Chapter 147: Dividing Territory and Quotas (Part 1)

On October 10, 1911, Premier Yan Fu and a special British representative signed the 1912 approved version of the *China Trade Framework Agreement* in Beijing. This news shook the entire Far East and even rippled through Europe and the United States. The reason it was called a “Framework” agreement was that anything could be stuffed into it. The British went as far as stationing a permanent special representative in Beijing. Tellingly, a deputy representative was stationed permanently in Wuhan.

In this agreement, what pleased the Beiyang side most was that 10% of the customs revenue would be directly allocated to the Ministry of Finance's account, available for withdrawal at any time. Historically, during the late Qing and early Republic, customs duties were controlled by the British; this steady stream of actual cash was the government's lifeline and the most potent weapon for British control over China's government. Having the power to freely use 10% of it finally gave Beiyang some liquid funds to work with.

The framework agreement established the import-export philosophy of “Trade Balance” for China. That is to say, the British, Beiyang, and the People's Party—banks from all three parties supported the concept of trade balance. China's import and export volumes had to be balanced; whatever amount was imported had to be matched by exports. The British were, of course, extremely pleased, while other countries were extremely unhappy. Britain had goods China needed, and China had goods Britain needed. Since British banks provided the financial services, it essentially meant Britain had other countries by the throat.

The Ministry of Foreign Affairs of the Beiyang government immediately became a hub of activity, with ministers from various countries scrambling to meet with the Foreign Minister. At this time, Foreign Minister Tang Shaoyi had already departed for Germany, so the foreign ministers turned their attention to requesting meetings with Premier Yan Fu.

However, by October 12, Premier Yan Fu released new information. Import and export commodity trade fairs would be held annually on a rotating basis in Tianjin, Lianyungang, Wuhu, and Wuhan. Any orders finalized at these four trade fairs would receive priority customs clearance.

The foreign ministers understood the significance of this policy perfectly: it was a trade control model. Yan Fu stated very clearly in the announcement that the trade balance policy was ultimately about the balance of import and export values. What Yan Fu didn't explicitly say, but what every minister understood, was that the new trade system would only support orders confirmed at these four trade fairs. Anything else was destined to face all manner of obstruction.

Shanghai had always been the trade center of China and even the Far East. But because Shanghai was currently neither under the control of the People's Party nor directly managed by Beiyang, the new trade agreement excluded Shanghai entirely. To receive official support, one had to take the initiative to join the trade framework agreement.

Yan Fu finally learned what it meant to be overburdened with daily tasks. Aside from complex civil affairs, the trade issue alone triggered countless incidents. The Beiyang Cabinet was called a cabinet, but in reality, it was more like a venue for competing interests. Not only were the Ministry of Industry, Commerce, and Civil Affairs fighting for a share, but the Ministry of Civil Affairs, the Ministry of Justice, and even the Ministry of War and the Ministry of the Navy attempted to stick their hands in. Navy Minister Sa Zhenbing directly requested to go south to Guangzhou to establish a new import-export trade fair there.

With "Provincial Autonomy," whether or not Guangdong was willing to participate was Guangdong's own problem. Since when was it the Navy Ministry's place to use military force to unite local Guangdong figures to participate in such activities?

Sa Zhenbing and Yan Fu were old comrades-in-arms. When one plan failed, he came up with another. Fujian Province soon commissioned Sa Zhenbing to apply to the Cabinet to open a brand-new trade fair in Fuzhou. Yan Fu wasn't sure if Sa Zhenbing was playing a game of "retreating to advance." On November 3, three days after Sa Zhenbing proposed his new suggestion, Fujian's parliamentary representatives came to Beijing in person under the name of “Yan Fu’s fellow townsmen.” They requested a meeting with “Premier Yan Fu” at the Cabinet gates, hoping to lobby him to bring prosperity to his hometown folks in Fujian.

This was the power of authority; a single word from Yan Fu could decide the fate of many. However, for three consecutive days, the Fujian representatives failed to see him. Yan Fu was tied up by the Russian and German ministers.

It wasn't that the Japanese minister didn't want to participate, but they knew they had deeply offended both Beiyang and the People's Party. The Japanese side found it somewhat incomprehensible how Beiyang and the People's Party could finally reach a compromise. As members of the Chinese cultural sphere, they felt that given the current situation of a weak sovereign and strong subjects, a struggle for supreme leadership was inevitable. Theoretically, even if Yuan Shikai didn't want war, the People's Party certainly would.

The reality was that Yuan Keding had vanished, and his retainers had likewise disappeared without a trace. The Beiyang side was conducting a massive dragnet for Chinese people who had collaborated with Japan. After these people were arrested, they too vanished. The operations were handled with such fierce intensity, yet there was no news in terms of intelligence. When the Japanese minister requested a meeting, Yan Fu met him with a cold face. In their dialogue, Yan Fu’s cold and precise “Everything will be handled according to the framework agreement” dismissed the Japanese minister.

The Japanese minister then turned to request a meeting with Yuan Shikai, but Yuan Shikai wouldn't see him at all. The attendants' words were: “This matter is the responsibility of the Cabinet.” Now the Japanese side was finally anxious. Yuan Shikai wasn't particularly short of money now, and the People's Party's industrial products—such as soda ash, industrial acids, hardware, and various dyes—had already begun to enter the Japanese market on a large scale. What Japan could sell to China was nothing more than coal, paper, and similar goods. Once this “Trade Balance” was implemented, the British provided no economic support for Japan's claims, which put Japan in a very difficult position.

Precisely because they knew what they had done and had lost British support, no matter how thick-skinned the Japanese minister was, he couldn't fully mobilize his influence.

The American minister didn't involve himself in this matter. Their biggest trading partner wasn't Beiyang, but the People's Party. Cooperation with the People's Party in synthetic ammonia had brought huge profits to American syndicates. The People's Party had begun importing large amounts of American machinery and equipment. Oil from the West Coast also began to be sold in large quantities to the base areas. Similarly, the People's Party's raw silk and other products were sold in large quantities to the United States. The People's Party now held significant decision-making power over import and export trade quotas.

The American minister simply went to meet Chen Ke. As it turned out, the results were quite satisfactory for him. Besides guaranteeing that current imports and exports would remain unaffected, the People's Party proposed the issue of importing coconuts from the Philippines.

The Philippines is commonly known as the "Land of a Thousand Islands," with numerous uninhabited islands of all sizes covered in coconut trees. When American industrial products crossed the Pacific to China, besides machinery and bulk commodities which remained profitable, many goods simply had no market in China. Conversely, it was cheaper to ship Chinese goods directly to the Philippines.

“We want to try our hand at the coconut trade. As long as the transport is timely, they can be shipped to China in just two or three days,” suggested Wang Bin, the negotiating representative who was considered “pro-American” by the US side, quite seriously.

“Can they be shipped to China in two or three days?” The American minister was not very familiar with the situation in the Philippines.

“There are as many of them as you want in the Philippines. There’s no need to ship them to Wuhan; they can be shipped directly to Guangdong.”

“What do you want coconuts for?” The US Minister to China didn't want the credit to be snatched away by the American Governor-General of the Philippines.

“To eat,” Wang Bin gave a concise and comprehensive reply.

Faced with such a straightforward attitude, the US Minister to China yielded on the matter. “Fine, I will look into it. Mr. Wang, are you satisfied with using the services of British banks?”

Having dealt with the People's Party frequently, the Americans quite liked their frank communication style. Wang Bin spoke of money and prices at every turn, which perfectly suited the American minister’s appetite. American diplomats had a characteristic: they were all sent out by prominent families. Diplomats, after all, came firstly to build their resumes and secondly to make money. The People's Party talked business at length; the price for positions at the US Minister to China—especially the consulates in Wuhan and Wuhu, which handled contact with the People's Party base areas—had already reached quite high levels. A third-class counselor position capable of talking business with the People's Party sold for twenty thousand dollars. As for a first-class counselor at a consulate, the asking price started at fifty thousand dollars, with no discount.

“What do you mean?” Wang Bin asked.

“I have read the full text of the *China Trade Framework Agreement*. It doesn't stipulate that British bank services must be used. Our American banks are also very reputable. Our country believes that trade between the US and your Party does not need to be under this total quota.”

Wang Bin thought to himself, *“Here it comes.”* His face remained expressionless as he continued to listen quietly.

The United States had once advocated for an “Open Door” policy in the Chinese market. When it was their turn to make a fortune in the Chinese market, the Americans immediately threw the “Open Door” principle to the winds. They held firmly to the People's Party market they had already occupied, unwilling to let other countries have a piece.

After articulating his position quite frankly, the American representative waited for Wang Bin’s answer.

“I think this can be discussed further. After all, commodities still need competition; only with competition is there progress,” Wang Bin said slowly, stating his viewpoint. The People's Party didn't want to be held by the throat. In the implementation of quota trade agreements, many things would surely become political struggles. It was somewhat better within the People's Party, but if foreigners used their monopoly advantage to squeeze prices, it would be a huge loss. Especially given that the base areas' own heavy industry was currently very backward, what the People's Party precisely needed was competition among foreign goods.

The American minister naturally wouldn't give up. Behind him was his financial backer, the Bank of Boston. In this trade, the Bank of Boston not only hoped to handle the People's Party's financial business in the US but even more so hoped to liberate US-base area trade from British control.

Regarding the Minister’s diligent lobbying, Wang Bin was a bit overwhelmed. He changed the subject: “Mr. Minister, have you considered the coconut trade?”

The Minister was not familiar with the Philippines at all. Seeing Wang Bin raise the topic again, he could only reply politely: “This issue isn't that important, is it?”

Wang Bin said slowly: “Suppose one coconut sells for one cent. If we buy a hundred million coconuts, that's one million dollars. If we buy a billion coconuts, that's ten million dollars...”

How much was ten million dollars in 1911? It was roughly equivalent to five billion dollars in 2011. Historically, the DuPont Company made a fortune during World War I and was cursed by Americans as heartless war profiteers. They made a hundred million dollars throughout the entire war.

Of course, the American minister didn't know about DuPont making a war fortune a few years later. He remained silent, his brain working rapidly. Trade with the People's Party was different from private trade; the contracts were large in scale and long in duration. If a trade volume of one billion coconuts per year could really be reached, that would be a steady ten million dollars in turnover every year. Even after deducting all expenses, a net profit of five million dollars was hopeful. If the Minister himself could act as the contact person and take a 10% commission, that would be five hundred thousand dollars a year. In three years, it would be 1.5 million.

“Mr. Wang, do you think this trade can really reach that amount? A billion a year?” The Bank of Boston matter was a big deal, long-term, with great interests. Naturally, the negotiations would be exceptionally difficult. Conversely, the immediate interest before the Minister's eyes seemed quite "short, smooth, and fast." The Minister pushed the Bank of Boston matter aside and began negotiating for the more realistic immediate interests.