Chapter Fifty-Two: The Royal Bank of Great Ming (II)

The ministers who opposed the court’s establishment of a bank and mint spread rumors everywhere, claiming that the court’s issuance of silver coins was merely a ploy to exchange them for the populace’s pure silver. Since the new coins contained only eighty percent silver, they called upon everyone to resist the new currency. When the court paid salaries, they urged officials to immediately exchange the coins for pure silver, arguing that a loss of a mere one percent was preferable to losing twenty percent. Zuo Guangdou went so far as to openly mock, “His Majesty’s methods of hoarding wealth are, indeed, more cunning than his predecessors’.”

Many people believed these rumors and prepared to exchange their coins for silver. Wei Zhongxian reported the situation, as investigated by the Eastern Depot. After listening, Zhu Youjiao replied indifferently, “Let them be. The day will come when they regret it.”

The bank opened for two days without a single visitor at its doors, as the new coins had yet to be released. On the tenth day, when salaries were paid, crowds surged into the bank, eager to exchange their silver and copper coins for pure silver. The bank first dispatched a squad of embroidered-uniform guards who organized the lines with batons—those who refused to queue were swiftly struck and thrown out. Piles of government-standard silver filled the counters, and anyone could exchange their coins for it by paying a small fee.

By the end of the tenth day, nearly ninety percent of the silver coins issued as salaries to officials had been reclaimed. On the twelfth, the emperor decreed that henceforth, taxes and military stipends in Northern Zhili could be paid in silver or copper coins. The capital’s bank branch would establish a sub-branch in every county of Northern Zhili, specializing in currency exchange. The exchange fee was reduced to one-thousandth, while exchanging silver for coins remained free.

Officials who had already exchanged their coins for silver found themselves regretting it too late. Though their salaries were not large, losing even one percent stung painfully.

After this episode, the new currency quickly gained widespread use in the capital. Since it could be used for tax payment, no one saw any issue—especially given its elegant design and the relief from worrying about being cheated on its silver content, as was common with old silver. Only a fool would refuse to use the new coins. As for the alleged eighty-percent-silver concern, no one cared; the ability to pay taxes was the greatest guarantee. Zuo Guangdou had already reported himself ill, too ashamed to face anyone.

On November 8th, the Nanjing branch of the Imperial Bank of Great Ming was established, along with sub-branches in every county of Southern Zhili. At the same time, the emperor decreed that taxes in Southern Zhili could also be paid with the new currency, and all official and military salaries would be paid exclusively in new coins. All tax revenues from both Northern and Southern Zhili were to be deposited in the Imperial Bank of Great Ming. The exchange fee was dropped to one-ten-thousandth, and if more than ten taels of silver were exchanged for coins, a fee would also apply.

These changes in fees were Zhu Youjiao’s own design. He believed that letting people suffer a small loss would make the lesson memorable, and then the fee could be gradually reduced. As for why not abolish the fee altogether, or why to charge for exchanging silver for coins, Zhu Youjiao explained to Li Zhizao, “I’m afraid people will have too much idle time and spend their days endlessly exchanging money, leaving you with no time for other work.”

Additionally, the bank introduced two new services: deposits and loans. Deposits could be made starting from one tael, with no limit on the amount and no fees charged. Each deposit or withdrawal required at least a month’s interval. If someone deposited more than ten taels of silver and wished to exchange it for coins, the fee would be waived after three months.

As for loans, the regulations were extremely strict: collateral and guarantors were required, and interest could be calculated monthly or every ten days—one percent for ten days, three percent for a month, with annual settlement and no compound interest within the year. After one year, the previous year’s interest would be treated as principal.

The first service attracted almost no customers, but the second nearly burst the bank’s doors. With annual interest rates of just thirty-six to thirty-nine percent and no compound interest, these loans were essentially charitable compared to those from private moneylenders. Thus, many merchants and families in urgent need flocked to borrow. However, Zhu Youjiao instructed Li Zhizao that safety was paramount; collateral assessment must be rigorous. The experienced clerks from the Ministry of Revenue played a crucial role, working tirelessly but growing more cheerful by the day, since the bank awarded them a bonus for each safe loan repaid. They dared not accept customers’ bribes, for the rules were clear: if a loan defaulted and the collateral proved overvalued, they would personally have to make up the loss.

One morning, as the bank bustled with activity, an eight-bearer sedan chair followed by a carriage slowly arrived at the main entrance of the Imperial Bank of Great Ming on Chessboard Street. The carriage’s deep ruts drew curious glances and whispered speculation.

“Isn’t that the Grand Preceptor Zhang’s carriage?” someone remarked.

The sedan halted before the bank, and a retainer announced loudly to the doorman, “Grand Preceptor Zhang is here to deposit silver. The manager is requested to receive him in person.” At this, the crowd erupted in an even fiercer commotion.

The man within the sedan stepped out, and someone in the crowd exclaimed, “It really is Grand Preceptor Zhang!”

Another immediately retorted, “You say that as if you actually know him.”

The first man protested loudly, “My uncle once worked with Grand Preceptor Zhang. At my nephew’s recent banquet, I saw him myself. Why wouldn’t I recognize him?”

At that moment, Li Zhizao hurried out to greet Zhang Guoji, “I did not realize your excellency was coming in person. I beg your pardon for failing to welcome you sooner.”

Zhang Guoji grasped Li Zhizao’s hand, preventing him from bowing. “Manager, you are too kind. His Majesty recently rewarded my family with some silver, but it is of little use sitting at home. I heard the bank can safeguard silver for us at no charge, so I have come to trouble you.”

Li Zhizao thanked him repeatedly and invited the Grand Preceptor inside. The retainers then unloaded box after box of silver from the carriage, aided by the bank’s staff, and carried them inside.

After this event, the bank’s deposits surged. Many reasoned that if even the Grand Preceptor entrusted his silver to the bank, there was nothing to fear, so they brought out silver hidden at home and deposited it as well. When Zhu Youjiao received the report, he lavishly praised Empress Zhang Yan, “The Empress’s idea is truly brilliant! Come, let me kiss you for this great achievement.”

Zhang Yan spat playfully at him, “You’re being improper again. But why do we want people to deposit silver in the bank? In the end, it doesn’t become the bank’s money. What difference does it make whether they deposit or not?”

Thwarted, Zhu Youjiao feigned displeasure, remaining silent. Zhang Yan, accustomed to his antics, smiled sweetly, stepped forward, kissed him lightly on the cheek, and then quickly slipped away before he could embrace her.

Laughing, Zhu Youjiao said, “Silver is only useful when it’s in motion. Piled in a cellar, it’s no different from dirt, but in the bank, even if it doesn’t technically become the bank’s money, it’s as good as being so. I truly am short of funds these days—just the sight of money makes me want to kiss it twice.” In truth, he didn’t fully grasp the deeper principles, but knowing that banks in later ages thrived by paying interest on deposits, he was determined to do the same.