Inclosure 1 in No. 1.
Consul Ker to Sir J. Jordan.
(No. 17.)
Nanking, July 24, 1907. Sir,
BEFORE the receipt of your telegram of the 13th instant, inquiring what were the facts regarding the proposed opium monopoly at Nanking, I had already been in communication privately with Sir Pelham Warren on the subject, and had sent him a précis of the Regulations originally proposed, copy of which I have the honour to inclose herewith. I had informed him, however, that I understood from the opium dealers here that the scheme had broken down owing to the refusal of the members of the proposed Syndicate to find the money which they were called upon to deposit by way of security.
Subsequent inquiries showed that the scheme was not entirely abandoned, but was in a transition stage; and on the 21st instant I called on the Viceroy in the hope of obtaining authoritative information. I found his Excellency very imperfectly informed as to the present position of the question, but he promised to instruct Mr. Sun, the official appointed as Director of the new Office, to call on me and explain fully what was being done. I mentioned that the British dealers in opium at Shanghae were apprehensive that an infringement of their Treaty rights was contemplated, and I invited his attention to Article V of the Treaty of Nanking, which explicitly permits British merchants to carry on their mercantile transactions with whatever persons they please, a privilege with which the provision of Article 2 of the published proposals limiting the trade in opium at Nanking to a certain limited number of licensed merchants seemed to me to be inconsistent. His Excellency promised to look up the Article, and assured me that no infringement of Treaty would be permitted.
On the afternoon of the 23rd instant Sun Taotai called by appointment, accom- panied by the new Associate Director of the Bureau of Foreign Affairs, Mr. U. K. Cheng. He informed me that the proposals for a Syndicate of merchants to prepare the opium under Government control had been already disapproved by the Viceroy-as shown by the inclosed extract from the Nanking "Gazette" of the 19th July---and he brought me a document on which, side by side with the Chinese text of Article V of the Treaty of Nanking, he had written out that section of the new proposals made by the Financial Commissioner and himself which dealt with the question of monopoly. I have the honour to inclose herewith copy and translation of this section. Mr. Sun said that he would supply me with a copy of the whole proposals when they were completed and approved.
I did not offer an opinion as to whether the new proposal did or did not infringe the Treaty, but I pointed out that if the Nanking dealers could only sell to the Government Office it made little difference how many of them were allowed to take part in the trade, and I asked whether the Shanghae importers would not be at the mercy of this Office as regards prices.
To this Mr. Sun's reply was that the establishment of a Government monopoly at Nanking could not affect the general market price of the drug. Although it was intended to extend the system to other places, the carrying out of this intention was conditioned by the possibility of finding funds in each place as had been necessary here, and was therefore very problematical; and even if it were so extended, there would still exist a healthy competition between the Government offices at different places.
Mr. Sun repudiated the idea that native opium might be favoured at the expensc of the Indian drug, and stated his intention, if he remained for as much as three years in the post, to recommend stringent measures for the restriction of poppy cultivation. He laid much stress on the argument that the proposed monopoly was a necessary corollary to the Imperial anti-opium legislation, and said that, in view of the difficulties involved by the scheme, it would never have been taken in hand but for the reiteration of the Imperial commands. As Director of the Government Bank, he had himself advanced the 500,000 taels necessary to start the scheme at Nanking, and he saw no prospect of profit, in view of the heavy expenses of the Office, and of the resolution to diminish the sales year by year. He added that there was much to be done before the schen e could actually come into operation.
I informed Mr. Sua that my instructions were only to report on the facts of the case. I thanked him for his information, which I would duly communicate to His Majesty's Minister, and I agreed to apply to him if necessary for further particulars and explanations.
3
I am sending a copy of this despatch and its inclosures to His Majesty's Consul- General at Shanghae.
Inclosure 2 in No. 1.
I have, &c. (Signed)
W. P. KER.
Précis of Original Proposals respecting the Nanking Opium Monopoly.
27
THE following is a précis from the "Nan Yang Kuan Pao" ("Official Gazette of Nanking), of the 31st May, 1907, of proposals by the Kiangnan Ts'ai Chông Chu (Revenue Department) for the Government monopoly of the sale of prepared opium.
THE Viceroy had instructed the Revenue Department to report on the practicability of a scheme drawn up by an expectant Taotai, Chão Shang-ta, and, if feasible, to draw up Regulations accordingly.
Chao Shang-ta's proposal was that the Government, following the Japanese precedent in Formosa, should undertake the monopoly of the sale of raw opium, leaving the retail of prepared opium in private hands. He argued that in view of the sympathetic attitude of anti-opium societies and of the Indian Government the moment was propitious for the establishment of a Government monopoly at Nanking similar to that in Hupei, the object being to restrict consumption, and not merely to increase revenue as in the latter case.
Such a measure would form a precedent for other reforms, and would tend to convince Great Britain and India of the sincerity of the Chinese Government,
The Revenue Department report that as long as the preventive measures are incomplete the Formosa scheme without modifications would entail an enormous expenditure. They embody the modifications they consider necessary in the following Regulations:-
1. Investigation of Consumption. In order to estimate the consumption of prepared opium an estimate must first be made of the consumption of raw opium. The amount of excise has hitherto been based on the reports of opium dens, which are inaccurate, first because they are apt to minimize the consumption, and secondly because private con- sumption is not accounted for. A fresh system of investigation is necessary. This will be difficult so long as the registration of smokers and other preventive measures have not been carried into effect, but the first essential is to get statistics of the consumption of raw opium. There are registered in Nanking over ten large dealers and fifty or sixty small dealers, all of whom have already elected representatives to manage their affairs. Investigation is now being made by the Chamber of Commerce in accordance with the article in the Central Government's Regulations concerning the inspection of opium shops, and the required estimates must be drawn by deputies of the Government Office in conjunction with the representatives of the merchants.
2. Restrictions on Trade in Raw Opium.-If prepared opium is to be sold by Govern- ment, the raw opium must be bought by Government. But over 1,000,000 taels worth of foreign opium is imported annually into Nanking, and still more native opium from Hsuchou, Anhui, Honan, Szechuan, and Yunnan. The purchase by Government of all this opium would necessitate an enormous initial expenditure, and, moreover, the limit of time allowed for opium shops not having expired, they cannot be closed, while, on the other hand, if they are allowed to retail ad libitum, the Government monopoly will be rendered nugatory. The best plan, therefore, is that after the consumption is ascertained a certain number of establishments of highest standing shall be bidden to contract for the supply of the raw drug required for the Government prepared opium. They shall furnish mutual guarantees, and shall be licensed experimentally for a certain number of All the opium imported shall be purchased from them by the Government Office for Prepared Opium, and no other sales shall be allowed. The hitherto existing small dealers shall either adopt some other trade or shall be allowed to act as branches of the Government establishment, and no illicit buying or boiling of the drug by the public shall be permitted. All such contractors shall pay an annual licence.
years.
3. Preparation of Opium by Merchants. The precedent of the Formosa Govern- ment monopoly, according to which the Government itself prepares the opium, is difficult to follow on account of the expenditure involved and the lack of expert knowledge available. Moreover, the limit of time not having expired, absolute prohibition is
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