[This Document is the Property of His Britannic Majesty's Government.]
607
CHINA TRADE.
CONFIDENTIAL.
[22023]
No. 1.
[July 4.]
SECTION 1.
C.0.
29969
RECE
!
Colonial Office to Foreign Office.-(Received July 4.)
REG 21 AUG 07)
THE Under-Secretary of State for the Colonies presents his compliments to the Under-Secretary of State for Foreign Affairs, and is directed by the Secretary of State to transmit, for the information of Sir E. Grey, with reference to the letter from the Colonial Department of the 14th ultimo, a copy of a Confidential despatch from the Acting Governor of Hong Kong (and inclosures) on the subject of the proposals of the Chinese Government for gradually abolishing the use of opium.
Downing Street, July 3, 1907.
(Confidential.) My Lord,
Inclosure 1 in No. 1.
Acting Governor May to the Earl of Elgin.
Government House, Hong Kong, May 15, 1907. I HAVE the honour to acknowledge the receipt of your Lordship's Confidential despatch of the 20th February, covering correspondence with regard to the proposals of the Chinese Government for gradually abolishing the use of opium, and requesting the observations of this Government on those proposals of the Chinese Government which especially concern Hong Kong.
Your Lordship adds that it is the desire of His Majesty's Government to meet the wishes of the Chinese Government in this matter as far as possible.
2. The proposals which particularly concern this Colony are contained in the 4th paragraph of the Memorandum handed to His Majesty's Minister at Peking by the Wai-wu Pu on the 29th November last,
The first proposal is that this Government should strictly prohibit the boiling of opium in Hong Kong for export to China, and the second that His Majesty's Govern- ment should agree to the Chinese Government imposing a prohibitive duty upon prepared opium exported from Hong Kong into China.
3. With regard to the first of these proposals, I must in the first place correct a statement made by Tong Shao-yi and quoted in Sir John Jordan's despatch of the 12th December last, to the effect that the original object in establishing the opium farm in Hong Kong had been to regulate the supply for the local Chinese population, This is not the case. Successive Hong Kong opium farmers have done a considerable export trade in prepared opium, and it was to enable them to carry on that trade that the number of chests to be drawn by the opium farmer has been fixed at an amount which is in excess of local requirements.
4. The Hong Kong opium farmers have, however, never, as far as I am aware, themselves exported prepared opium to China for the reason that, in addition to the customs duty which is double that on raw opium (because opium boils down into half its original bulk) and li-kin, an additional tax is levied in China on foreign prepared opiun which prevents it from competing with prepared opium boiled in China.
5. Nevertheless, it is open to the opium farmer in this Colony to export prepared opium to China if he is able to produce the drug sufficiently cheaply, and it is conceivable that after securing a profit on his undertaking by sales in Hong Kong at the high prices his monopoly enables him to command, he might put his surplus produce on the market in China at rates that would enable it to compete with the native prepared drug.
The prohibition, therefore, would entail a curtailment of the rights of the opium farmer under the existing grant made for a period of three years from the 1st March last, copy of which is inclosed, and might actually diminish his legitimate business under the grant. The prohibition could not, therefore, be imposed without exposing this Government to a claim for compensation on the part of the farmer.
6. In order to avoid any such claim and to obtain the consent of the opium farmer to the legislation necessary to impose the prohibition, I have to suggest that the
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