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Inclosure 3 in No. 1.
Hong Kong Opium Merchants to Consul-General Fox.
Sir,
Hong Kong, September 23, 1908. WE have the honour to bring to your notice translations of the following documents, copies of which are inclosed* :-
1. Notification dated Kwong Sui, [34th year, 8th moon, 9th day (the 4th September, 1908), purporting to be issued by the Provincial Judge, the Colonial Treasurer, the President of the Reorganization Board, and the Superintendent of Police of the Province of Kwong Tung.
2. Form of licence referred to in the notification proposed to be issued by the Kwong Tung Coast Defence and Reorganization Board to native shops, authorizing them to buy and sell by retail raw opium.
8. A licence referred to in the notification proposed to be issued by the same Board for smokers of opium, authorizing the purchase by the individual mentioned in the licence of foreign and native opium from native shops.
The notification states that the provisions contained therein will come into force and become operative on the 1st day of the 7th moon (the 25th September, 1908). Under the circumstances, therefore, it would appear that no time should be lost in protesting against the action of the provincial authorities, which, for the reasons hereinafter set forth, we contend, is wholly illogical and contrary to Treaty.
The notification provides that the local authorities shall make-
1. Clear investigation into the number of shops selling raw and prepared opium in
every city, town, village, and hamlet.
2. That the local authorities shall have these shops registered.
3. That the authorities shall then grant them licences for carrying on their business, ie., of selling raw and prepared opium.
4. That after ascertainment and registration of the number of opium shops in the Province of the Two Kwongs, no new opium shops doing business in the buying and selling of raw and prepared opium may be established.
5. All opium shops are to be licensed, and the licence is to be renewable every year, and any shop either buying or selling raw opium without a licence is liable to be seized and shut up.
6. Individuals who wish to purchase raw opium must procure licences, and produce them to the opium shop to enable them to purchase the raw opium from that shop. It is incumbent on that shop to see that the purchaser has a licence enabling him to purchase the specified amount, and no other quantity than that specified in the licence. The purchaser has to hand over to the opium shop one copy of the licence on purchasing and retains the other himself. Purchasers without a licence are subject to arrest and punishment.
We contend that the Governmeat of China having by Articles 5 and 10 of the British Treaty of Nanking, 1842, expressly agreed to abolish the practice named in Article 5 of the Treaty, and having agreed to-
"Permit British merchants to carry on their mercantile transactions with whatever persons they please,"
it is a gross abuse of this Treaty if the provincial authorities of the Two Kwongs are allowed to carry into effect the enactment contained in the notification above referred to. It is obvious that if clauses 1, 2, and 3 are carried into effect, the result will be that a certain number of native establishments selling raw and prepared opium will be ascertained, registered, and licensed, and this will enrtail the sale of raw opium, and only the native establishments registered and licensed will be competent to purchase raw opium from the British vendor, and whether the purchase by the native opium shop be made direct or through an agent, the result will be the same. In effect the British merchant will have his trade cut down to the limits of those who are permitted by the provincial authorities of the Two Kwongs to trade with him. Such a monopoly would prevent other dealers from participating in the opium trade, thus destroying healthy competition and thereby crippling business and causing heavy loss to importers who will
* Not printed.
be at the mercy of the few native shops who hold licences authorizing them to purchase raw opium. Holders of licences would be able to combine to dictate purchasing prices, feeling confident of their position as monopolists in the trade.
We submit that the scheme is illogical and is contrary to Treaty, and is illegal. With regard to clause 4, viz., "That after ascertainment and registration of the number of opium shops in the province of the Two Kwongs no new opium shops doing business in the buying and selling of raw and prepared opium may be established," the result of this clause will be that a monopoly will be created amongst a certain number of existing opium shops,.which shops will, as time goes on, decrease in number by either---
(a.) Retirement from business;
(b.) Seizure and closure by the authorities of shops for an infringement or alleged infringement of the law;
(c.) The purchase by capitalists of the shops and of the licences.
In the course of time, therefore, the sale of raw opium will be in the hands of a few, thus creating a monopoly. In this regard we would point out that it would be obviously difficult for a native shop to judge whether or not a licence was a genuine licence. If a licence presented by a purchaser is found to be false, the proprietor of the opium shop is liable to have his shop seized and shut up, and he would sustain the This would open loss of his entire capital through, perhaps, no fault of his own. the door to fraud, inasmuch as false charges could be trumped up against opium shops in order to get them seized and closed, in order to obtain the forfeiture of their capital to the Chinese authorities. This again will ultimately result in the authorities farming the licensed shops out to those capable of paying heavy sums for them over and above the ordinary licence fees.
If these conditions are to prevail, native merchants will be chary of entering into We the business, and the trade will, consequently, get into the hands of a few traders. predict that in a short space of time the provincial authorities either by closing the existing shops or by farming them out to a few, will get the whole trade into their own hands, thus creating a monopoly, which is expressly contrary to the Treaty of Nanking. With regard to clause 6, on each and every occasion that an individual wishes to purchase opium this burdensome procedure has to be carried out, and on each occasion the purchaser has to pay a licence fee. This will of necessity hamper trade and prevent freedom in the buying and selling of raw opium.
We contend that all the Regulations, as we have in some detail pointed out, form the nucleus of a monopoly which will monopolize the raw opium trade in the province of the Two Kwongs into the hands of a few individuals, and possibly into the hands of the Provincial Government.
It would also be greatly prejudicial to the interests of the Indian Government if such a scheme is permitted to be enforced, especially in the present unsettled and unsatisfactory state of the opium trade owing to the action of the Chinese Government in closing up the public smoking dens; and importers, in view of the further uncertainty of demand from those who would hold a monopoly, would curtail importation, which would mean a material reduction of their purchases from the Government of India's monthly sales.
We think, therefore, that it is advisable to lay the matter before you, so that immediate steps may be taken to stop the Regulations being carried into effect, and we trust you will support us in protesting against this proposed infringement of our Treaty rights.
In further support of our contention we would beg to refer you to the following :---
Article 5 of the British Treaty of Nanking, 1842 :--
The Government of China having compelled the British merchants trading at Canton to deal exclusively with certain Chinese merchants, called hong merchants (or co-hong), who had been licensed by the Chinese Government for this purpose, the Emperor of China agrees to abolish that practice in future at all ports where British merchants may reside, and to permit them to carry on their mercantile transactions with whatever persons they please; and His Imperial Majesty further agrees to pay the British Government the sum of 3,000,000 dollars on account of debts due to British subjects by some of the said hong merchants (or co-hong) who have become insolvent and who owe very large sums of money to subjects of Her Britannic Majesty."
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