Chapter 7: The Crazy Stock Disaster

  In the end, the company couldn't hold on any longer and they also realized that the rise of China's chemical industry was unstoppable. Therefore, they had to grit their teeth and put out a second plan.

  Bowne & Co. would relinquish 80% of the Asian market share, but Hua Dong Group was not allowed to continue expanding into other markets. In the Asian region, if Bowne & Co.'s caustic soda had any price changes, it must be approved by Hua Dong Group.

  This Cartel agreement is still quite reliable, and after signing, it can raise the price of pure alkali to a monopoly height, with profits increasing sharply. 80% of the Asian market (including Australia) can make Huadong Group profit more than 30 million silver coins in one year.

  And after the outbreak of World War I, the remaining 20% market share in Asia will also disappear. Currently, the caustic soda plant is not large, and it will take at least half a year to fully occupy that 80% market share, so this agreement is very cost-effective for Jiangyu.

  Then Jiangyu can use pure alkali to produce higher-grade products, such as dyes and so on, the profit will be higher.

  With the end of the competition with the Abonai company, Jiang Yu's investment in other areas did not stop. When attending the Nanyang Industrial Exposition, Jiang Yu found Chen Guangfu, who would later become China's first banker.

  Chen Guangfu returned to China after graduating from the University of Pennsylvania in the United States and was responsible for handling some work at Nanyang Industrial Exposition. He had already made a name for himself at Nanyang Industrial Exposition, and originally Jiangsu Governor Cheng Dequan wanted to appoint Chen Guangfu as the supervisor of Jiangsu Bank, but Jiang Yu dug a corner.

  It is clear that Chen Guangfu also understood that taking the post of supervisor at Jiangsu Bank would not allow him to realize his own ideas, and if he went to work at the 'Huadong Bank' established by Jiang Jue, he would have the 'full power' promised by Jiang Jue and hold 5% of the shares.

  In the past, Chen Guangfu himself set up a bank and was only a small shareholder. Most of the capital came from others, and with his financial resources, he couldn't have set up a bank on his own. Chen Guangfu didn't have any opinions on the issue of capital.

  Moreover, after a night of conversation with Jiang Yu, he found that Jiang Yu was also extremely familiar with banking management concepts. The ideas he proposed, such as one-yuan account opening, zero deposit and withdrawal, and lump sum deposit and withdrawal, were all in line with Chen Guangfu's thoughts, giving Chen Guangfu the feeling that they had met too late. Furthermore, Jiang Yu possessed a large amount of capital, and cooperating with him would surely enable the bank to be run well.

  Huadong Bank immediately set up branches in Huaiyin and Shanghai. At first, the scale of Huadong Bank was not large, because after negotiation between the two parties, it was decided to focus on talent cultivation rather than blind expansion, otherwise there would be trouble.

  Huadong Bank, although newly established, has a thriving business, especially in Huaiyin. Even ordinary construction workers have their wages directly deposited into bank accounts and can earn relatively high interest rates: 2.8% for demand deposits, 6.8% for three-month deposits, 8% for six-month deposits, 10% for one-year deposits, and up to 13% for three-year deposits.

  Whether they were workers or soldiers, anyone who did business with Chiang Kai-shek had accounts in the Bank of China. People also liked to put their money in banks because first, they didn't believe that the powerful Chiang would go bankrupt and secondly, having an account in a bank earned interest.

  Once such a system is established, foremen and officers will be unable to withhold wages and military pay.

  The pioneering move of opening an account with one yuan also attracted many ordinary people to deposit money in banks. Although these ordinary people did not have much money, the problem was that they were numerous and this market had yet to be tapped.

  If most ordinary people in China have opened accounts at Bank of Communications, then the funds that Bank of Communications can mobilize will be terrifying.

  And these deposit amounts will continue to increase with economic development.

  The establishment of Huadong Bank solved part of Jiang Yu's funding shortage problem, allowing him to have more funds for investment.

  The rubber stock disaster in the first half of 1910 brought a large sum of money to Jiang Yu.

  This rubber investment craze originated from the industrial upgrading in the United States, and since Ford produced the Model T car, rubber naturally became hot.

  The account is very good: the extraction cost of each pound of rubber is 1.6 shillings, but the market price is 12 shillings, with a difference of up to 7.5 times; in the words of later generations' stock trading terminology, that's an industry with explosive profits, with an industry rating of 3A+!

  At the same time, under the hype of international speculation, the London stock market started to rise continuously from 1908, and rubber stocks began to rise.

  In 1907, Jiang Yu began to set up.

  Under the banner of Jiang Yu, there are eight rubber companies listed in London, UK. They have acquired a large number of rubber plantations in Southeast Asia and South America. In China, Jiang Yu has set up many shell rubber companies. Due to the lack of regulation in the Chinese stock market, foreigners can freely manipulate the market without any obstacles. As a result, Jiang Yu successfully listed 26 rubber companies in China, but these 26 companies only have some rubber seedlings.

  Starting from 1909, Jiang Yu's rubber company began to continuously issue new shares and secretly sell stocks, constantly cashing out.

  The capital in Jiang Yu's hands was like a snowball, getting bigger and bigger. The first half of 1910 was the most critical stage. In London, UK, the initial stock price was only ￡15, but by March it had risen to ￡120. In China, the initial stock price was only 130 taels, but by March 2nd it had reached 1080 taels.

  And the rubber market has been close to crazy.

  March 2: 1080 taels

  March 18: 1,300 taels;

  March 21: 1600 taels;

  March 29: 1675 taels...

  At this time, the rubber stocks on the stock market were not only expensive but also unbuyable. At this time, Jiang Yu's rubber company stocks had all been sold out by 50%. From the end of March, Jiang Yu began to increase the speed of selling, and in just two months, he had sold out all his remaining stocks completely.

  The initial ￡2 million invested in the stock market became ￡56 million, making him one of the winners of this rubber stock boom. Of course, Jiang Yu was not the biggest winner; he just got a share from behind the Rothschild and American financial groups.

  If it weren't for the concerted hype from these financial groups, rubber stocks wouldn't have risen so crazily.

  The secret of those financial groups' wealth lies in the stock market.

  They repeatedly created a bubble economy, driving stock prices to crazy highs, then grabbed a large amount of funds, and after withdrawing the funds, they burst the bubble, thus accumulating wealth. After the bubble burst, the stock price of their industry became very cheap again, and they bought in heavily at this time.

  Kiangyu withdrew from the stock market half a month ago, and international financial groups also completed their capital withdrawal. Immediately afterwards, the US government announced its contraction policy in June 1910, and the rubber bubble was ruthlessly burst.

  The London stock market plummeted first and then affected the Chinese stock market.

  Doomsday seemed to have descended on investors in an instant, their stocks becoming worthless scraps of paper overnight. However, before this crash, Chinese financiers had received advance notice and immediately tightened up funds. By the time foreign banks got wind of it, China's big financiers had already begun to withdraw.

  This news was naturally spread by Jiang Yu, and in order to preserve the national spirit, Jiang Yu notified those money houses one by one.

  Foreign banks are not all in touch with the high-level decision-making of international financial groups, nor do they know when there will be a big drop, but only receive news before a big drop.

  But this time the news of Chinese people came earlier than them, as a result, a large number of rubber stocks invested by foreign banks in the Chinese stock market were trapped.

  Although many small investors were trapped in the Chinese stock market, those big investors still saved some energy. Coupled with foreign-funded banks being trapped, as a result, among the 60 million taels of silver invested in the stock market, it was not the foreigners who were trapped, but rather China was trapped for nearly 6 million yuan.

  However, among this money, a lot was swindled by Jiang Yu, totaling over 30 million taels of silver.

  Moreover, Jiang Yu made more money in the London and US stock markets, totaling around 530 million pounds. This means that although this stock disaster caused heavy losses for Chinese investors, the wealth was concentrated in Jiang Yu's hands, and he also made an additional 530 million pounds from abroad, greatly increasing the nation's vitality.

  But for those investors, the losses were obviously too heavy. For example, a "player" called Chuanhan Railway Company lost 3.5 million taels of silver in the stock market crash, laying the groundwork for the outbreak of the railway protection movement. At the same time, wealth was concentrated in the hands of Jiang and Yu, and although the national vitality increased greatly, the vitality of the Manchu people was severely damaged in this financial disaster.

  Because the Qing government couldn't see clearly the situation, they took out silver to rescue the market, resulting in certain losses. What's more terrifying is that some money shops had received the news ahead of time but couldn't completely withdraw their funds, resulting in a large-scale financial crisis spreading throughout China.

  July 21, Zhengyuan and Qianyu Money House went bankrupt; July 22, Zhaokang and Senyuan Money House went bankrupt; July 23, Yuanfeng went bankrupt; July 24, Huida, Xiefeng and Jinda went bankrupt.

  On October 7, foreign banks suddenly announced that they would no longer accept the notes of 21 Shanghai qianzhuang. Yuan Fengrun was unable to recover and on October 8 declared bankruptcy, with debts totaling over 20 million taels. Its 17 branches in Beijing, Guangzhou and other places also closed down at the same time. The collapse of Yuan Fengrun led to a large number of Shanghai qianzhuang going bankrupt, and the financial crisis began to spread across the country.

  The chain reaction of the bankruptcy of Yuan Fung Yuen spread across the country, from north to south, and from east to west, causing panic in all major commercial cities. This led to an economic crisis nationwide, with far-reaching impacts that went beyond the rubber stock market, actually draining the last bit of vitality from the Qing government's finances.

  In this stock disaster, only Jiang Yu, who had been reckless, made a huge profit, and in the end, his 2 million pounds turned into 560 million liang of silver.

  Such a huge sum of money is mostly abroad, with 300 million yuan in profit in China.

  The stock market's ability to extort money also gave Jiang Yu a full view. It is likely that international financial groups have absorbed many times more funds in various countries around the world, with the Rothschild family being the dominant force, which was once said to have owned $6 trillion in wealth. At this time, they are the masters of global finance and control the American financial sector through their support for the Morgan financial group, and gradually control a large number of American industries through their support for the Rockefeller financial group.

  After the stock market crash, Jiang Yu did not immediately use this large sum of money, but instead transferred it to Deutsche Bank and Dresdner Bank in Germany.

  Take out a portion of the money and buy high-quality rubber stocks again. With the development of the automotive industry, it is no doubt that rubber can make money.

  Moreover, rubber planting requires a relatively long time to put into production, and it is easier to monopolize.

  Of course, international financial groups are also acquiring rubber stocks. Jiang Yu's goal is not to monopolize, but to buy enough rubber plantations to support the demand of China's auto industry in the future. Rubber is an important strategic material, and it would be too costly to purchase from international financial groups' rubber plantations at that time.