they issued port entry documents to British ships, claiming them as their own and reporting to the Spanish customs, paying tariffs. Thus, these British ships transformed into Spanish ships and freely traded in the American colonies. At the time, Spain could only supply 5% to 10% of the goods needed in its American colonies, with the rest requiring imports, making this form of smuggling trade very prevalent.

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