Chapter 333: A Tripartite Alliance
Growing japonica rice in the Great Lakes region wasn't just about the cooler temperatures compared to East Africa's coastal plains. It also aimed to boost competitiveness in the global market. Consumers in the Far East, Japan, Korea, and parts of Southeast Asia expect a very different kind of rice from that preferred in the Middle East and India.
Meanwhile, global grain markets are getting ever more competitive. With East Africa's grain production added to that of the U.S., Australia, Canada, and Russia, supply is outpacing demand. Indeed, the world's total grain production is already in surplus, even earlier than in real history. Rapid industrialization is inflating the global economy to an extreme, with everyone blindly investing, believing all ventures profitable. When that bubble inevitably bursts—likely within a year or two—a major economic crisis will occur.
To mitigate risks, Ernst's next priorities include optimizing East Africa's industries, further developing its internal markets, disposing of Europe's bad assets, and fortifying East Africa's economic barriers. East Africa has largely been insulated from global markets, being a personal state owned by a consortium. All foreign trade goes through the Hechingen Consortium as a "connector," so East Africa is not directly tied to the global market.
Hence, a global economic crisis will have minimal direct effect on a purely agricultural nation like East Africa, possibly even some benefits. Historically, we can see how the Far East often became a hotspot for industrial investment during global crises. Though it might help East Africa, a global crisis might cut into profits for the Hechingen Consortium, whose major assets lie in Germany and Austria-Hungary.
With East Africa's disruption of this world, Ernst can't be certain exactly when the financial collapse might erupt. History points to early 1873, with warnings arising in late 1872—mainly from America's failing railroad sector—though ironically, the crisis first erupted in Austria-Hungary, centered in the U.S.
…
July 1871.
Because East Africa is developing Nairobi, it's recruiting some workers from the Far East. Meanwhile, after two major wars in Europe ended, orders for manufactured goods dropped, leaving part of the spinning capacity in Jiaozhou idle, forcing them to cut back. These cuts primarily affect the Hechingen Consortium's Far Eastern textile operations. With fewer laborers in Jiaozhou, the consortium decided to sell off some surplus machinery.
At Jiaozhou Textile Mill…
Sales rep Levins greeted a visitor: "Mr. Qiao, look at these machines—they've been in use for less than two years. They could serve as good as new. Even after ten years, they won't be obsolete. A Japanese company has already shown interest, but we'd rather keep most of these machines in the Far East if possible."
In truth, the Hechingen Consortium has no intention of selling to Japan. When these units were purchased, they ranked among the world's most advanced. Even now, they're top-tier. The Japanese textile industry is on the rise, but Ernst doesn't want to see Japan upgrade its machinery. Let them stay a sweatshop for now.
At present, Western countries generally ban advanced machinery exports to "the East." Often, they only send older, near-obsolete equipment. The machines in Jiaozhou came from Britain, purchased in the name of Prussia (Germany) by the Hechingen Consortium. Britain hadn't expected that they would be shipped to build a factory in the Far East.
Qiao Zhiyong responded, "Mr. Levins, though your machines look new, they're still secondhand, and your price is too high!"
Levins shook his head. "Mr. Qiao, let me clarify something: Even in Europe, these machines are cutting-edge. Their efficiency is outstanding. If you traveled to Britain, you'd see plenty of mills still using older machines. So these that we're selling could be described as 'priceless' here in the Far East. If you pass up this chance, you—and even your country—will regret it."
Qiao Zhiyong sighed, "That may be, but I run a small business. I have no experience here, and the risk is huge!"
Of course he was wary—"Trust me" means nothing. The Jiaozhou Textile Mill is carefully picking its buyers. Those without the financial means can't even view the goods.
In the south, there are a few big merchants who could afford them, but they have close ties with British capital. The Hechingen Consortium won't even let them in. That would be "arming the enemy." As the German representative of major capital, Hechingen and the British are global competitors, all the more so after the unification of Germany.
Qiao Zhiyong, however, is from the north and represents the most powerful Shanxi merchants. Shanxi's primary business is "piaohao" (like a bank), effectively the same industry as the Hechingen Bank. So their financial might is assuredly strong. Most importantly, there's no foreign power behind them—they're homegrown entrepreneurs in the Far East—making them a promising partner for Hechingen.
The Shanxi merchants dominate the provinces of Shanxi and Shaanxi, plus Inner and Outer Mongolia. Meanwhile, the Hechingen Consortium's business in the Far East focuses primarily on north China, extending only to northern Anhui, eastern Henan, and southern Zhili (Hebei). That's about their limit, as the north lacks the dense waterways of the south, and they still face English and French competition out of nearby Yantai.
If the Hechingen Consortium and the Shanxi merchants cooperate, Hechingen and East Africa could reach deep into the northwestern interior of the Far East via Shanxi's commercial networks.
Levins added, "You're a visionary man, Mr. Qiao. Don't fuss over trivial margins. Picture what you could do with these machines, leveraging your local population and resources to build a textile enterprise to compete with the southern provinces. We understand that your northern and northwestern lands are suitable for cotton farming."
While they haggled in one workshop, over in another, the Jiaozhou Textile Mill was simultaneously negotiating with Hu Xueyan, representing the Huizhou merchants.
That's right—the Hechingen Consortium plans to "sell on both ends." Jiaozhou is the biggest textile factory in the Far East, and cutting half of its capacity is by no means a small figure. East Africa is hardly a major power—its influence in the Far East hinges on German backing, letting them hold some ground in the north. To grow further, they need local partners, and as two of the nation's major merchant blocs, Shanxi and Huizhou have the wealth to collaborate.
For all their power, the Shanxi and Huizhou merchants also face precarious positions—both are challenged by foreign capital. Working with the Hechingen Consortium can help delineate spheres of influence and reduce internal friction, preventing outside capital from exploiting divisions. They're all competitors against the British, French, and American capital, so "clinging together for warmth" makes sense. If the three alliances hold firm, they can maintain economic independence in their respective territories. If a rival uses warfare to break in, that's another story.
The Huizhou merchants are especially vulnerable: the lower Yangtze and Huai River region is already a British beachhead. The entire Yangtze Valley is shaky. Though the Huizhou clan can still resist, eventually that might fail. Historically, Hu Xueyan battled foreign capital but was ultimately crushed by corrupt officials colluding with foreign powers.
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