CO129-395 - Public Offices - 1912 — Page 579

[This Document is the Property of His Britannic Majesty's Government]

OPIUM.

CONFIDENTIAL.

C

[30490]

No. 1.

Minute by Mr. Max Müller.

571

[July 11.]

SECTION 3.

C. O.

FOR 2 AUG 12!

MR. DAVID, one of the Shanghai opium merchants, called on ine this morning, He wished I had seen him in 1909 in Shanghai in connection with some opium claims. to see the Secretary of State to explains the present position of the opium trade in China and its probable effect on the Shanghai market, but he was satisfied with my assurance that I would report all he had to say.

The burden of his story was exactly what we have already heard, viz., that the opium merchants had made large purchases at the auctions in India relying on the conditions of the 1911 agreement, but that now they found that the Chinese were allowed to disregard that agreement while His Majesty's Government stood by and did nothing. He talked vaguely of enormous losses, of depreciation of stocks, and of a probable financial crisis in Shanghai.

I asked him what exactly be expected us to do more than we were already doing. He admitted that the employment of force in such a cause was out of the question, that to bring a huge claim for damages against China was useless, or, if made à charge on a loan, would be repugnant to public opinion throughout the world, and be added that the idea of making the Chinese Government take over the stocks of opium was impracticable.

I said that the only action possible was diplomatic pressure, and I assured him that both at the legation at Peking and here nothing had been, and nothing would be, neglected in this respect. I knew from experience in Peking how constant was the pressure exercised by the legation, and I mentioned that the Secretary of State had quite recently spoken strongly to the Chinese Minister. I thought it better not to say anything about recognition. I added that we were prepared to continue to exert all possible pressure on their behalf, but I reminded him that at the present moment the provincial authorities openly defied the orders of the Central Government-uot that this was anything new, as it was a mere repetition of my own experiences in 1910. While deploring the recrudescence of the cultivation of opium, it seemed to me a little premature to judge of the real intentions of the Chinese Government. He and the opium merchants maintained that the Chinese Government intended to abolish the trade in Indian opium and establish a Government mouopoly of opium; Ynan Shih-kai, on the other hand, assured us that China would, as soon as order was restored, continue the work of suppressiou. It was difficult to place no faith in the President's repeated assurances, and only time would prove whether he or the opium merchants were right.

The

I then reminded him of the admission he and other opium merchants had made to me at Shanghai in 1909 as to the huge profits they were making. My personal opinion was that they had a long established monopoly of the Indian opium trade; they had cornered the market and raised the prices at the auctions for speculative purposes, and now had to continue buying to prevent others coming in and underselling them. losses they complained of were paper losses, the 2,000,000l. depreciation in the value of their stocks was reckoned on the high prices lately obtained in China, not on the prices paid at the auctions. They now expected the Indian Government to make sacrifices in order to help them to realise the huge profits that they had hoped to make and which were now gradually dwindling away. As to a financial crisis in Shanghai, I reminded him that in 1910 they had tried to frighten us with the prospects of a financial crisis in Hong Kong and nothing had come of it.

Mr. David did not contest the accuracy of these surmises, he actually admitted that the merchants had reaped large profits from the policy of opium reduction, but he maintained that all they now wanted was to get out of the trade.

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