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The wholesale dealers number 72, the retailers about 700, of whom 522 are in the international settlement, where they have monthly licences, the balance in the French concession.
Owing to the uncertainties of other branches of trade over half the funds of the Shanghai native banks are invested in advances to dealers in opium at 3,000 taels a chest, making their commitments some 10,000,000 of taels.
All the foreign banks have lent on opium, their total holdings being about 6,500 chests say 19,000,000 of taels; and six reputable British firms also have lent on 100 to 200 chests each, as well as two American firms through British employés, and probably other foreign firms have also been tempted by what looked a safe and profitable speculation.
The 700 retailers each hold from two to ten chests, which are outside the total stock reported, and there are also in private godowns and shops a stock of old native drug, for mixing with Indian, computed at 5,000 to 6,000 piculs.
Mr. Ezra holds that in case of a time limit being set by our Government, the above two stocks and the 3,600 chests paid for but left in bond would be drawn on first and would take some six months to exhaust, and that meanwhile the banks, foreign and native, would demand payment of their advances, with the result of a panic which would affect greviously all trade in Shanghai.
I venture to think that the plan suggested in my despatch No. 38, Confidential, of the 16th instant, would obviate the dangers Mr. Ezra apprehends; but the period of six months might prove short if the real supply is nearer 20,000 than 11,000 chests.
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under the agreement of 1911, have loyally complied with its terms in submitting to searching investigations, and to compel them now to reopen their markets even temporarily to foreign opium would involve an injustice and a virtual breach of faith (which neither His Majesty's Government nor the Government of China could defend. The Chinese Government, I feel sure, is not in a position to enforce such an arrange- ment upon the provinces without risking serious trouble, and the British Government could scarcely support a proposal which would justify the provinces in resuming the cultivation of native opium.
I have, &c.
J. N. JORDAN.
Enclosure 2 in No. 1.
I have, &c.
E. H. FRASER.
Sir J. Jordan to Consul-General Sir E. Fraser.
(No. 35.) Sir,
Peking, April 27, 1914. I HAVE received and carefully considered your despatches Nos. 38, Confidential, and 40, of the 16th and 20th instant, setting forth the statements of the representatives of the British importers of opium regarding the present position of their trade in China.
The arguments advanced by the representatives to account for the inflated market price of Indian opium-on which inflation His Majesty's Government, as notified to you in my telegram No. 18 of the 3rd instant, has commented in no uncertain terms do not carry conviction to my mind; on the contrary they tend to confirm the impression, already generally prevalent, that the importers and the dealers are reaping an abnormally rich harvest from the monopoly which they enjoy.
If the importers had been satisfied with a reasonable return on their capital, the dealers could have sold at a rate which, while leaving themselves a fair profit, would have placed the power to purchase in the hands of a considerable number of people who are now barred by prohibitive prices. But under the circumstances created by the importers the market is closed to all but the monied few, and their number is doubtless further restricted by the difficulties of dealing with opium in face of Chinese surveillance. The dealers may have to consider these risks in fixing their prices; but there seems to be no reason why they should be utilised by the foreign importers to inflate prices, to cause stagnation of the market, and to delay indefinitely the consummation of the programme of opium reform to which the British and Chinese Governments are alike committed.
If the importers would honestly put the matter to the proof, by fixing prices at a fair and reasonable margin of profit-the rate of 6,800 taels per chest mentioned by the combine's representative is in my opinion excessive-I am convinced that stocks would pass from the importers' hands with comparative celerity.
The suggestion in your despatch No. 38, that a solution of the question of the disposal of the stocks might be found in the temporary reopening of the provinces to the importation of Indian opium, does not appeal to me as either practicable or just. Large profits have been made by the Government of India and by the foreign importers, while the Chinese Government and many of the provinces of China have made strenuous efforts, involving considerable sacrifices, to secure freedom from opium. These provinces have gone through an arduous course of preparation for examination
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