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(III) PAPERS (1927-1929) RELATING TO THE OPIUM POLICY OF THE HONG KONG GOVERNMENT AND THE EXPERIMENTAL REDUCTION OF PRICE OF OPIUM AT HONG KONG.

C.*30236/27 [No. 1].

No. 88.

HONG KONG.

THE GOVERNOR to THE SECRETARY OF STATE.

(Paraphrase.)

7TH OCTOBER.

(Received 10.58 a.m., 7th October, 1927.)

TELEGRAM.

[Answered by No. 90.]

Confidential. In order to achieve a yet more strict control of the very serious problem presented by the smuggling of opium into this Colony, the Monopoly Department has since the 3rd October placed on the market the following fresh varities of chandu :-(A) a mixture of Indian and confiscated opium at $8.33 a tacl; and (B) a brand made from confiscated opium only at $6.66 per tael. These prices are provisional. I am sending particulars of these arrangements by mail of 6th October. The immediate effect has been that the sales of Government opium have soared from 500 to 2,000 taels a day. This rise was beyond all expectations and it is possible that they may go yet higher. In order to meet this demand it is necessary to supplement the stocks of confiscated opium immediately. Otherwise the experi- ment is bound to fail. I accordingly propose to negotiate forthwith for the purchase (In this connexion see your of Persian opium at the rate of 40 chests a month. Confidential despatch of 25th January, 1926.*) I am inquiring of the Government of the Straits Settlements as to the best procedure for getting into touch with merchants in Persia.

In the event of my being unable to get supplies direct from Persia by the 1st of December, I ask your permission to request the Straits Settlements Government to lend me 80 chests. I would refund it from my regular supply when this is arranged.

C. 30236/27 [No. 6].

(Confidential.)

Approved by all members.

No. 89.

INTERDEPARTMENTAL OPIUM COMMITTEE.

MINUTES OF THE SECOND MEETING, held at the HOME OFFICE ON 11тп OCTOBER, 1927

Present:

SIR MALCOLM DELEVINGNE (Home Office), Chairman.

Sir Gilbert GriNDLE (Colonial Office).

MR. G. MOUNSEY (Foreign Office).

MR. M. D. PERRINS (Home Office), Secretary.

THE CHAIRMAN explained that the Committee had been called in order to con- sider the telegram received from the Government of Hong Kong on the 7th October† (paraphrase attached) to which a reply was required at once.

SIR M. DELEVINGNE said that the situation appeared to him to be as follows:- The system of control at Hong Kong (Government sales, high prices, &c.) had, owing to the flood of smuggled opium from China, broken down." The late Governor had estimated the illicit opium consumed in Hong Kong as at least equal in amount to the Government opium consumed. The Hong Kong Government now proposed to capture from the smugglers the huge market hitherto supplied from illicit sources. by the production of a cheap brand of monopoly chandu, with the intention presum- ably, of regaining some sort of control.

* No. 112.

† No. 88.

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SIR G. GRINDLE agreed with this view of the situation and said the amount of illicit opium consumed was clearly very much greater than the late Governor had supposed. The telegram indicated that it was at least four times as great.

SIR M. DELEVINGNE said that if the increased sales resulting from the new policy had been merely a return to the normal sales, of, say four or five years ago before the illicit traffic had attained its present proportions, the position would have been different and it was difficult to see how we could defend the Government's entry into competi- tion with the smugglers for the market which the smugglers had built up outside the market normally supplied by the monopoly. The pressure from the smugglers was continuous. Even if the Hong Kong Government managed to oust the smugglers and capture this market how could they retain it except by continuing to sell chandu superior to that supplied by the smugglers at a low price, and if so, in what respect would things be better than they are now. If, having captured the present market for illicit opium, the Government then proceeded to limit consumption by putting up the price or by other methods, the smugglers would return.

MR. MOUNSEY inquired whether the capture of the illicit market by the Govern- ment was calculated to put a stop to the smuggling. SIR G. GRINDLE said it was impossible to suppress the petty smuggling which prevailed, but the Government might be hoping to break up the wealthy smuggling syndicates. It was very doubtful, however, whether the permanent suppression of the smuggling was possible by this or any other means, whilst the present conditions in China remained.

SIR M. DELEVINGNE said that he thought it would be a mistake to embark on the new scheme unless an overwhelming case could be made out for it, which did not seem possible, and he would be in favour of retaining the status quo. The present position had been explained and defended both at Geneva and in the House of Commons. SIR G. GRINDLE recalled that the Netherlands East Indies had adopted the policy of a reduction in price, but he appreciated that the geographical position of Java in its relation to China was quite different from that of Hong Kong and more nearly resembled that of Malaya.

SIR G. GRINDLE suggested that the action of the Government of Hong Kong, which in his view had been taken quite improperly without the approval of the Home Government, should be accepted as an experimental attempt to deal with the smuggling situation. Could not the Governor be given a period of, say, six months to give the experiment a fair opportunity of success and then called upon to report the result?

MR. MOUNSEY Considered that the new policy of the Hong Kong Government should only be approved if a very strong case could be made out in its favour. His Majesty's Government should be able to show that some benefit would accrue from its adoption. Sir, G. Grindle agreed. After some discussion it was agreed that the Government of Hong Kong should be called upon to explain fully the reasons why the Monopoly Department had undertaken this new policy and asked what results are expected from it; whether it was supposed that the market hitherto supplied by the smugglers could be captured, if so, upon what grounds, and, presuming that the bulk of the "illicit "market be captured, in what way would things be better than they are now. The Committee also considered the proposal of the Hong Kong Government to purchase Persian opium. It was agreed that it should be pointed out to the Govern- ment of Hong Kong that any further large demand for Persian.opium from a British Colony would increase the embarrassments of His Majesty's Government in regard to the traffic in opium from Persia, and that this fact made it all the more necessary that a very strong case should be made out before the Hong Kong Government em- barked upon a policy of greatly increased sales at a low price.

SIR G. GRINDLE pointed out that it had been agreed that the Eastern Colonies must supplement any deficiency in the Indian supply by purchase in the Persian market. If the experiment was a good one and were finally approved, purchase in the Persian market, if necessary for the scheme, would have to be approved also. He saw that any considerable fresh demand for Persian opium did constitute a difficulty for the British representatives, but he contended that the real question was whether the experiment was a good one.

The Committee was informed that the Assistant Legal Adviser to the Foreign Office had been requested to advise whether the proposal that the Straits Settlements Government should loan Persian opium to Hong Kong was permissible under the provisions of Article 6 of the Geneva Agreement. Sir M. DELEVINGNE had very little doubt that it was not permissible.

The Committee agreed that the proposal of the Hong Kong Government was not a matter upon which they could take a final decision, but was of such importance as to require reference to Ministers.

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ཋཱཡཱའE —----—

PUBLIC RECORD OFFICE

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Reference :-

HC.O.882/11

PUBLIC RECORD OFFICE, LONDON ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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