A huge signboard, beautifully written by a local gentleman-calligraphist, adorned our gate. We were open for business. Such quick action on our part impressed the town. But I imagine our Kunming Headquarters experienced a shock at the receipt of our telegram announcing that the shop was open.

Now I was free to devote myself entirely to the promotion of industrial co-operative societies. Of course, everybody thought that, henceforward, we should be sitting grandly behind our desks all day long expecting the prospective co-operators to call. Had we followed this line of action, or rather inaction, we might have been sitting with crossed arms for years. Instead, every morning, accompanied by one of the office clerks, I tramped to all the wool-weaving factories we could find. Slowly and with infinite pains I tried to explain to these simple people what co-operation meant and how they could enlarge their tiny factories, improve their products and become prosperous. At first they did not understand a word, although everything was explained in Nakhi. Their minds could not grasp or digest all these technicalities. Day after day I persisted. When I mentioned that the loans could be given to assist in the improvement of their looms and in getting more stocks of yarn and dyes, this information seemed at last to touch a chord in the eminently practical heart of the Nakhi women.

We saw at once where our advantage lay and next time we concentrated our attention not on the men but on their wives and sisters. It worked brilliantly. It was the women who were the first to understand the idea of co-operatives and appreciate the benefits they promised. They became our most active protagonists. We did not know what they said or did to their husbands after our visits but when we came again the men seemed less obdurate and talked much more sense. We knew that if we could break the ice and establish one co-operative successfully, the results would be swift in this city where gossip was more effective than any advertising in the papers or radio broadcasts in the West.

I knew a Nakhi student by the name of Hochiatso. His father and two uncles jointly ran a wool-weaving factory on the hill just a couple of hundred yards from our office. Working through him and independently we at last succeeded in converting the factory into a co-operative enterprise, with others joining in on a share basis. Afterwards I sent Hochiatso to our Bailie Training School at Shandan, Kansu, where he learned how to make serges and good, woolly blankets.

The greatest event in the industrial life of Likiang was my introduction of the wool-spinning wheel of which, prior to my arrival, the Nakhi had no idea. I had brought with me a model of the type of wheel which was used for ages in Europe before the introduction of mechanization. Even this simple machine puzzled them and it was only after many trials and errors that a really serviceable wheel was evolved. It caused a furore, probably as great as when the first chariot-wheel was constructed. It was copied and re-copied and constructed, with and without variations, by the hundred. In a very few months the whole town was in a frenzy of wool spinning. Every shop had two or three whirring wheels at which the lady of the house and her daughters or sisters sat spinning whilst waiting for customers. Spinning-wheels lined the streets and could be found by the dozen in the larger houses. Everybody, men, women and children, began to spin. Varieties of wool yarn, hitherto hardly seen on the market, and then only good for sackcloth, were carried from one end of the town to another in women’s baskets. There was the yarn for weaving and the yarn for knitting. All the pangchinmei now sat knitting the most fantastic and elaborate sweaters and pullovers I have ever seen for their sweethearts and for sale. Shops groaned with piles of these sweaters, socks and stockings, some so fine and fluffy that they could be compared with the best from abroad. The importation of wool from Tibet now jumped from the hundred bales a year, before my arrival, to two thousand bales a year, and more. Orders for woollen knitted goods were pouring in from Kunming, Lhasa and even Chungking. Likiang had now become a great centre of the wool industry in Yunnan.

There was no question any longer of my running after the prospective co-operatives in wool spinning or weaving. I was besieged with applications. But it was important to create spinning and weaving societies of quality, which would be genuine and strong, and this was not so easy as it might seem. I had to watch very carefully and not allow the formation of a society of members of the same family. Such co-operatives were not true co-operatives, for the loan from the bank to which co-operatives were entitled was, in the case of a family co-operative, negotiated and used entirely by the eldest male of the family, more often than not, for opium and other business in no way connected with the purchase of wool yarn or looms.

As the Chinese co-operative law prescribed a minimum of seven persons to form an industrial co-operative society, I required at the least seven separate families to join together. Each family nominated, as a member of the co-operative, a representative who could be a man or woman but who had to work with his or her own hands. I was very strict about this and never permitted anybody to act as a sort of honorary member, simply lending the use of his name to fill the list of members. The formation of co-operatives by the members of well-known local rich families was not permitted. They already had plenty of money of their own. Why should they get from the bank at a low interest the loan which was intended for the really poor? They would use this loan to lend money to somebody else at ten times the usual interest. I may say that I was not a great favourite with these avaricious merchant families who were without any pride. No matter how many times I snubbed their attempts to muscle in on the co-operative movement, always of course with the quintessence of politeness and decorum as befits a Chinese official, they always came back again and again, trying some other subterfuge or trick.

I can never forget one glaring example of such manoeuvrings. One day I was approached by a great local gentleman who styled himself a general in retirement. He had an elegant house by the Likiang River across the bridge from Madame Lee’s shop. He said that he heard much about my ‘sublime and incomparable’ work. He desired very much to assist me to extend it. Some of his friends wanted to form an Oil-pressing Co-operative Society. What they needed was just a small loan to put it into effect. As a refusal was, according to all the rules of etiquette, impossible, I had to agree. He informed me that the prospective members would wait for me at his house on the morrow at noon. I cordially assured him that I would be enchanted to attend this auspicious meeting.

I went with my trusted assistant Wuhsien at the appointed time. On arrival I was adversely impressed by the sight of food and wine prepared for me, as I had requested beforehand that no entertainment should be offered me during business conversations. Eight old gentlemen, very well dressed, sat around the room smoking their long pipes. They were refined and fragile-looking, with long, stained finger-nails. ‘I have never seen a better collection of old opium smokers,’ I managed to whisper to Wuhsien. I bowed and they rose and bowed. I had to take a sip of wine and a cake. Then we got down to business. In refined accents and high-flown terms the elders officially proposed to me to form an Oil-pressing Co-operative Society at a village near Likiang. Everything was almost ready — the presses, stocks of rape seed, etc. The only thing lacking, to start the operations, was money. They thought thirty or forty thousand silver pangkais would be a very modest sum to ask for as a loan. I looked round and composed myself.

‘Do you mean to say, gentlemen, that you yourselves are prepared to press the oil?’ I exclaimed dubiously.

They were terribly offended, and were shaking with indignation.

‘The very idea of it, sir!’ exclaimed their spokesman. ‘Of course not! We have enough workmen to do that for us.’

I made a very long pause, slowly sipping my wine. Then I spoke slowly and with infinite politeness.

‘Gentlemen, the idea of this worthy co-operative society is beyond praise.’ Again I paused, and then continued, ‘I am rather worried about the amount you require. We never recommend to the bank to grant such large loans without referring the matter to our headquarters in Chungking, possibly to Dr Kung himself.’ They listened respectfully. They were greatly impressed by the exalted name.

‘I will report the matter to my headquarters at once. As soon as I have a reply I shall be glad to inform you,’ I said, bowing. We slowly filed out of the room.

Of course, I never bothered Chungking with such matters. But that was one of the correct ways of saying ‘No.’ I do not think these elders really expected any reply. They knew that I saw through their game, but there was no harm in trying. I do not think they were even angry with me: it was a legitimate gamble, a trial of wits. They had lost the first round, but hoped they might win the next.

When I first came to Likiang there was but one bank there and a very modest one at that. It was the Provincial Cooperative Treasury. As there were no co-operatives of any kind prior to my arrival, it had nothing to finance and, therefore, it seldom had any funds in its coffers. The cost of a remittance from Kunming to Likiang was, at least, 10 per cent; and to lose ten dollars on a hundred was a lot of money. Moreover, as Likiang used nothing but silver dollars, the problem of transporting and storing funds was acute. People either brought the money in their baggage by caravan or, if they had the connections, made transfers through the local merchants who had plenty of silver dollars (Whenever I refer to transactions in dollars it means silver half-dollars or pangkais, not paper currency.) both at Kunming and Likiang, and so a loan of thirty thousand dollars, for instance, as the clever elders had desired, would have required quite a sizable caravan, as thirty horses would have been needed to carry the money, quite apart from the small army that would have been necessary as an escort from Hsiakwan. The bandits were no fools, and they had their own sources of information. They would mobilize all their friends and connections to make a concerted bid for so rich a prize.

Keeping such a precious cargo in the living-rooms of a wooden house, with no safes available, was another problem. Likiang had been plundered several times before by large groups of bandits, and a few hundred local militiamen provided doubtful protection. It was for this reason that the Co-operative Treasury held little capital and the local merchants tried to keep their hoards of silver coin down to a minimum. So there was always a shortage of ready money in Likiang and the purchase value of the dollar was, therefore, abnormally high. The interest on loans was fantastic: 10 per cent per month was considered a reasonable interest, and the 4.5 or 5 per cent charged by the treasury was regarded as extremely low and were much sought after.

As I had brought with me only a small sum of silver dollars, and as there were no other government banks but the Cooperative Treasury, our Kunming Headquarters probably thought that this shortage of dollars would be a major stumbling-block in the development of my industrial co-operatives, even if I did manage to get a foothold in Likiang. They did not reckon on my powerful connections with the headquarters of the Provincial Co-operative Treasury and with certain Yunnan provincial banks. My first Wool Spinning and Weaving Society, for instance, received a loan from the Provincial Co-operative Treasury in about a fortnight after their first constitutional meeting. As soon as other societies had been formed, they also obtained loans, though they were very small compared with the standards not only of European countries but even of such places as Kunming and Chungking, where values were inflated. The first loan was only for 300 dollars and the subsequent loans ranged from 200 to 500 dollars and they were all granted for a period of one year only. The loans were not needed for salaries or wages or any such unproductive purposes, for the co-operators lived in their own houses, ate their own products and carried on their duties without salaries or wages. They received their remuneration, according to the work done, when the profits were divided at the end of the year. With a few hundred dollars they could buy a lot of raw wool and make a number of looms and spinning-wheels. Their products were sold like hot cakes and there was no difficulty in making enough profit during the year to pay off the loan. I never had any trouble about loan repayments from the Nakhi people. The poorer they were, the more conscientious and particular they were about their financial obligations. Nor did I ever lose any personal loan I made to friends.

Luck was clearly with me. Something else soon happened which greatly stabilized and strengthened my position, and gave my work additional prestige. I received a telegram from the Bank of China in Kunming requesting me to meet and render assistance to their people who were proceeding to Likiang by chartered plane to open a branch of the bank there. This was great news indeed. I must mention in this connection that the bank’s general manager in Kunming was a friend of mine and I also knew very well the secretary-general of the bank’s headquarters in Chungking. I found at once a small temple for accommodating the bank’s staff on their arrival. Then I assisted them in securing a good house for the exclusive use of the bank, which was so difficult in Likiang. The Kunming and Chungking branches were very grateful and gave a free hand in negotiating loans for my co-operatives at the incredibly low rate of interest of only 3.5 per cent per month. Unfortunately for the bank, however, all the loans made by them were in paper currency, which the recipients were at liberty to convert into materials or silver dollars. As the paper dollar was depreciating month by month, the societies had not the slightest difficulty in repaying even large loans when they matured. They made huge profits, as what they were repaying at the end of the year was in many cases less than a half of what they had originally received. It did not affect the individual branch bank itself as it was doing only its duty within the law. It was an overall disaster of a national magnitude with which even the Government was unable to cope. Only the silver dollar remained steady and, with this in circulation, life in Likiang remained stable and cheap.

The Bank of China stayed in Likiang only until VJ-Day and then the branch was withdrawn. But by that time all my co-operatives had become the favourite children of the Cooperative Treasury and of several other provincial commercial banks which had hastily opened branches in Likiang, attracted by the rich caravan trade with Lhasa. Also, by that time, we had begun to receive some capital direct from our headquarters in Chungking.

In about two years my position had become so consolidated, and there were then so many first-class co-operatives, that there was no question of any withdrawal from Likiang. Dr Kung was so pleased with my work that he honoured me with the title of commissioner and sent me a certificate to that effect. During my subsequent visits to Kunming I was received at our Yunnan Headquarters almost obsequiously, and it seemed that I was considered a power in the Chinese industrial co-operative movement.

I must pay my unstinted tribute to the National Government of China for its interest in, and sympathy with, the cooperative movement. Its laws and rules were wise and uncomplicated. Simplicity in the organization, the accounts and m the supervision of the industrial co-operative societies was the rule. The disposition of the earnings was very sensible and it left a considerable latitude in their distribution. A reserve fund was insisted upon, but it was not retained by the Government at its pleasure. Upon the dissolution of any society, if a loan had been repaid and all claims satisfied, the reserve fund was returned for payment to members in accordance with the number of their shares and the length of their association with the society. The underlying principle was not to coerce the industrial co-operative society to continue for ever but to help poor craftsmen who had nothing with which to start to become prosperous and to regain their footing in society through co-operative enterprise. When they had reached the highest point of prosperity and security, it was up to them to continue their profitable association or, if they so wished, to dissolve, and enjoy the fruits of their labour individually and perhaps in other capacities, thus making way for another group of less fortunate people to repeat the process. It was a constant movement which slowly but surely was transforming Likiang and its district into a uniform community of prosperous and contented people. The results and proofs were there for all to see.

It was not difficult to start an industrial co-operative society if there were a number of people who knew the same line of industry. There were no great expenses involved in the preparation of account books. They were made of soft Chinese paper and the whole set cost no more than two or three dollars. The law did not require a set of printed and bound ledgers, or minute books made of expensive paper. Anyway, they would not have been procurable in Likiang. Whilst, under the uniform strictness of Western laws, a co-operative society is treated on the same level as a bank or a great limited company, and has to watch and comply with innumerable legal requirements, necessitating the employment of a highly qualified secretary and manager, an industrial co-operative in China was regarded for what it really was — an association of very poor people, often ignorant and illiterate, of whom not much could be asked. What trial balances or balance sheets could be demanded from a society whose members calculated the cost of materials and products with pebbles or beans and had never written a word in their life, as was the case of many co-operative societies in Likiang and elsewhere? They ran their affairs as well, if not better, than the societies with more educated members, though, naturally, a measure of supervision was necessary.

Whilst carefully avoiding the creation of the rich men’s and family co-operatives, I had to be equally vigilant in not giving my sanction to the master and apprentice co-operative societies. There were several small workshops, especially in the padlock-making line, where the proprietor ran the show with a few young apprentices some of whom were his relatives. They were not loath to proclaim their little factories as industrial co-operatives in order to secure a loan from the bank, and were remarkably persistent in their efforts, inviting me for frequent inspections of their proposed societies, shuffling and reshuffling their apprentices and neighbours as prospective members. I never said ‘No’ to them, but merely mentioned that the banks had no money for loans at present.

Actually I was very fortunate with the material I had in Likiang for my co-operatives. The Nakhi were very independent and themselves never favoured the idea of a master and apprentice relationship. They had brains, though perhaps not very good ones by Western standards, but nevertheless capable of independent thinking and judgment. It was for this reason that large factories were impossible in Likiang, for no Nakhi would stand the peremptory orders of a manager or overseer for long, and when my co-operative movement had spread, many apprentices left their bosses and formed their own co-operatives.

The number of members in each of my co-operatives was not large. It was difficult to reach the necessary harmony of opinion and co-operation among a large number of people. Moreover, the Nakhi were so clannish that they could never work together with other people whom they did not know well. A successful co-operative could only be formed out of the people living in the same village or street. The plan of forming a combined co-operative of the Nakhi and the Minkia or some other tribes succeeded only in one case.

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