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as far as I can judge, an honest man, to consider carefully the facts I had put before him, and to remember that the efforts this Government was making to suppress the amuggling of opium, which was conducted at present on a large scale both from Hong Kong and from Macao, would be neutralised unless the extravagant importa of the drug into Macao were cut down with an unsparing hand.
Finally, I told him that the Macao farmer would in 1914 probably have nothing to fear from a rival in Hong Kong, because I was considering whether I should advise my Government to abolish the Hong Kong opium farm in that year. I considered it. expedient to give him this information as it would strengthen his hands in disuading his Government from granting an extension of the Macao farm.
5. In conclusion, I wish to emphasise the fact, which I made clear to M. Sanches de Miranda, that the success of the efforts of this Government to stop the smuggling of opium, and indeed the financial success of a Government opium monopoly in Hong Kong, depend largely on the restriction of smuggling from Macao. The means of communication between Macao and Hong Kong are frequent and easy, and the opportunities of smuggling prepared opium into the colony and through the colony on board of steamers to other countries are so many that with an excessive supply of opium in Macao the consequent smuggling must largely defy the utmost vigilance of any preventive staff, no matter by whom organised.
I have, &c.
F. H. MAY.
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risks. Deduct, say, 40 per cent. for risk, and the fee left to the Government would be, in round figures, $450,000.
October 23, 1912.
R. O. HUTCHISON, Superintendent of Imports and Exports.
for
Note. According to the Hong Kong farmer, expenses might come to $12,000 a-month (I believe this figure to be much too great, in view of the small danger of
The margin smuggling from China). The capital he considers $150,000 sufficient. risk ought to be greater owing to the fear of a rise in the price of raw opium.
2. On these suppositions the balance would work out:—
Total profit
Deduct―
Expenses
Interest on capital at 15 per cent.
Net profit
804,400
144,000 22,500
166,500
637,900
Making an allowance for risk of 50 per cent., the amount that could be paid to the Government would be $318,950.
3. The farmer says he thinks he might get it for less.
R. O. HUTCHISON, Superintendent of Imports and Exports.
Enclosure 2 in No. 1.
Estimate of the Rental of the Macao Farm for Legitimate Consumption.
I HAVE previously given an estimate for the legitimate local consumption of Macao, and think that 135 chests is a reasonable estimate. The export is to be taken at 120 chests.
2. The price of raw opium (uncertified) at the last auctions was 1,800 rupees, or, taking the dollar at 28., $1,200 per chest. The price of raw opium may increase, but, with the severe restrictions obtaining in China, the price of prepared opium can probably be increased in proportion.
3. The Macao farmer is at present selling at $4.80 per tael for local consumption, and $3 per tael for export.
4. No figures are available for the cost of producing prepared opium, so I propose to use the method adopted by the Hong Kong farmer. One chest of raw opium ought to produce 1,100 taels of prepared opium. In estimating the cost of production, the Hong Kong farmer estimates one chest at 1,000 taels, and assumes that by using this figure be fully covers the expense of boiling. That is to say that the cost of production is about 10 per centum of the cost of raw opium. In Macao the expenses such as reut, &c., are probably less, but the quantity boiled is less. The figure does not include the cost of a preventive staff.
5. On the above assumptions we get :-
(a.) Local consumption—
Actual cost of 185 chests of raw opium 135 x $1,200 = $192,000. At 1,000 taels per chest amount of prepared opium produced
tael 8192/133.
135,000 taels, therefore cost per
Actual amount produced 148,500 at a total cost of $148,500 x 192 135.
Therefore profit per annum on local consumption = $148,500/ 4.80 192
= $592,800.
100 135
This is sold at $4.80 per tael.
(b.) Export.
The cost of producing is the same bat it is sold at $3 per taol. Therefore profit per annum on export $132,000/ 8.00
Tota! profit
= $304,400.
192 100 135
—
= $211,600.
6. The expenses of a preventive staff in Macao should not be great. $10,000 should easily cover it.
7. The capital of the farm would be about $250,000. On this 15 per cent. could be expected as ordinary profit, ie., $37,500, The calculated net profits amount to $784,400. This would leave $756,900, but no allowance has been made for
November 13, 1912.
(Confidential) Sir,
Enclosure 3 in No. 1.
Governor Sir F. May to Mr. Harcourt.
Hong Kong, December 14, 1912. I HAVE the honour to confirm my cypher telegram of the 13th instant, of which a paraphrase is attached.
2. I enclose copy of a letter from merchants in Hong Kong interested in the opium trade, urging the suspension of sales of certified opium in India, and of a letter from the managers of the three British banks here pressing for the same action to be taken. I also enclose copy of translation of articles from a new criminal code alleged The to have been sanctioned by the Central Government of China in May last. translation has been furnished by the manager of the Hong Kong and Shanghai Bank, The attached summary of the and I cannot vouch for the authenticity of the code. situation in some of the provinces of China has been likewise furnished to me by the manager of the Hong Kong and Shanghai Bank.
3. The situation is undoubtedly very grave, and I would ask you to bring it to the notice of the Indian Government with a view to the adoption, if possible, of the measures of relief asked for.
Enclosure 4 in No. 1.
Governor Sir F. May to Mr. Harcourt.
I have, &c.
F. H. MAY.
Hong Kong, December 13, 1912. (Telegraphic.) P.
REFERRING to your telegram of the 23rd July, I have received fresh repre- sentations from British banks and opium merchants concerning crisis caused by excessive stocks of Indian opium at Hong Kong and Shanghai, said to be worth 12,000,000. sterling, and caused by regulations imposed by Chinese contrary to treaty. My correspondents urge that sales of certified opium by Indian Government should cease.
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