.
Kauband
339
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average on account of the uncertain conditions arising out of the revolutionary troubles. It will be seen, however, that the fears expressed by the foreign importers in their letter to His Majesty's consul-general of being without a market or the prospect of a market have not been fully realised.
In my telegram No. 30 of the 1st February, I had the honour to communicate the following proposals made by the Chinese Foreign Minister at an interview:—
1. The British Government undertake to import no more opium into China. 2. The Chinese Government will take over the existing stocks and establish an opium monopoly on the basis of the Japanese system which aims at gradual suppression under Government control.
The proposals of the Chinese Foreign Minister would appear to show that the Chinese Government have recognised the futility of the present violent repressive measures for the sudden extinction of opium, and that they have at last realised the danger of violating even opium treaties.
In regard to the Japanese system to which reference is made in the second proposal, I enclose a short report on the State monopoly of opium in Formosa drawn up in this legation. The Japanese opium policy and system for Chinese opium smokers in Formosa appears to have commended itself to the Foreign Ministers as applicable to the needs of China.
There would be no necessity to entertain the Chinese proposal to take over the existing stocks, valued at about 10,000,000, if China had not imposed restrictions on the legitimate trade in contravention of the opium agreements. The history of the recent anti-opium campaign beara testimony to the fact that the Central Government has been too weak to control the independent action of the provinces and to restrain them from violating these agreements in a most flagrant manner.
I have repeated every argument and exerted the strongest pressure in my power in the endeavour to obtain the due observance of the opium treaties, and to prevent the closing of the legitimate outlets for the enormous stocks now lying at Shanghai and Hong Kong. I cannot, however, hold out any strong hopes of any improvement in the present unsatis factory position during the current year. It is possible, indeed, that a period of relaxation may follow the tension caused by the strongly worded proclamations and stringent measures of the provinces. So long as there is a demand for opium, so long will smuggling continue in China and assist the lightening of the heavy stocks in the hands of the foreign importers in Hong Kong and China. But it would be an unfortunate solution of the present deadlock for the British name to be associated with opium smuggling and its concomitant evils.
The financial details connected with the second proposal to take over the stocks will not be easy to arrange under existing conditions in this country. The Foreign Minister had evidently not worked out the scheme in any detail when he presented his proposals, nor did he make any more definite statement than that the stocks would require to be taken over in four or five instalments, He seemed to think that the Cabinet and the National Assembly would endorse his proposals.
Comparing the two sets of proposals put forward by the foreign opium importers and the Chinese Foreign Minister, the latter appears to offer a less complicated and less uncertain solution of the disposal of the stocks, thus affording relief to the foreign importers and foreign banks concerned from a grave and critical situation. I have, &c.
(No. 11.) Sir,
J. N. JORDAN.
Enclosure 1 in No. 1.
Consul-General Fraser to Sir J. Jordan.
Shanghai, January 22, 1913.
I HAVE the honour to forward copy of a communication from the opium importers, setting forth a scheme for the liquidation, within less than two years, of the existing intolerable burden on trade constituted by the large stocks in China.
The scheme pre-supposes the acceptance by His Majesty's Government of the Chinese repudiation of the existing agreements as to the Indian opium trade. It depends on the maintenance within the colony of Hong Kong and the foreign settle- ments here (each of which markets is said to consume 400 chests & month) of the
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licensed sale of the drug. I hear that certain United States citizens purpose bringing forward at the approaching meeting of ratepayers a resolution to close all opium shops within one month, but the risk of such a policy being adopted is, I believe, remote,
Mr. Ezra admits that the scheme will be opposed by the Straits Settlements, Java, and Indo-China, where the Governments have profited enormously through the reduction in the value of uncertificated opium brought about by the 1911 agreement. The French commercial attaché told him that Indo-China made 1,500,000 dollars a year at present from opium, and so its authorities had protested against the recent diminution of the amount of uncertificated drug to be offered at the Indian auctions. Singapore likewise, that used to pay 2,000 taels or so per chest has, he says, maintained the retail cost to consumers while buying wholesale at 900 taels. Java is in a similar position. Each of these markets takes monthly an average of 200 chests; while Hong Kong, Macao, and "other places" take each 65 to 70 chests for their own consumption, although Macao has recently followed the precedent of Formosa in buying direct from the Indian Government.
The effect of the scheme would be to put on India the burden of carrying a considerable stock of Bengal opium for malwa is used outside India only in China- until the China stock had been worked off; to divert the handsome profit
on wholesale and retail business in uncertificated opium from the non-Chinese markets' Governments, and to force them to raise the rates to consumers some 50 per cent. in order to meet the 3,000 taois laying-down cost of the China stocks.
On the other hand, the Indian Government may hope, after the China stock has vanished, to obtain higher prices for what is now uncertificated opium (especially as, for some time at least, there will, in all likelihood, be considerable smuggling of opium by junk and overland into China and consequently an increased demand), and will avoid any claim for refund of the very considerable sums paid for certificates for the 13,000 or 14,000 chests of malwa in China or on the way hither. Indo-China and the other markets, which sell under monopolies, can recoup any extra charges from their consumers, and will be able to keep on the enhanced retail rates after the immediate reason for them has passed; while these higher rates will tend to discourage a vice condemned or, at least, deprecated by all the administrations concerned.
Of the 37,000 chests to be dealt with under the scheme, as shown in Enclosure 2, 11,000 had been before the recent agitation contracted for by native dealers at an average of 3,000 taels, exclusive of the old duty of 150 tacls. The dealers are, through their authorities' action, quite unable to carry out their contracts. If those authorities' sense of justice were alive, they should gladly pay the difference between the contract price and that ruling in the Straits Settlements and the other markets (especially since China has already profited by the extra-duty paid since the 1911 agreement, without giving the stipulated consideration for that duty), in which case the opposition of those Governments would presumably be lessened.
The scheme would not leave the importers scathless, as it does not provide for repayment of the banks' heavy charges for interest and the other costs of keeping the stocks in store.
Probably the fairer arrangement to obviate the possibility of the scheme resulting in a monopoly, for the non-China markets have no stocks to draw on and no other source of provenance, except Turkey, Persia, and Yünnen, would be for India to hold auctions for those markets of uncertificated opium, to be drawn from the stocks in Hong Kong and Shanghai, an upset price equivalent to whatever is considered a fair value say 2,500 teels a chest-being fixed and the number of chests determined by the demand only.
If Shanghai Settlement shops are left unhindered the duty-paid cargo (at present 4,300 chests) will go into consumption here and only the opium in bond will go elsewhere.
With the greatest diffidence I venture to suggest the possibility of estimating the total loss due to the recent course of events in the China opium trade and apportioning it equitably among China, India and Great Britain. It is to the resolution of the House of Commons condemning the trade that the agitators have persistently appealed, as proof that our uation would not object to any measures of reform taken in China, and that the subsequent 1911 agreement need not be considered a serious obstacle to the attainment of their object. It is to the excessive sales of uncertificated drug by India. that the wide divergence of prices in the China market from those elsewhere, with which they used to be practically identical, is generally ascribed. It is to the arbitrary suddenness of China's prohibitive measures that the vast accumulation of opium here and in Hong Kong is due. Even if the importers' plea that they had to keep paying at