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[This Document is the Property of His Britannic Majesty's Government.]
OPIUM.
CONFIDENTIAL.
[30773]
No. 1.
[July 20.]
SECTION 1.
RECE 10 AUG 10
8
Messrs. D. and Messrs. E. D. Sassoon and Co, to Foreign Office.(Received July 20.)
17, St. Helen's Place, London, July 19, 1912. WE have the bonour to acknowledge receipt of your letter, dated the 15th instant, on the subject of the opium question.
Sir,
We regret to learn that Sir Edward Grey cannot see his way to press the Chinese Government to take over the stocks of certificated Indian opium now in merchants' hands, nor is he able to give any general promise of support as to claims on the Chinese Government for losses sustained by British merchants while the nature and amount of such claims are unknown to him. In connection with this latter point, however, the concluding paragraph of your letter suggests that the Secretary of State is of opinion that a claim could justly be made on the Chinese Government for any losses arising from a further reduction in price of certificated opium below the level now ruling in ludia, but the reasoning which fixes the price of to-day as a starting point is not very apparent.
We cannot but protest strongly against your statement that the magnitude of the losses complained of is in a great measure due to the action of the merchants themselves, inasmuch as the high prices paid to the Indian Government were determined by our- selves and other opium dealers on what must be speculative grounds." If it is speculative to carry on one's legitimate trade under the assumption that His Majesty's Government are able and willing to enforce the observance of treaties, then all business is speculative. The "inflated price" of opium for the China market was solely due to the action of the Government of India in establishing two descriptions of opium, namely, a small quantity certificated for China and a large quantity uncertificated and not available for open importation into China. It is an axiom in all businesses that if supplies are reduced prices must and will rise, and the greater the reduction in quantity the greater the rise in price. So it was with the China opium trade in the autumn of last year-the period to which you refer. The smoker, the boiler, and the Chinese dealer in raw opium, being all ready and willing to pay advancing prices for an article which was diminishing in quantity, it is incorrect to charge the British merchant with carrying on a speculative business if, in his endeavour to continue his regular trade, he is forced by competition to pay the Indian Governinent advaned prices.
Au erroneous impression, due to an imperfect knowledge of the China opium trade, appears to prevail in certain quarters, as from articles which have appeared from time to time in the press we observe that the writers have made much the same statement that appears in your letter under reply. They are evidently of opinion that we and other merchants have bought large blocks of opium with the sole idea of holding same for large profits. Certain stock must necessarily be held by merchants, but a very large proportion of what is thought to he merchants' stock has already been sold to Chinese dealers, but, owing to the restrictions placed upon the trade, the dealers have
to have same cancelled. been unable to take up their bargains and are pressing
It is impossible to attack one interest without injuring others. The banks know this only too well; hence their grave anxiety on the subject of the opium question. If some satisfactory solution of this matter cannot be found soon, serious loss will be sustained not only by the British merchants engaged in the opium trade as many appear to think, but upon all China traders, native and European alike, and on the British shareholders of the exchange banks, who will suffer heavily.
We are pleased to learn that the Secretary of State and His Majesty's Minister at Peking are still actively occupied in endeavouring to induce the Chinese Government to observe the terms of the agreement of May 1911, and, we trust their efforts will soon be rewarded with success, but we may mention that in the meantime the smuggling of uncertificated opium into China from Macao is, according to our last cable advices, increasing considerably, and adding still more to the troubles of the legitimate trade.
[2549 u--1]
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