[This Document is the Property of His Britannic Majesty's Government.] 485
AFFAIRS OF CHINA.
CONFIDENTIAL.
со 6654
[February 20.]
SECTION 5.
Prof 17 MAR
No. 1.
[6129]
(No. 38.) Sir,
Sir J. Jordan to Sir Edward Grey.-(Received February 20.)
Peking, January 26, 1911. REFERRING to my telegram No. 16 of the 23rd instant, sent in reply to your telegram No. 10 of the 19th instant, regarding the taxation in Manchuria of cigarettes manufactured in the British-American Tobacco Company's factory at Mukden, I have the honour to report briefly on the action taken in this case since the date of my last despatch to you on the subject, No. 7 of the 6th January, 1910.
On the 6th February Mr. Willis, Acting British consul-general at Mukden, reported that, in reply to his question as to whether any compromise was possible, i.c., between the company's claim to pay export and coast trade duty at a specific rate of 45 tael cents per 100 catties, with liability to li-kin, as charged on the products of the Shanghai and Hankow factories, and the provincial authorities' demand for a 5 per cent, ad valorem rate, with immunity from any further taxation, the Commissioner of Foreign Affairs had informed him that "the Provincial Government were not prepared to grant more favourable terms than those now offered."
The Wai-wu Pu could not be induced to bring pressure to bear on the Viceroy of Manchuria to make him alter this decision and give effect to the Revenue Council's assurance of August 1909, so with the company's consent, the matter was allowed to drop for the time being, the company being allowed provisionally to export cigarettes made in the Mukden factory under a guarantee to pay whatever duty might subsequently he agreed upon,
As a matter of fact this arrangement suited the company very well as it placed them in a favourable position vis-à-vis their Japanese rivals, the Newchwang factory, whoso Manchurian trade was hampered owing to disputes with the Chinese authorities on the subject of duty, and who were therefore on the watch to share in any concessions which might be obtained by the British company.
In the month of August the Manchurian authorities reopened the question themselves, repeating their demand for a 5 per cent, ad valorem payment, and threatening to increase the production tax on raw tobacco if their terms were not accepted.
After protracted negotiations between the commissioner of foreign affairs and Mr. Willis an arrangement was come to whereby (1) Shanghai terms were to be granted on shipment to all points in China proper; (2) a uniform duty of 1 tael per picul of 100 catties (1334 lb.) was to be paid, which would free the goods from any additional taxation in transit and within the limits of the Manchurian trade
marts.
This arrangement was reported to me by Mr. Willis on the 9th January, 1911, and two days later he wrote to say that the London directors of the company had telegraphed to their local agent refusing to agree to these terms and insisting on their Mukden factory being placed on the same footing as their factories in Shanghai and Hankow.
On the 18th January I informed Mr. Willis that I approved the suggested compromise, which appeared to me to be a reasonable one under the circumstances.
I have the honour to enclose copies of this correspondence.
I do not think there is any likelihood of the Chinese Government carrying out the original offer of the Revenue Council to grant "Shanghai terms " to the Mukden factory, and as it is essential to the successful development of the company's business in Manchuria that they should retain the good-will of the provincial authorities I think they would be well advised to settle this longstanding question by accepting the terms now offered.
[1909 u-5]
I have, &c.
J. N. JORDAN.
B