2
Several ill-considered schemes were put forward at the outset as the basis for a monopoly for the disposal of the stocks acquired under the agreement, but a monopoly company with a capital of 2,000,000 dollars has now been established. Shares to the value of 1,200,000 dollars have been bought by native opium dealers and officials in the know, and I am informed on good authority that the civil and military governors have each invested 200,000 dollars in the venture. The remaining 800,000 dollars has not been taken up, but it is understood to be reserved for the provincial Government without payment. The company is, in fact, a joint-official merchant undertaking, so familiar and frequently so lamentable a feature in Chinese enterprise. The opportunity for piling up regulations has not been let slip, and no less than three sets have been issued within a fortnight dealing with the licensing of dealers, sales of opium, and permits for smokers. The result is that no one knows precisely the rules under which the monopoly will be conducted.
I have been in touch with a Chinese merchant at Hong Kong who holds 200,000 dollars of scrip for himself and his friends, and is also interested in the trade to some extent. He has a good business reputation, and has frequently been consulted by both parties to the agreement, and was offered a post in the administration of the monopoly but declined it. He tells me that it was first of all proposed by the monopolists to limit the number of selling licences and reserve these for their friends and relations. This has been dropped, and his own scheme will be given a trial for three months. The scheme places the preparation of the drug on the hands of the monopolists, and a staff of boiling and testing experts has been engaged. As regards distribution this varies according to the locality. At Canton and Fatshan, the company itself regulates the sales by means of licensed shops (80), which pay a deposit of 1,000 dollars and a fee of 100 dollars. The vendor is allowed 2 per cent. of the fixed price, 15 dollars per Chinese ounce, and is liable to a fine should his sales fall below a fixed minimum. The rest of the province is divided into sixty-two divisions-twelve first-class and fifty second-class. Each division has been advertised for open tender, which will be given to the bidder offering to dispose of the largest quantity within three mouths. The licence fee for a first-class is 500 dollars, and for a second-class division 300 dollars. The successful farmer must pay cash. for his He may stocks, and deposit an additional 10 per cent. as security for his contract. open an unlimited number of shops in his division. There are no restrictions against smoking, and even the farce of a medical certificate will be abandoned in practice.
It is estimated that one chest will yield 100 Chinese ounces of prepared opium, so that the price realised. chest will be 15,000 dollars. This should bring the mono-
per polists a net profit of about 14 millions in sixteen months, and it may be safely inferred that the temptation to mix the legitimate drug with the cheaper Yünnan article and to adulterate it with pigs' blood and lard will be too strong to resist, so that the prospective profits are even larger than the figure given above. Buyers for shares in the monopoly scheme have been tumbling over one another in eagerness, and the present prices are quoted 100 per cent. above par.
The weak spot in the monopoly is not a scarcity of demand or any fear of popular disapproval, but the competition smuggled opium. I am informed that the amount available for smuggling within the next year is about 1,500 chests of uncertified Indian opium, via Macao, Kwangchouwan, and Tongking; 500 from Formosa, and 1,000 from Yunnan, and a quantity from Fukien, In addition, there are 100 chicsts of Yunnan opium at Pose and 100 at Nanning. The smuggling danger is a real one for the monopolists, as the price is so much lower. General Lung has, however, assured his friends that he can and will deal with this danger effectively by means of gunboats and military patrols. As a token of his earnestness in the new scheme, it is interesting to note that the smuggling depôt and opium dens at the Canton Cement Works, under the control of his brother, have now been suppressed.
In conclusion, I have the honour to report that there has been no popular protest against the introduction of the monopoly and the legalisation of opium smoking within the province.
I have, &c.
E. C. WILTON.
3
Enclosure 2 in No. 1.
Memorandum of Agreement.
MEMORANDUM of agreement made the 1st day of October, 1915, between the companies, firms, and persons whose names appear at the end under the heading "the parties hereto of the first purt" of the one part, and his Excellency Tui Nai Haug, the special envoy appointed by the Government of the Republic of China by Presidential Mandate, dated the 30th day of April, 1915, for the prohibition of the sale of native opium in the Provinces of Kiangsu, Kiangse, and Kwangtung (bereinafter called "the Envoy"), of the other part, whereby it is agreed as follows:-
1. The parties hereto of the first part shall sell, and the cavoy shall purchase, 1,200 chests of certificated opium, of which 806 shall be chests belonging to the parties hereto of the first part (as hereinafter defined), or held by them or some of them for sale on account of others, as set out opposite the signatures to this agreement of the parties hereto of the first part, and 394 chests shall be chests obtained by the parties hereto of the first part from Suanghai.
2. All opium sold to the envoy under this agreement shall have been certified by the Indian Government for export to China.
All opium purchased under this agreement shall be sold or disposed of by the envoy for consumption in Kwantung, and no opium shall be shipped to Kiangsu or Kiangse.
3. The envoy shall pay for all opium purchased on delivery in the Hong Kong notes of a British bank carrying on business in Hong Kong at the following prices:
For Malwa opium (old and/or new)
Guzerat alwa
W
Patua Benares
1
--
་་
Dollars. per picul 9,30
9,110 per chest 1,150 8,950
-
4. All payments for opium from Shanghai shall be made in taels, and the prices set out in clause 3 shall be converted into tuels, at the rate of 79 taels for each 100 dollars Hong Kong currency and payments made accordingly, and drafts shall be drawn on Hong Kong against documents in respect of each shipment from Shanghai, and such drafts shall be met by the envoy at the above rate of exchange. Non-duty paid opium from Shanghai shall be shipped to Hong Kong, and duty paid opium shall be shipped to Canton."
4A. If any chest of Malwa opium, or of Patna or Benures opium, shall, owing to circumstances over which the parties hereto of the first part have no control, contain less than the normal quantity of opiuni, whether cakes or balls (as the case may be), delivery shall nevertheless be taken by the envoy, but the price shall be proportionately
diminished.
5. The weight allowances given to Chinese purchasers in respect of all Malwa opium as specified in clause 8 of the agreement between the parties hereto of the first part of the 8th July, 1913, shall be allowed to the envoy in respect of all opium purchased which is Malwa opium, but such Malwa opium must be weighed within two months from the 1st October, 1915.
6. The envoy shall take delivery without fail of not less than thirty chests of all opium purchased under this agreement during the mouth of October 1915, and of not less than thirty-five chests during November 1915, and shall thereafter without fail take delivery in each month, commencing in December 1915, of not less than one- sixteenth of the balance of all opium purchased. If the envoy shall not have taken delivery of any monthly quantity or any portion thereof within thirty days after any mouth, the parties hereto of the first part shall be entitled to sell such opium either by public auction or private contract, and the envoy shall pay to the parties hereto of the first part all losses, damages, costs, charges, and expenses incurred or sustained by them,
7. The envoy shall, in respect of all opium purchased under this agreement, pay to Messrs. David Sassoon and Co. (Limited), for each chest of opium taken delivery of by him, the sum of 3,500 Mexican dollars in accordance with the agreement between the envoy and the Shanghai Combine, dated the 1st May, 1915, in addition to the price for such chest as hereinafter provided.
8. All payments to be made by the envoy for all opium purchased shall be made to Messrs. David Sassoon & Co. (Limited).
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