Chapter 770: Letters of Credit

Everything unfolded as if it had been written into a script—there were fluctuations, twists, and conflicts, but everything had already been arranged, and nothing could defy Jia Xu's fully activated spiritual talent. It was as if he possessed the power to write fate itself, with everything that happened already foreseen.

The so-called "overwhelming tide" could not be resisted. To Jia Xu, who had practically completed his deductions of the entire Yuan-Liu conflict, any of the smaller conflicts were mere ripples in comparison. All these ripples would eventually be swallowed by the unstoppable tide.

This was why Taishan remained a bastion of calm amidst the chaos. No matter how turbulent the events were, they could never overshadow Jia Xu's predictions for the future. The most that could be lost were resources, but never victory.

Of course, this was assuming no unforeseen accidents occurred. But unfortunately, in life, there were always situations that rendered one's preparations futile, shattering all predictions.

Leisurely completing his official duties, Chen Xi handed over the strategic plans to Wang Yi. He had to admit that Wang Yi was becoming increasingly capable, already surpassing Wang Xiu of old and striving toward the level of Lu Su when he first arrived in Taishan.

"Bernin, have you finished?" Chen Xi asked as Wang Yi poured him tea, then turned his attention to Man Chong. As for Jian Yong and Liu Yan, they had already returned to Taishan from Yanzhou, but the work was still incomplete.

"The basic laws are drafted, but there are some loopholes. The biggest issue is how to implement them. After all, some ranks are fixed, and we simply don't have the authority!" Man Chong replied, looking up at Chen Xi with a slightly stern expression.

"Have the civil law, criminal law, commercial law, and clan law been revised and compared?" Chen Xi frowned. The issue of ranks was something even he didn’t have a solution for, and given the nature and intensity required, these were meant to be fundamental laws.

"Yes, civil and criminal laws are fine. But the clan law is difficult to enforce, and as for the commercial law, according to Bernin, there are already loopholes. Some are using promissory notes as collateral to complete secondary transactions. Worse yet, others are relying on their reputation, using bank notes to make initial trades and then leveraging the time gap to complete multiple trades without actual capital, effectively making profit out of thin air," Mi Zhu interjected, pointing out that the commercial law had already been exploited by some in his merchant guild.

"As I said, they should all be arrested. Families like the Shen, Han, Deng, and Song clans that exploit these loopholes should be detained!" Man Chong said, his face dark with anger. He had added his own clauses to Mi Zhu’s draft regulations for the merchant guild, only to see them quickly exploited.

"Oh, someone has already learned how to use letters of credit in transactions?" Chen Xi asked, glancing at Mi Zhu.

"Letters of credit?" Mi Zhu was puzzled at first, but quickly realized that such transactions essentially amounted to using one’s reputation as collateral.

If others weren’t aware of your wealth, who would trust you? It was like Mi Zhu writing a note promising future payment and using that note to secure goods without actually exchanging money immediately. As long as the other party wasn’t in a hurry, no one would question it. This practice was, in reality, a testament to the confidence in one's financial standing and reputation.

"Indeed, that's essentially what’s happening. And everyone seems quite used to it. For example, when I recently purchased wool, the payment was 300 million coins. You don’t expect me to cart that much money for payment, do you?" Mi Zhu said, noticing Man Chong's deepening scowl. "Transporting that much cash would be ridiculous."

Hearing this, Man Chong’s face turned even darker, while Chen Xi nearly burst out laughing. Three hundred million coins transported by carts would require a thousand of them, each carrying about three tons.

In truth, the wealthiest merchant families, like the Mi and Zhen families, only held around two billion coins in liquid assets. The rest of their wealth was in land, properties, and servants. In the past, large transactions were usually conducted in batches, or through barter. If actual money was involved, it would indeed be absurd.

"Are your transactions becoming increasingly large? Have some already started running exclusive businesses?" Chen Xi asked, sensing that something significant was brewing.

"Yes, exclusive deals benefit us greatly. In fact, we now rely on promissory notes for any transactions over a million coins. Major merchants, like our top ten firms, essentially run exclusive businesses because we’ve found it’s easier to manage our workforce that way," Mi Zhu explained. "If you were to abolish promissory notes now, the wealthiest families in the empire would never agree to it."

"Do the Wu and Wei families also use your promissory notes?" Chen Xi asked, curious.

"Every major merchant in the Han Empire uses our promissory notes. Who else would they turn to?" Mi Zhu responded as if it were obvious.

Chen Xi was at a loss for words. Mi Zhu had no idea of the implications of what he’d just said. The promissory notes had effectively become a form of currency in circulation, and since Chen Xi had been using the funds deposited in the banks to finance infrastructure in Qingzhou and Xuzhou, the liquid capital of the region had essentially doubled in the shadows.

"Alright then, let’s legalize the use of letters of credit. But make sure to tell them that we won’t guarantee secondary transactions. It’s best to have a formal document drawn up at the bank for every transaction. Zizhong, you need to make sure the banks are tightly regulated to prevent any chaos," Chen Xi said, tugging at the corner of his mouth. Letters of credit could be allowed, and it might even improve the security of transactions.

"I’ll ensure they don’t cause any trouble and will strictly review any documents issued by the banks," Mi Zhu nodded. He assumed Chen Xi was referring to monitoring the issuance of promissory notes.

Currently, the banks operated on somewhat exploitative terms, requiring individuals to provide proof of assets when depositing money. While most merchants didn’t reveal everything, they still declared a third or even half of their wealth.

As for the top five merchant families, they didn’t bother hiding anything. They openly declared fifty to seventy billion coins and deposited about three billion in cash, confidently issuing promissory notes worth ten billion to conduct their business.

To Man Chong, this seemed entirely illegal. What’s worse, these wealthy families didn’t stop at using the ten billion promissory notes once—they used them twice or even more. Depositing only three billion in the bank but trading tens of billions? This had to be illegal, although Man Chong hadn’t yet figured out exactly how.

"No, I’m not asking you to monitor the merchants. They’re playing with their own money. We just need to safeguard our side. I meant ensuring the relationship between the banks and local governments is properly managed. The funds we’re using to develop Qingzhou and Xuzhou come from the banks and are then reimbursed by the Taishan Bank to local branches. We need to avoid any mismanagement along the way," Chen Xi explained, feeling a headache coming on.

"That actually seems like a good system. It’s helped us avoid a lot of issues," Man Chong replied, his frown easing a little. Chen Xi's methods had indeed solved many potential problems with government integrity.

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