2
Chinese Government should undertake on its part to prohibit the exportation of prepared opium from China to Hong Kong and the new territories, and to take effective measures to prevent prepared opium being so exported.
The price of prepared opium in Hong Kong, owing to the enormous rental paid for the opium monopoly, varies from 3 dol. 30 c. to 3 dol. 50 c. per tael, while the price of prepared Indian opium in Canton is only 1 dol. 46 c. to 1 dol. 53 c. per tacl, and of prepared native opium 1 dol. 11 c. to 1 dol. 18 c. per tael. It will be readily understood therefore that the principal difficulty the opium farmer has to contend against is the smuggling of prepared opium into Hong Kong and the new territories from China.
7. With regard to the second proposal, it is unnecessary if the first is granted. Nevertheless, I would urge that it should not be conceded without some compensating advantage being first obtained.
I would respectfully draw your Lordship's attention to the fact that this Govern- ment without being consulted in the matter has been seriously compromised by the decision of His Majesty's Government to restrict the export of opium from India. This action necessitated the addition at the eleventh hour of a proviso to the form of grant for the farm let last autumn for three years as from the 1st March, 1907, to the effect that, in the event of the exportation of raw opium from India being so restricted as seriously to affect the business of the grantee, a reduction of the rent payable under the grant or other modification of the terms of the grant shall be made.
The annual revenue under the new grant of the farm amounts to 1,452,000 dollars, or roughly one-fourth of the revenue of the Colony, exclusive of land sales.
Any serious inroad upon this item of revenue cannot be regarded with equanimity, especially when it is borne in mind that Hong Kong produces practically nothing; that it owes its existence, not to say its prosperity, to the fact that it is a free port; and that sources of additional taxation to replace any large reduction in the item would be extremely difficult to find.
I therefore deprecate this further concession to the Chinese Government, except in return for a substantial quid pro quo.
8. There are several questions intimately affecting the development of this Colony which require settlement satisfactory to this Government. I may mention the employ- ment of British engineers for the Canton-Hankow Railway, and the junction of that railway, when constructed, with the Canton-Kowloon line; the introduction of a national Chinese currency, upon which subject I addressed your Lordship in my Confidential despatch of the 27th ultimo; and the negotiation of an agreement for working as one concern the Chinese and Hong Kong sections of the Canton-Kowloon Railway.
I would therefore earnestly beg your Lordship to endeavour to secure for this Colony some adequate return for the loss in revenue which she is bound to suffer if the policy of His Majesty's Government in curtailing the export of opinm from India is persisted in, and for the concessions which she is now being asked to agree to.
9. In the above remarks I have confined myself to the points which specially concern Hong Kong in the Memorandum handed to Sir John Jordan by the Wai-wu Pu. But it is evident, from the remark in Sir John Jordan's covering despatch, that "the Ministers laid special stress on the effective measures being taken to stop this illicit importation," that what the Chinese Government really want is that this Government should take more effective steps to stop the smuggling of prepared opium from this Colony into China,
Measures involving amendments of the Raw and Prepared Opium Ordinances might be devised, by which the smuggling both of raw and prepared opiam out of Hong Kong would be rendered very much more difficult than it is at present. Such measures could, however, not be adopted till after the expiration of the existing opium farm, because they would involve variations of the grant, and would entail direct and considerable expense on this Government. But the prevention of smuggling into her borders is a matter which concerns China, and I submit that she should not be given the assistance of this Colony in mitigating such smuggling unless she will purchase that assistance by granting compensating advantages. I submit that this question be brought up for discussion a year hence, when, if the other questions alluded to are solved, others will, without doubt, have arisen for the settlement of which this Government would be anxious to negotiate.
10. The three points discussed above are the only ones dealt with in the correspondence accompanying your Lordship's despatch which directly concern this Government. But, as I have already indicated, the whole policy of His Majesty's Government in reference to opium must affect this Colony, and I trust I may, therefore, be excused if I add the following general remarks on the subject.
Just as it is hopeless to expect the establishment of a national currency for China
3
until the Central Government takes into its own hands the control of the provincial mints, even so is it useless to expect that the Chinese Government will succeed in enforcing the Opium Edict of the 20th September last until it takes into its own hands the regulation of the traffic in opinm. This traffic at the present time is vested in a separate monopoly in each province, from which the Provincial Governments, always hard-pressed for money, draw a considerable proportion of their revenues. As Sir John Jordan very pertinently remarks in the antepenultimate paragraph of his despatch of the 12th December last, the financial side of the question has not been sufficiently considered. It appears that the Central Government receives 2,000,0001. out of a total revenue of something less than 7,000,000/, collected upon native opium alone. The Viceroys of the various provinces concerned use these 5,000,000l. for their own administrative purposes, and cannot possibly forgo such revenue without a dislocation of the provincial finances, which, I venture to say, few of them are in a position to deal with.
This Edict is nothing new. Innumerable Edicts containing similar provisions have been promulgated in the past without producing any abiding effect. In the meantime the system of Government in China has not changed, and it is idle to expect a better fate for the new Edict than its predecessors shared.
If, however, I am wrong and the Chinese Government accomplishes the unexpected and succeeds in enforcing the Ediet, then there will be no demand for Indian or other opium, for there will be no opium smokers.
In the interests of this Colony I would respectfully urge that it would seem prema- ture to take any further steps than have been taken in limiting the export of opium from India.
11. I attach a copy of a letter which I have addressed to His Majesty's Minister at Peking on the subject of the proposals discussed in the earlier part of this despatch.
I have, &c. (Signed)
Sir,
F. H. MAY,
"Officer Administering the Government,
Inclosure 2 in No. 1.
Acting Governor May to Sir J. Jordan.
Government House, Hong Kong, May 9, 1907.
I HAVE had under my consideration your Excellency's despatch of the 17th December last, inclosing copies of despatches which you have addressed to His Majesty's Secretary of State for Foreign Affairs on the subject of the Opium Decree of the 20th September last, and of the Regulations made by the Chinese Government to give effect
to that Decree.
2. In reply, I beg leave to point out that Tong Shao-yi is mistaken in thinking that the original object in establishing the opium farm in this Colony had been to regulate the supply of opium to the Chinese population. This Colony has since the institution of the opium farm always done, and still continue to do, a considerable trade in the export of prepared opium.
3. The Chinese Government new propose that this Government should renounce that trade as far as the export to China is concerned, and should adopt fresh measures to prevent the smuggling of prepared opium into China.
1 observe, however, that the Chinese Government offers no consideration whatever in return for the concession and assistance for which she asks, and in view of the fact that her proposals would involve this Government in considerable expense and entail executive action fraught with no little trouble, I am unable to recommend them to His Majesty's Government for consideration unless the Chinese Government is prepared to fulfil various obligations on her part which are of immediate concern to the prosperity of this Colony, and will offer in addition other compensative advantages.
4. In these circumstances I have laid before the Secretary of State for the Colonies the views of this Government on the subject, and I shall lose no time in addressing you further in the matter when I shall have learned how far those views weigh with His Majesty's Government.
I have, &c.
(Signed)
F. H. MAY,
Officer Administering the Government.
GGS
;