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Her Majesty's Government should agree to the Chinese Govern-
-ment imposing a prohibitive duty upon prepared Opium exported from Hongkong into China.
3.
With regard to the first of these proposals I must in the first place correct a statement made by Tong Shao-yi and quoted in Sir John Jordan's Despatch of the 12th December last, to the effect that the original object in establishing the Opium Farm in Hongkong had been to regulate the supply for the local Chinese population. This is not the case. Successive Hongkong Opium Farmers have done a considerable export trade in prepared Opium, and it was to enable them to carry on that trade that the number of Chests to be drawn by the Opium Farmer has been fixed at an amount which is in excess of local requirements.
4.
The Hongkong Opium Farmers have, however, never, as far as I am aware, themselves exported prepared Opium to China for the reason that in addition to the Customs Duty which is double that on raw Opium (because Opium boils down into half its original bulk) and likin, an additional tax is levied in China on foreign prepared Opium which prevents it from competing with prepared Opium boiled ...