The Fourth Outstanding Person of Huangpu Military Academy

Chapter 80: All started with money from the bank

By the time Trotsky arrived in Türkiye and found a safe place to settle down, the Chinese Revolutionary Communist Party at Sun Yat-sen University had fallen to the point of being forced to perform the stage play "When Trotsky Met Sima Guang".

After receiving the letter from Gao Yuhan and Zheng Chaolin requesting "theoretical guidance", Trotsky glanced over it but did not want to reply immediately.

"Almost all my energy and attention is focused on Russia. The Russian Revolution is the cause I am most familiar with, and it is also the benchmark for world revolution. People are watching to see whether the revolutionary cause there can continue, and whether it will succeed or fail. As for China, I don't have many opinions to express."

"Victor, I've been researching agricultural collectivization in the Soviet Union lately."

The Belgian writer Victor Serge, a follower of Trotsky, came to Turkey to meet Trotsky. Serge read Gao Yuhan's letter (written in Russian) and asked: "It seems that the Chinese comrades are in some trouble."

Trotsky: "Gao and Zheng must learn the art of theoretical struggle."

Serge: "After all, they have to confront the Chinese Communist Party directly, just like you did with Stalin and the Soviet Communist Party under his control. It's a difficult process."

Trotsky: “The Chinese Revolution of 1925-1927 ultimately suffered a betrayal by Chiang Kai-shek, and the Chinese Communist Party suffered heavy losses. But this defeat led them from the proletariat to the peasantry. This means that the revolutionary process in China is still far behind that of Russia, at least three historical stages behind. Therefore, I do not think that the Chinese Revolution and the Soviet Revolution can be discussed in the same terms.”

"The CCP and the CPSU were different even from the very beginning. This wasn't about the founders' peasant or worker backgrounds, but rather the source of the party's funding."

"The Russian Bolsheviks resorted to kidnapping and robbery to raise funds. Stalin and I were among the many who did so. After the Chinese Communist Party decided to raise the funds it needed, it found a way to do so by becoming capitalists, doing business in Shanghai and the Yangtze River basin to raise the funds it needed."

Serge suddenly realized: "So, the Soviet Communist Party likes to use violent means to deal with its enemies, while the Chinese Communist Party is a shrewd businessman?"

Trotsky: "Stalin's CPSU could also have dealt with the rebellious working class by violent means."

Hong Kong.

"Mr. Chairman, believe it or not, but this is how the coalition government in Guangdong works."

"Although the main leader of the peasant movement that swept across one-third of China and chopped off the heads of countless landlords was Mao Runzhi, a Communist, most of his capable followers and supporters were members of the Kuomintang, or what we call the Kuomintang left."

"The economic policies of the coalition government over the past three years, especially the precise financial and industrial policies that have helped avert disasters since the Great Depression, were the work of the Communist Party Central Committee."

Standard Chartered (Hong Kong) manager Hayes Jefferson was very respectful.

He was on a nearly 100-meter-long private cruise ship in Victoria Harbour. The owner of the private cruise ship was Samuel Wilson III, chairman of Standard Chartered Bank.

Jefferson took over as head of Standard Chartered Bank's Hong Kong branch in 1929. Just one month into his tenure, the Wall Street stock market crashed, causing Standard Chartered's market capitalization to plummet by 26%. The financial crisis that gripped the Western world also stirred a storm within Standard Chartered. Twelve managers of its dozens of branches worldwide were fired, and three branches were closed outright.

Standard Chartered's board of directors ranked each branch's performance KPIs and found that while its Hong Kong branch ranked only 20th globally in size, it ranked fifth in profits last year and had the lowest bad debt ratio. Indeed, it had the lowest bad debt ratio of any Standard Chartered bank.

So Jefferson not only did not have to worry about losing his job, but he was also praised by the headquarters in January 1930.

In 1930, Standard Chartered Bank's Hong Kong branch's profitability ranking rose from fifth to third, and its bad debt ratio remained the lowest. This is why Chairman Wilson summoned Jefferson specifically when his ship arrived in Hong Kong.

"Manager Jefferson, are you saying that the Communist Party plays the role of a capital engine in the Guangzhou coalition government?"

Jefferson: "Yes. In the early days of the CCP, before they acquired Guangdong, the leaders of the Communist Party raised funds for their party by establishing companies and businesses in the Shanghai Concession. Of course, as an underground organization at the time, the CCP didn't need much money to maintain its operations. Well, when establishing companies and businesses, their leaders also borrowed money from Standard Chartered Bank for working capital, which is very interesting."

Wilson III: "According to Communist doctrine, well, do their leaders know what they're doing?"

Jefferson: "I think they do. But the Soviet Communist Party also robbed banks in its early days."

Wilson III: "This is not like robbing a bank."

"I think it's the same. They both get the money from the bank, sir." Wilson III's butler interrupted with a humorous remark at the right moment.

Jefferson: “…When the Communists transferred their power to Guangzhou, my predecessor, Manager Smith, even moved to Hong Kong to ensure that Guangzhou’s loans were repaid on time. Unfortunately, Manager Smith was the first person to borrow money from the CCP. But when the CCP established its power in Guangzhou and sought more loans, Smith backed off, allowing HSBC to take the lead.”

"So in 1929, the board decided to fire Smith, and you took his place," Wilson III said. "Jefferson, since you took over, Standard Chartered Bank Hong Kong has achieved excellent results, ranking among the best in the Standard Chartered banking system. However, you should understand what the board wants."

"Standard Chartered's business in Guangzhou has yet to surpass HSBC." Jefferson: "This..."

Jefferson certainly understood the chairman's increasing pressure on Standard Chartered Bank in Hong Kong. Standard Chartered had been devastated by the October stock market crash of 1939 and had struggled during the year-long Great Depression. Naturally, other major banks were also struggling. Now, Standard Chartered's top management was trying to reverse the adverse economic situation and, naturally, demanded that the Hong Kong-Guangdong region, which was currently performing relatively well, generate more profits.

Jefferson: "Mr. Chairman, the Hong Kong branch will accelerate business development over the next year, with a target annual growth rate of 20%."

Wilson III: "Will a 20% profit increase allow you to surpass HSBC by the end of the year?"

Jefferson: "According to the financial report sent by headquarters last month, our branch didn't get the amount we expected. I was hoping to get 4000 million pounds this year, but headquarters said they could only provide 3000 million. HSBC as a whole is facing a currency shortage, and I'm afraid this is a problem all British banks are facing right now."

Wilson III: "Then let me tell you an inside scoop that few people know right now. The British pound is about to change."

Jefferson: "Dilution... or decoupling from gold?" "Just go ahead and take your guess."

Jefferson: "If sufficient funds were available by mid-1931, the Hong Kong branch could achieve a growth rate of... -30%."

Wilson III: "Very good. Tell us how to make it happen."

Jefferson said, "In terms of government investment, Guangzhou has focused on road transportation, steel, coal, and electricity. The latter includes both coal-based thermal power and hydropower. However, Guangdong lacks a natural coal-steel complex, so Hunan is the ideal location for this. Standard Chartered will expand its business into Hunan, which Guangzhou controls. Now that they seem to be focusing their development efforts on Zhuzhou, we will follow suit there."

"The second is private investment. I found that the Guangzhou government seemed to be implementing a long-term strategy, which seems to have never been made public, but I can see it. Guangzhou is deliberately making economic inroads into the areas controlled by the Nanjing government."

Wilson III: "How to invade?"

Jefferson: "If Guangzhou and Nanjing are considered two independent economies, then Guangzhou currently has a large trade surplus with Nanjing. The Communist Party wants to further expand this surplus and plunder the silver within Nanjing's control. As we all know, the currency issued by Guangzhou is based on the silver standard."

"Standard Chartered plans to focus on following up on investments in industries that Guangzhou is most likely to dump to Nanjing."

Standard Chartered's chairman has been unhappy lately.

Last year, the United States suddenly went crazy and President Hoover signed and passed the Smoot-Hawley Tariff Act. A month later, the British Parliament immediately passed a retaliatory tariff bill. These two cousins, Britain and the United States, were so confused that they were almost out of their minds.

A week after the UK introduced its tariff retaliation bill, France also decided to increase tariffs. Following the Wall Street crash, the already fragile global trade system suffered a severe blow, and the investment system subsequently came to a near standstill.

Although the chairman is quite impressive and has an exclusive cruise around the Far East, the future prospects of Standard Chartered Bank are very grim. If the recession continues, his yacht may have to be auctioned off.

Wilson III's cruise ship set sail again from Victoria Harbour. "Shanghai, the Paris of the East, as the Chinese call it."

"Yes, sir, after the Paris of the East, Kolkata, and the Little Paris of the East, Saigon, we have arrived at the Paris of the East, Shanghai." The butler muttered.

When they arrived in Shanghai, Wilson III followed the same old routine and called Rogers, the manager of Standard Chartered's Shanghai branch, on board.

"I met Hayes Jefferson in Hong Kong. In a sense, your business areas are growing while Jefferson's are shrinking. What do you think of this?"

Rogers: "I understand, Mr. Chairman. And this is beyond our control. The Shanghai branch has heard that Nanjing has not stopped its preparations to launch a war against Guangzhou, so I am very worried."

Wilson III: "War will not affect the interests of bankers, but quite the contrary. If Nanjing is preparing for war, then isn't that an opportunity for banks?"

"We seized this opportunity last year and provided guaranteed loans to the Nanjing government for its arms purchases," Rogers said. "Our concern was that the Nanjing government would not be able to repay these loans."

Chapter 81: Straw sandals have no pattern, they are made as you go along

Rogers actually said that Standard Chartered's investment prospects in Shanghai might not be as good as expected because Nanjing might not be able to repay the money, which made Chairman Wilson III almost want to fire Rogers on the spot.

After European and American countries fell into economic depression, the economic development in the areas controlled by the two Chinese regimes was good. Although Nanjing did not develop as fast as Guangzhou, Nanjing used silver dollars as its currency, and the long-term trend of silver prices was to fall. This meant that Nanjing, like Guangzhou, had its own currency naturally depreciating gradually, which was beneficial to exports and also beneficial to stimulating the domestic economy.

What exactly made Rogers think Nanjing's economy would be in trouble? "Although the economy in northern China was moving forward, the Nanjing government was facing financial difficulties. Yes, a moving economy was facing financial difficulties."

Rogers stated his reasons:

“到现在，1931年3月,南京待偿还的公债和债券共有30种,欠款本息总计11亿元,这还不算‘庚子赔款’。而南京政府的财政收入,1930年是4.3亿元，1931年的预期数字也只有5.5亿元。”

"Of course, many people might think that 4 or 5 million yuan in fiscal revenue and 11 billion yuan in debt are not a big deal, but we also have to pay attention to another issue: the Nanjing government's massive military."

"According to information I've gathered from the upper echelons of Nanjing, Chiang Kai-shek formulated a military plan in 1929, after the failure of his second anti-communist war, of 'three years to reorganize the army, five years to suppress the rebellion.' Instead of reducing the army, which already numbered 140 million, it actually increased to 150 million last year."

"Considering that Chiang Kai-shek had disbanded 15 poorly equipped local faction troops the previous year and replaced them with better-equipped and more expensive direct-command units, it's understandable that military spending was the biggest financial burden on the Nanjing government."

"We're all waiting and watching June of this year, because June is the repayment date for 100 million yuan in public bonds issued by Nanjing in 1928. My banking friends and I are not optimistic about whether the other party can repay this debt on time. We are all mentally prepared for the Nanjing government to announce a debt extension after the maturity date."

Wilson III pondered for a long time and suddenly asked:

"There's a question I forgot in Hong Kong. The Nanjing government has 150 million troops. How many troops does the Guangzhou government have?"

Rogers: "30 regular troops and an unknown number of local militiamen. We estimate the number of militiamen to be around 20 to 30. The fiscal revenue of the Guangzhou government was close to half of that of Nanjing in 1930."

Steward: "It seems that the military salary level in Guangzhou should be good."

Wilson III: "I know that. Guangzhou's fiscal revenue nearly doubled last year. This is actually the natural result of the country's transition from chaos to order. Nanjing seems to be doing the same. Rogers, tell me about private investment in the Nanjing government-controlled area."

"Both capital inflows and outflows are quite large, compared to the period of the Beiyang warlords' rule. Standard Chartered's business is concentrated in Shanghai and the surrounding provinces of Jiangsu and Zhejiang, where there is a relatively high level of private enterprise investment. We have investigated other provinces to identify promising investment targets, but have not found encouraging results."

"Mr. Chairman, although our business scope covers a population of 350 million, our business potential cannot be compared with Guangzhou, even though the population of the Guangzhou government-controlled area is 70 million."

Rogers, facing the chairman's unfriendly gaze as if he was about to fire him at any time, laid out the current economic situation of the Nanjing government, saying that Standard Chartered's business in Shanghai was not doing well and that if it forced the scope of loan issuance to expand, it might explode.

Wilson III listened to Rogers' explanation with a serious face and reluctantly accepted Rogers' target for the future growth rate of Shanghai business.

During his stay in Shanghai, Wilson III sent a telegram to London, asking him to readjust the bank's fund allocation plan in his capacity as chairman.

Following the Bank of England's further quantitative easing, Standard Chartered had intended to increase the credit line of its Hong Kong branch by £3000 million and that of its Shanghai branch by £2500 million. Wilson III, however, ordered the Hong Kong branch's credit line to be increased to £4000 million, while the Shanghai branch remained at £2500 million.

Guangzhou.

airport.

Mao Runzhi got off the plane again.

After the last Central Theoretical Conference, Mao Runzhi immediately took a train to Changsha, and then returned to Xiangxi from Changsha to continue his rural reform work. A month later, he was picked up again, and the same transport plane was used as last time.

"Chen Tianheng, this seems to be a deliberate arrangement on your part," Mao Runzhi said. "The Central Committee—they said they were going to hold a theoretical work conference, and it just so happened that an Air Force plane was carrying goods from Guangzhou to Sangzhi."

"Theoretical meetings, well, although they're a bit theoretical, if you're not too busy, we should still discuss them together," Chen Tianheng said with a smile. "Didn't the General Secretary say that every Politburo member should attend?"

The difference between the third theoretical conference and the previous two was that no one had a stack of bulky tomes at hand. Capital and other works by Marx and Engels had been put aside. There were still some papers on the desks, but they were mostly practical data, such as social statistics pamphlets or data from the National Bureau of Statistics.

"Are these the official Soviet verdicts on Trotsky?"

Li Dazhao had an extra document at hand, which he had distributed to everyone at the start of the meeting. Zhou Enlai replied, "Yes, in November 1926, the CPSU expelled Trotsky from his post. After that, there were some evaluations and judgments about Trotsky and 'Trotskyism' in the CPSU Central Committee documents. After Trotsky was exiled in 1928, these evaluations and judgments increased, and some were even published publicly in newspapers. We copied and translated all of these evaluations."

In the first two meetings, Li Dazhao was critical of Trotsky and "Trotskyism" because the Soviet Union was critical of Trotsky.

He now wanted to see how the Soviet Union criticized Trotsky.

"Proclamation of the Plenum of the CPSU, March 1927."

“Trotsky is a saboteur of the socialist cause, a Social Darwinist who has infiltrated the ranks of the revolution.”

Li Dazhao frowned. "How can Social Darwinism be connected to Trotsky's ideas? Let me take a look at the next one. Pravda, January 1929. Since 1922, Trotsky has engaged in numerous activities opposing the cause of socialism, conspiring with similar anti-socialist elements to overthrow the Soviet regime established by Lenin and Stalin."

"In March 1929, 'Trotsky has committed a long list of evil deeds over the past decade or so, embezzling state and party assets for his own personal gain.' What a mess."

“Trotsky not only opposed Comrade Stalin’s program for socialist construction, but also attempted to murder Comrade Stalin and the leadership of the Central Committee that supported Comrade Stalin.”

"September 1930, Komsomolskaya Pravda. Trotsky not only had a bad record in the ideological field, but recently discovered revolutionary documents also show that he had questionable sexual tendencies... I won't read it anymore."

Li Da and Li Zhao closed the materials and asked, "Is this how the Soviet Union excluded Trotsky from the ideological sphere?"

Chen Tianheng: "Secretary Li, we have also discovered this problem. Whether in Soviet Party documents or in articles published in newspapers and magazines, not a single one directly refutes the theoretical viewpoints put forward by Trotsky."

Chen Duxiu: "Cai Hesen sent a telegram in February, and recently sent another one about Trotsky. He said that Stalin, in a conversation with him, told him very seriously, 'Don't discuss Trotskyist theories, don't engage in any debates. As soon as you debate with Trotskyists, you will be negatively influenced by them.' But we've already started discussing it, and there's no way to stop."

Chen Tianheng: "General Secretary Chen, this is probably the reason why we had such heated debates at our first and second theoretical discussion meetings, but didn't reach a clear conclusion."

"I object to what Stalin said," Mao Runzhi said. "I believe that Stalin understood Trotsky's ideas, and understood them very thoroughly. Because he understood them so thoroughly, Stalin warned his party comrades, and warned us, not to explore this theory."

Li Dazhao: "Runzhi, your first and second sentences...do you think Comrade Stalin's warning was wrong?"

Chen Tianheng: "From these two meetings, it's clear that discussing Trotsky isn't a big deal. We held two meetings over a month apart, and nothing happened. Secretary Mao, please stop talking about the plane. That was truly an emergency transport plane sent to Xiangxi."

Dong Biwu: "It's not chaotic, but I feel heavy-hearted right now. If the cycle repeats itself over and over again for 300 years, no, according to the rhythm of modern society, the cycle of land annexation and revolutionary decline will be shortened to 60 years, then what will we leave for future generations, and how will we be written into history?"

Chen Tianheng: "Mr. Dong, the concentration of land, or capital, is almost instantaneous in modern society. The following sixty years have been a process of striving for self-rescue, because modern society has also given the government more technical means to save itself. Secret reports from the Jinyiwei used to take a month to reach the central government, but now they are received in half an hour, and they are encrypted to prevent counterfeiting. The Central Inspection Team can rush to any place in the country in a few hours. A plane can circle the sky, and people like Wang Danwang can be suppressed on the spot. Decades later, Wang Danwang evolved into Wang Danwang V8.0, 9.0, and even Wang Danwang Pro Max. Only then did the government have no way to deal with him."

Dong Biwu: "This is why I feel so heavy-hearted right now."

Mao Runzhi: "Stalin believed that an in-depth study of Trotsky's theory would cause revolutionaries to lose confidence in the prospects of the revolution, and that some naive revolutionaries would be led astray by Trotsky. But will we be disheartened by a few books? No. Are we naive now? Not really. We have already reached a preliminary stage of maturity, and our thinking will mature even more in the future. But to achieve this, we must not shy away from issues and must discuss these things in detail."

Mao Runmin: "Let's discuss this in detail. Runzhi, will today's meeting continue into the evening? Manager Jefferson from Standard Chartered Bank has been waiting for me to see him since this morning. He's already had lunch here. Perhaps he'll have dinner here too."

Chen Tianheng: "Runmin, how about this, Chen Yun go meet Manager Jefferson on your behalf."

Mao Runmin: "Okay."

Chen Duxiu: "We have been practicing Marxism-Leninism in China and have established a small revolutionary regime. But for the past two years, people have been asking us, 'What will happen after you seize power?' The implication is that you won't be going through another cycle of rise and fall of dynasties. Now Trotsky's theories have emerged. According to him, the regime established by the Communist Party will ultimately be a cycle. Let's not even think about world revolution for now. Isn't this continuous revolution just the corruption and degeneration of the regime established by the last victorious revolution, and it will have to be reborn a second, third, fourth, or fifth time?"

Dong Biwu: "Zheng Chaolin said that after Trotsky overthrew the current degenerate working-class regime in the Soviet Union, he could establish a pure regime run by members who wholeheartedly work for the interests of the people. This reminds me of Lenin's assessment of Trotsky before his death: 'too naive.' However, Trotsky's other assertions were not naive, including his extension of Marx's concept of 'permanent revolution' to the Leninist theory of the proletarian vanguard."

Mao Runzhi: "But the revolutionary cause we are currently engaged in provides a possibility for breaking out of the cycle, whether it is the cycle of dynasties in China or the cycle of revolutions as Trotsky said."

Dong Biwu: "The revolution overthrew the dynasty, and the dynastic cycle is gone. But how can we break free from the revolutionary cycle?"

Mao Runzhi: "We Hunanese people often say, 'There's no single model for straw sandals; we make them as we go.' I believe that by always putting the people's interests first, seeking truth from facts, and doing more work and less empty talk, we can find a new path to escape the dominance of this cycle."

Chapter 82: Using British Tanks to Reclaim the British Concession

"Manager Jefferson, I'm very sorry. Minister Mao Runmin is attending an important meeting, so I'm having this business meeting with you. The minister asked me to convey his apologies to you."

Jefferson, the manager of Standard Chartered (Hong Kong), met with Chen Yun. Because it was late, the meeting was changed to a dinner party.

"Standard Chartered now plans to acquire shares in your Hunan Urban Investment Group, which is the 400 million pounds of foreign investment you are seeking to introduce." Jefferson conveyed Standard Chartered Bank's latest ideas concisely.

Chen Yun: "I am very pleased that Standard Chartered Bank has become a shareholder in Hunan's urban development. Your rights are as per our initial plan. Direct foreign investment will result in a one percentage point increase in returns over the prevailing rate of return."