Zuo Zongtang's western expedition specifically selected high-interest foreign bank loans, and the annual interest rate was not as high as Zhang Jike's IOU.
In the past few days, the names of Zhang Jike and Li Weiao have successively appeared on the hot search list, and the statements about Zhang Jike borrowing debts and using actresses' private videos to "pay off debts" have intensified.
The monthly interest rate is 1.99%, which translates to an annual interest rate of 23.88%.
The loan contract that was "exposed" has become one of the focuses of public opinion Source: Sina Weibo
At the end of the 19th century, China in the late Qing Dynasty was facing great difficulties. The treasury is empty, military spending is difficult to raise, and various external pressures are constantly pouring into China. It was during this turbulent era that Zuo Zongtang, the governor of Shaanxi and Gansu, borrowed money from foreign banks to reconquer Xinjiang and suppress other warlords. However, it is worth noting that in the process of borrowing, Zuo Zongtang specifically chose foreign banks with high interest rates to borrow money. Why is that? This is an issue worth exploring in depth.
First, the reason for the high bank interest
First, we need to understand the reasons for high bank interest. In the historical context of the time, it is not surprising that bank interest rates were high. On the one hand, because bank credibility is directly proportional to strength, those banks that are strong, reputable and safe usually offer higher interest rates, which attract more customers. On the other hand, bank interest rates also tend to rise because of risk. Due to China's political turmoil, frequent wars, and uncertainty and risks on the road to the west, borrowing is largely a high-risk investment. To ensure that they do not lose money in this military operation, foreign banks must raise interest rates to cover risks.
2. Purpose of borrowing
Second, we need to focus on Zuo's purpose in borrowing from foreign banks. Undoubtedly, the most fundamental reason is the lack of adequate military spending. Without sufficient military spending, the war would become extremely difficult, and the western expedition would not have been successful. As Zuo Zongtang said, "a penny is difficult for a hero", and if the government cannot give enough military salaries, then fighting a war will be an almost impossible task. Because the treasury was empty, the imperial court could not provide enough military salaries, so Zuo Zongtang had to resort to other ways to raise funds. Choosing to borrow money from foreign banks is an effective way to raise overseas funds quickly.
Third, the amount of funds is large and the speed of fundraising is fast
As mentioned earlier, high bank interest rates usually mean higher amounts of money and speed of financing. Zuo Zongtang needed a lot of military money to fight the war, and there was no doubt that he wanted to raise these funds as soon as possible. Due to the size, complexity and risk of the expedition, a large number of bank loans were required to support it. The use of high-interest borrowing to attract foreign banks to borrow money can undoubtedly increase the speed and efficiency of capital raising.
4. Persecution of pay
The fourth reason is to force the provinces to assist in raising military salaries. If Zuo Zongtang only raised military salaries from the imperial court and the provincial governments, he might encounter great difficulties. As mentioned above, the provincial governments at that time owed the imperial court more than 20 million taels of silver, which meant that the government could not immediately receive sufficient military spending. Therefore, Zuo Zongtang chose to borrow high-interest debt, and the final repayer was the governor of the provinces. The provincial governments must pay the central government a paid repayment, otherwise they will have to bear higher interest costs. In this way, the provincial governments feel the urgency to return the benefits to the central government as soon as possible, so as not to increase the interest rate.
5. Hu Xueyan's profit margin
It is worth mentioning that borrowing high-interest loans also allows Hu Xueyan to obtain more profit margins. Hu Xueyan is a businessman who cannot get paid due through the system. Since Mr. Zuo received an adequate salary from the government, all business actions were not included. However, Hu Xueyan used his network and experience to help Zuo Zongtang borrow a large number of loans. These loans are usually high-interest borrowings, so Hu Xueyan has profit margins to earn corresponding returns.
6. The support of the British
The last reason was that borrowing high-interest loans also allowed Zuo Zongtang to gain the support of the British. Since the British have always had a profound impact on the Chinese army, Zuo Zongtang borrowed money from the British HSBC with great fanfare, also trying to tie the British to the chariot of the Western Expedition. When the British provided advanced weapons and other support, the Western Expeditionary Army was able to achieve a quick victory. It can also be said that Zuo Zongtang's borrowing from the British was a last resort, but at the same time, he also gained the support and help of the British, laying the foundation for the success of the Western Expedition.
To sum up, Zuo Zongtang's reasons for borrowing from foreign banks at high interest rates are many factors, including the need for a large amount of capital, the speed of raising, the pressure of provincial pay, Hu Xueyan's profit margins, and the support of the British. These factors interacted to make high-interest borrowing an effective way for Zuo to raise military spending.