The Yunnan Tea Monopoly
“You want exclusive rights to Yunnan tea?”
The Provincial Commissioner’s eyes went round, then he tilted his head.
“Why are you telling me that? You ought to be speaking to the Provincial Commissioner of Yunnan. Or are you asking me to pass the word along?”
“Would you hear the full proposal first?”
“Spit it out, then. You’ve already got me curious. If you’re the one bringing it up, I expect it’s another scheme that will make a handsome pile of money.”
Sharp as ever!
Hwiyeom grinned.
“We still haven’t reestablished contact with Yunnan or Guizhou, have we?”
“No. They’ll still be in chaos over there.”
“Yunnan especially will be a nightmare. If the locust swarms that reached Sichuan after crossing Yunnan were that dense, the ones that hit Yunnan itself weren’t a black cloud—they were a full solar eclipse.”
It was exaggeration, but to men who had lived through the terror of the locusts only days earlier, it did not sound like exaggeration at all.
“Yunnan will have nothing left to eat come autumn. Not unless they foresaw the locusts the way we did and stockpiled grain from last year. From everything I’ve learned, they did nothing of the sort.”
Last year Yunnan Province had sold most of its harvest inland. That much was confirmed.
Hwiyeom continued.
“So the Provincial Commissioner of Yunnan, who cannot simply let his people starve, will immediately petition the court for relief grain and beg aid from every neighboring province.”
“Of course. The first request will land right here in Sichuan, the closest province. Though they have no idea we’re sitting this pretty.”
“If we simply hand over relief grain for free, we gain nothing. The rice leaves the Sichuan granaries, yet no one thanks us. Yunnan’s common folk will praise His Majesty’s benevolence and the Yunnan Commissioner’s merit—not Sichuan’s labor.”
“Mmm…”
The Provincial Commissioner’s brow furrowed as the scene painted itself all too clearly. Hwiyeom pressed on.
“So what if we do this instead? Your Excellency distributes your rice as relief to the people of Sichuan first. Leave only the bare minimum for Yunnan and Guizhou, and sell everything else to the Dang Family.”
“And then?”
“You send Yunnan just enough grain to save face and keep the Emperor from finding fault. We buy the rest. Then we take that rice and grain and open trade with Yunnan. Relief we would have given anyway becomes the opening wedge for commerce.”
“And that commerce is the tea trade.”
Understanding dawned on the Commissioner’s face.
“Yunnan has always been famous, alongside Fujian, for its premium teas. Especially Yunnan’s Pu’er, Biluochun, and Tieguanyin—stronger in aroma and finer in taste than anything grown in the Central Plains, and priced accordingly. But the volume any single merchant house may handle has always been strictly limited.”
“Exactly so they can play the houses against each other and maximize profit.”
Yunnan had never granted a monopoly to any one trading firm.
“But with famine breathing down their necks, we dangle grain as bait and propose exclusive rights.”
The Commissioner tilted his head again.
“Will that even work? They don’t have to buy from Sichuan. Wait a little and merchant caravans from every corner of the empire will arrive loaded with grain, desperate to trade it for Yunnan tea.”
“Impossible.”
“Why?”
“Margins.”
“…Ah!”
The Provincial Commissioner grasped it at once. The Regional Military Commander, looking left out, demanded,
“Would someone please enlighten me as well, Your Excellency? What are you talking about?”
“Suppose a merchant loads rice in Anhui, one of the great grain provinces of the Jiangnan. If an entire army unit tried to haul that rice all the way to Yunnan, what would happen?
“You can’t sail upstream against the Yangtze, so river transport is out. They would have to come overland. Dragging heavy carts of rice across the wilds to a place as remote as Yunnan would take half a year at the very least. How much of that rice do you think the troops themselves would eat along the way?”
“Ah… I see.”
As a soldier, the Military Commander understood the moment the problem was framed in terms of army supply trains.
“And it isn’t only the grain the men consume. A caravan hires its labor, so wages pile up. Add spoilage from insects and weather, and the losses grow still larger.”
“Whereas we sit right next door to Yunnan. Compared with the granary provinces of the Central Plains, we’re practically close enough to trip over. No Central Plains house could ever undercut our prices even if they rose from the dead.”
Hwiyeom flashed a mischievous smile.
“Refusing monopolies and stoking competition to keep tea prices high is clever business, sure. But when people are about to starve to death, are they really going to refuse cheap Sichuan rice just so they can sell tea at a premium? When will that inland rice even arrive? At what ruinous cost?”
“Exactly!”
The Provincial Commissioner slapped his thigh in delight. Hwiyeom’s grin widened.
“What good is expensive tea when you’ll only end up buying expensive rice? The merchants of Yunnan—and the Provincial Commissioner himself—will smash a few trading-house heads if they have to, just to lock in cheap Sichuan rice in exchange for monopoly rights. Once memorials start arriving that people are dying of starvation, that looks very bad on a Commissioner’s personnel file, doesn’t it?”
Even though the problem was not his, the Provincial Commissioner felt a chill run down his spine at Hwiyeom’s oily smile.
“You terrifying little bastard. You ruthless little bastard!”
“From a member of the Dang Family, that’s the highest praise. Thank you.”
Hwiyeom’s shameless cheek drew a weary laugh from the Commissioner.
“Now I understand why you brought up exclusive rights. If the Dang Family alone can handle every leaf of Yunnan tea that enters Sichuan, you’ll hold absolute leverage over every merchant who deals in tea.”
In short: the Dang Family intended to expand into a sector that had never been theirs—not by building a new market from scratch, but by seizing the wholesale source itself, the springhead, and thereby holding the throat of every retail stream that flowed from it.
Hwiyeom smiled.
“If you will recognize the exclusive privilege of selling ‘Yunnan tea’ inside Sichuan Province as belonging solely to Hwieon Trading Company, then I will consider myself more than adequately repaid—no need for monuments of gratitude or plaques of righteousness.”
The Provincial Commissioner fell silent for a moment, then looked to the Regional Military Commander. The Commander merely shrugged.
“Outside my jurisdiction. Do as you see fit, Your Excellency.”
“…Very well. Proceed on those lines.”
“Thank you.”
“When do you leave for Yunnan?”
“Preparations are already under way, but there’s no need to rush. They’re the ones who will be desperate.”
“Fair enough.”
The Provincial Commissioner steered the conversation elsewhere and brought the meeting to a natural close.
After the Military Commander departed, the Provincial Commissioner received Hwiyeom in private and asked again,
“So. You’re going to cut me in, yes?”
“Of course, Great-Uncle. What do you take me for?”
“Ahem. How much?”
“I will pay the taxes in tea—physical tea.”
The Commissioner’s eyes rounded as if he had just heard pure nonsense. Inwardly Hwiyeom clicked his tongue.
Of course. Twenty-first-century concepts like tax optimization and creative accounting haven’t been invented yet.
He began explaining carefully.
“Tea is a luxury good. It carries heavy taxes—special levies plus progressive rates.”
“True.”
“And it is expensive.”
“True.”
“So what happens when we pay our taxes with tea brought in from Yunnan? Rice and bolts of cotton have long been accepted as tax goods; their values are more or less fixed. But a high-value luxury like tea has no clear official price, does it?”
“Wait…”
The Commissioner’s eyes narrowed.
“You’re telling me to set the tea price myself.”
Hwiyeom laughed.
“As expected of Great-Uncle.”
“Price is originally settled by negotiation between buyer and seller. Goods that have not yet reached the market have no market price. Therefore the right to fix that price rests with you and me. That is what you’re saying.”
Tea prices fluctuated every year. Yield and demand sent them leaping about like a commodity hypersensitive to market mood. Among high officials it was an indispensable gift, so the swings could rival twenty-first-century crypto at their worst.
Of course, for the Commissioner to set the price at will, that year’s Yunnan tea could not yet have reached the open market.
“Which means no other Yunnan tea can appear on the market first. Otherwise taxes would have to be assessed at the market rate. But if I bring the tea straight to the yamen and pay it as tax before a single leaf is sold…”
“Then from the tea you submit, I take a portion at the price I myself have assigned and record it as tax paid. The remainder I ought to return… yet if you simply keep your mouth shut, that remainder becomes my private slush fund—your gift to me.”
“And that gift is how we keep our relationship strong.”
Trust, in Hwiyeom’s philosophy, existed only so long as both sides could profit from each other.
The Provincial Commissioner could not close his mouth; admiration kept spilling out as he spoke.
Suppose, for example, Hwiyeom owed one hundred guan of heavenly silver in tax and offered one thousand catties of Pu’er in lieu of coin. The Commissioner need only “decide” that one hundred catties of that Pu’er were worth one hundred guan, enter it in the books as tax received, and quietly pocket nine hundred catties. If he recorded the price lower—say fifty guan—he would have to take two hundred catties as tax and could pocket only eight hundred. The entire trick worked solely because the tax was paid in kind with a luxury good and because the taxpayer himself consented to the valuation.
“The higher I set the tea price, the less tea I collect as tax, and the more I keep for my private coffers. And the price I assign for tax purposes automatically becomes the floor price for the entire market.”
Hwiyeom grinned.
“You spotted that as well. Selling tea cheaper than the tax valuation leaves no margin at all. We would have to sell higher—no choice.”
“In other words, the greedier I am for my slush fund, the higher the Dang Family can sell its tea… Exquisite. Truly exquisite!”
Hwiyeom gave an innocent smile.
“Of course, if you set a ridiculous price the tea becomes unsellable and the Censors start asking awkward questions. Best to compare prices from other famous tea regions like Fujian and pick a reasonable figure. I estimate Your Excellency can consistently take two to three tenths of the profit.”
“Splendid!”
“It is nothing.”
Hwiyeom bowed modestly, but privately he was already calculating the angle the Commissioner had missed.
Paying a portion of the goods as tax before any revenue is booked also shrinks the total taxable base. He hasn’t noticed that part yet.
Once the Dang Family prepaid every tax it owed in the form of raw Yunnan tea, the volume of tea left to sell would drop. Lower volume meant lower recorded revenue, which meant lower tax—pure tax savings.
Anyone who thought, “If revenue falls, the money you make from selling tea falls too, so what’s the point of cutting taxes?” had only to ask why twenty-first-century corporations always booked expenses before calculating tax on revenue. Expenses carried no tax; booking them first reduced taxable revenue and therefore the tax bill. With an item like Yunnan tea—already burdened by special levies and progressive rates—the effect was even larger.
Rough calculation put the difference at roughly half the total tax burden vanishing into thin air.
Ignorant of these inner thoughts, the Provincial Commissioner was still chuckling with glee when sudden suspicion narrowed his eyes.
“You’re not going to run straight to the Surveillance Commissioner with a memorial, are you?”
“I’m not a mayfly. I have to walk the long road with Great-Uncle to the very end. Why would I do something that stupid?”
“And yet this same fellow builds a Legal Affairs Division? Hmm?”
In truth Hwiyeom had already become someone the Provincial Commissioner could no longer easily oppose—so long as Master Bang Un stood behind him. The Commissioner therefore voiced his unease as a barbed joke, and Hwiyeom parried it like a ghost.
“That Legal Affairs Division is exactly how I learned this little trick, isn’t it? I’ll keep dancing attendance without a whisper of betrayal, so please keep looking kindly on me. Heh heh heh!”
Hwiyeom rubbed his hands together in a shameless little pantomime. The Provincial Commissioner finally burst out laughing.
“You impossible boy. I simply cannot get the better of you.”
He threw up both hands in surrender, still smiling.
“Very well. From this day forward, no shop in Sichuan except the Dang Family and Hwieon Trading may deal in Yunnan tea.”
Hwiyeom clasped his fists and bowed with a grin.
“Thank you!”
Having closed the negotiation in complete triumph, Hwiyeom returned at once to the Dang Family and reported the result to the Family Head’s Hall and the Elders’ Council.
The Family Head’s Hall, not fully grasping the magnitude of the coup, looked somewhat bewildered. The Elders’ Council, however, erupted into open festival.
Jin Cheong looked ready to drag Hwiyeom into a full embrace and plant a kiss on him.
“Young Family Head! You are my light, my path, and my very life!”
Ma Jeonggu eyed the slightly alarming Jin Cheong, then nudged Bak Chang-eon in the ribs.
“What’s gotten into him? Looks like he’s lost a few marbles.”
“The Agricultural Cooperative took heavy losses this time, and the tax bill was brutal. Their books were a disaster. Now the entire tax burden is being paid in a lump sum at the Hwieon Trading level. He must feel as if he’s met the Medicine Buddha in the middle of hell.”
“Oh—so our ironworks won’t have to pay tax either?”
“Looks that way. What a man.”
The elders laughed and shook their heads. The entire atmosphere was warm and festive; the day’s council seemed ready to adjourn on that note.
“Ah, and speaking of which—”
Without warning Hwiyeom dropped the bomb.
“I’ll be heading to Yunnan for about half a year. I was thinking of leaving someone as acting head of operations… Elder Bak, I’m counting on you?”
Bak Chang-eon—who, ever since becoming Hwiyeom’s right hand and seizing real authority, had been famous for never losing his composure or dignity no matter how buried he was in work—watched his face crumple like a piece of waste paper.
“You’re going where?”