8
observed by the Chinese Government, who seem to be 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 postponed is quite inadmissible for the reasons set out below:-
any
reduction 1. The notification of the 21st November, 1911, by which the Calcutta sales for the year were fixed requires three months' previous notice to be given of
You make the suggestion that uncertified in the quantities to be put up for sale. opium should be substitueil 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 Department, Nos. 671 and 59, of 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 China's repeated violation of obligations in the modify our arrangements to suit them, past has, no doubt, suggested to traders the prudence of anticipating similar possibilities 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 Sassoon's 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 commitments of banks is not justitied 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 gue 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.
(6.)
Sir J. Jordan to Sir Edward Grey.
(No. 128.) R.
Peking, June 8, 1912. Situation at Shanghai is undoubtedly most serious, and His Majesty's consul- general considers that a financial crash is imminent. Merchants allege that they are obliged in self-defence to continue purchasing so long as Government of India sells. They urge suspension of sales as only remedy. I am not in a position to say how far
9
their contention is justified, but piling up opium in Shanghai, for which there is no market, must lead to a catastrophe.
Obstructions are confined to Chekiang and Fukien, whose normal annual consumption is about 9,000 chests. I have exhausted every effort, but Central Government is evidently unable to enforce observance of treaty,
(Sent to India.)
(7.)
Sir J. Jordan to Sir Edward Grey.
(No. 129.) R.
Government of India telegram of the 6th June, which crossed my telegram No. 128
Peking, June 11, 1912. of the 8th June.
The
arguments of the Government of India do not appear to me to take sufficient account of disorganisation produced by revolution in China, which was not a contingency in the nature of an ordinary trade risk that merchants could possibly have anticipated. Although upheaval has affected all trade, it has especially hit the opium business, the continued existence of which, under Agreement of May 1911, largely depended upon a Central Government able to enforce its authority in provinces.
The depreciation in existing stocks of opium is estimated by merchants at 2,000,000Z., and their request is made with a view to prevent further depreciation rather than enhance value of their stocks. The unprecedented fall of 1,700 rupees per chest in June sales in India has caused a panic in Shanghai, and banks in some cases are demanding repayment of advances or auction of stocks. The commitments of the banks amount to 40,000 taels (say, 6,000,000%), of which share of Hong Kong and Shanghai Bank is over 800,000
Substitution of uncertified for certified opium would encourage smuggling and afford no remedy, while suspension of sales, even temporarily, would undoubtedly prejudice future enforcement of agreement with China, but situation seems to demand some alleviation. If sales were suspended, it might be, perhaps, possible to arrange with Chinese Government that balance unsold this year should be added to next year's fixed import.
Every possible pressure has been exercised on Yuan Shih-kai and the Government generally. They are, I believe, quite sincere in their desire to uphold opium agreements, but they have not power to enforce them in Chekiang and parts of Fukien, where there are strong anti-opium societies which practically ignore instructions from Peking.
(Sent to India.)
(No. 95.) R.
(8.)
Sir Edward Grey to Sir J. Jordan.
Foreign Office, June 17, 1912.
Your despatch No. 234 of the 23rd May. Your representations have my entire approval. The provincial authorities are doing everything to hamper the trade in Indian opium and nothing to prevent the cultivation of the poppy.
You should inform the Chinese Government that, after careful consideration of the facts before them, His Majesty's Government have reluctantly come to the conclusion that their present policy aims, not at the extinction of the opium habit, but at the substitution of the native for the foreign drug, thus defeating the humanitarian objects of His Majesty's Government in negotiating the Agreements of 1907 and 1911. China, by flagrantly violating her promises under articles 1 and 7 of the Agreement of 1911, has conferred on His Majesty's Government the right to denounce that agreement, and the Chinese Government must feel that the Indian Government is acting generously as far as China is concerned in continuing the reduction of export in face of her attitude, and that China would not be entitled to complain if the Indian Government cancelled or suspended on their side the operation of the agreement.
We are reluctant to bring the question of opium into the larger question of recognition, but His Majesty's Government could only be expected, when the time comes, to grant recognition to the Republic of China if the Chinese Government were in a position to give such assurances as would fully safeguard British treaty rights and
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