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parliamentary questions. For instance, we have not received any official information in confirmation of a statement made by Sassoons in another telegram to the effect that appeals made by their representatives in China to Jordan have received the reply that every possible attempt has been made to cause the treaty to be observed by the Chinese Government, who seem to be either unwilling or unable to make the provinces obey their will. We are of opinion, however, that whatever may be state of affairs in China at present, the request of the merchants that the sales should be discontinued or post- poned is quite inadmissible for the reasons set out below:--
1. The notification of 21st November, 1911, by which the Calcutta sales for the year were fixed, requires three months' previous notice to be given of any reduction in the quantities to be put up for sale. You make the suggestion that uncertified opium should be substituted for certified, but no reduction in the proportion of either class is contemplated by the notification. Moreover, the quantities for markets outside China were fixed with due regard to the requirements of such markets, and we are therefore against increasing them at the expense of certificated opium, as this would afford ground for the complaint that exports to non-China markets are in excess of requirements, and may be smuggled in China. It is also necessary to give three months' previous notice of any reduction at Bombay sales, as collector reserves the right to vary conditions only after such notice. The sale month by month of the amounts specified is contemplated by the conditions (please refer to separate revenue proceedings of the Finance Depart- ment, December 1911 and March 1912 respectively).
2. Any loss which may be suffered by merchants must be looked on as one of the ordinary risks incidental to trade. Opium has yielded them immense profits in the past, and also, it is believed, during the present operations, and they cannot expect us to modify our arrangements to suit them. China's repeated violation of obligations in the past has, no doubt, suggested to-traders the prudence of anticipating similar possi- bilities on this occasion.
3. The disingenuous demand of the merchants that sales should be stopped has largely in view the enhancement of the values of the large stocks which they now hold.
4. If India stops sales, even for a time only, her position in regard to the enforcing
of the terms of the agreement with China will of necessity be prejudiced.
5. In opposition to Sassoons' protest, some firms in Calcutta press for the sales to be continued on the ground that, having done business against future sales, stoppage would cause them great loss.
6. If sales are stopped, or uncertified opium is substituted for certified, at the Calcutta auctions, India will lose a large amount of revenue which can be ill afforded, and which may aggregate several crores. Moreover, we cannot add to exports in future years any chests out of specified number which may not be exported this year. Revenue will not be postponed, it will be lost permanently.
7. Native States to whom definite promises have been made, will similarly suffer heavy loss. If traffic is stopped they will have to be compensated in some other way. Native States cultivators will also, of necessity, lose heavily.
8. We are under no obligation to render assistance to merchants in regard to their indebtedness to banks. The suggestion that a financial crisis will be caused as a result of the commitinents of banks is not justified by the information at our disposal.
For the reasons set out above, we do not propose to discontinue auctions while reasonable prices are obtained. Our information is that suitable biddings should be obtained at present without difficulty, and we are strongly against suggestion that we should go back on assurances which have been given publicly in the financial statement and in other places. Our firm conviction is that China is making an attempt to replace Indian opium by the indigenous drug. Our earnest request is that strong pressure may be applied to China to make her act up to the agreement for which she professed to be most grateful. We also suggest that the participation of Great Britain in the proposed national loan to China might, in addition to the methods contemplated, be used as lever.
The text of the merchants' memorial is as follows:-
"We earnestly request you to bring to the notice of his Excellency the Viceroy the extremely critical position of the opium trade in China. Chinese merchants having already bought opium, express their inability to take delivery because they are obstructed by several provincial authorities who unreasonably refuse to admit Indian
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opium in defiance of existing treaties. The consequence is that our stocks go on accumulating, and we are unable to effect sales. We are obliged to go on buying so long as opium is put up for sale by Government in order to keep up rates, otherwise China markets would collapse and our losses would then be unbearably great. It is on the faith of explicit treaties entered into between British and Chinese Governments, particularly that of May 1911, that merchants have hitherto been buying opium. It is notorious, however, that those treaties have been in many ways defiantly disregarded, the resumption of cultivation of opium in China is unchecked, and in several most important provinces free and unrestricted cultivation is decidedly in evidence. Repeated efforts have been made to secure fair play for opium trade in China in accordance with existing treaties. These efforts have hopelessly failed, because present Chinese Govern- ment is evidently unable to secure observance of treaties by its own provincial authorities. Unless the British Government will at once come to our rescue and give us strong support, a grave financial crisis will follow, which will result in widespread dislocation of trade in general. There are several ways of averting a crisis. May we venture to make a suggestion, which is that some arrangement should be arrived at whereby our present stocks can be taken over by the Chinese Government and dealt with as the exigencies of their Government may require. We are quite willing to put an end to our trade in opium and stop further purchases, and, consequently, we respect- fully request you to stop further sales of Bengal (opium) in Calcutta and the export right of Malwa (opium) in Bombay. This will put an end to all friction and conflicting interests, and will secure earliest possible cessation of shipments of opium to China which the British Government so sincerely desire. May we add merchants signing this appeal to Government represent their branches not only in Bombay but also in Calcutta and China. We beg his Excellency the Viceroy to cable the terms of our telegram to the Secretary of State for India, so that negotiations may be promptly entered into with the Chinese Government, and a grave financial crisis averted."
Enclosure 3 in No. 1.
Government of India to the Marquess of Crewe. (Telegraphic.) P.
June 14, 1912. PLEASE see Jordan's telegram dated the 11th instant to Foreign Office regarding opium.
We quite saw that disorder in China might probably result in lessening of merchants profits. Merchants must, however, have foreseen the probable risks which the transactions involved, having in mind the repeated failure in the past of China to fulfil obligations and her constant ignoring of treaties. The question is not affected to any extent by the fact that the revolution brought about the failure to keep engage- ruents. We do not consider it admissible to disregard terms of notifications fixing Bengal sales and, apart from one sale of 670 chests for the 24th September, this is the only way in which the suggestion that sales for 1912 should be suspended can be effected. The proposed arrangement with China, by which chests unsold in 1912 would be carried forward into 1913, would support the provincial Governinents in their present attitude, and is therefore very undesirable.
Reference is made in Jordan's despatch to Foreign Office, No. 180, dated the 18th April, to a fall in the value of stocks by 2,000,000% from apparently 9,000,0001. Presumably the depreciation is not on prices paid originally at sales, but on market rates; we should like to be informed as to number of chests on which the value is based.
We are not aware where Jordan obtained his information as to commitments of banks in China. Statements as to commitments in India are shown by enquiries to be much exaggerated. Not more than 1,000,000%. at most has been advanced against opium. Large firms are very strong financially, and the opium in hand stands at prices much in excess of those that were paid at the sales; failure among such firms is there- fore inconceivable. At the most small speculators might suffer some loss. It is reported that the prices at Calcutta auction were manipulated, and on the 5th local prices per chest were 200 rupees higher. Though prices less than in previous month they are still very high.
Please see Jordan's telegram to Foreign Office, No. 128, dated the 8th instant. Merchants' assertion that they must go on buying in defence of their own interests is clearly indefensible. We cannot see why stocks in Shanghai should be affected by
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