CO129-437 - Public Offices - 1916 — Page 162

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agreed on was practically the market price of the day, but no interest was allowed. The 3,500 dollar tax already agreed on was to be paid by the purchasers. In practice, on delivering a chest of opium the combine receive a receipt for 3,500 dollars signed by the commissioner, which is forwarded by the combine to Shanghai 500,000 dollars has been deposited by the commissioner as security.

3. A syndicate has been formed for the purchase and sale of this opium in Kwangtung. The theory of the agreement from the suppression point of view is roughly as follows:-

(1.) The Canton Government have purchased the whole of the Indian opium that under treaty has a right to go into Kwangtung.

(2.) That the opium will be prepared and sold, but only to licensed persons who are known to have the opium craving. The prepared opium will contain an ingredient that will gradually cure persons using it from the opium habit,

(3.) At the end of eighteen months the supply of opium will be finished, and all opium smokers will be cured of their craving. The opiuin question will have then disappeared.

4. The facts are very different. I do not pretend to know full details, but the following generalities may be safely laid down:-

(1.) Officially, the smoking of opium has for some time past been practically pro- hibited in Kwangtung.

been allowed to (2.) Certain classes of people have, during the last few years, smoke opium freely, and certain merchants and officials have been able to make money thereby.

(3.) Other classes of people have been smoking opium-smuggled without officials or persons connected with them being able to make anything out of it

(4.) The present agreement is an attempt to get the smoking of opium officially recognised, and at the same time to make certain that all persons connected therewith shall pay toll, a proportion of which will go to the Government.

5. Very little has been published with regard to the composition of the syndicate, but the capital is said to be something as follows:--

Canton Government

Merchants

Lung Chai Kwang Other officials

•

Dollars.

400,000

800,000

400,000

400,000

The only amount actually paid up is that of the merchants, but the profits are to be paid in the above proportion. A very large number of people have an interest in the syudicate.

6. The syndicate have purchased the 1,200 chests of certified opium from Hong Kong. They boil and pack the opium in Canton. The sale of opium in each district is let to a sub-company, who in their turn let it to the various villages. This has been done by tender. The syndicate sell at 15:00 dollars a tael. Tenders have been asked from the various districts for the amount they require. The company from a particular district undertaking to dispose of the largest quantity is given the monopoly. The syndicate allow the successful tenderer 2 per cent. on his purchase, but he must purchase the full amount he tenders for. If he can purchase more he gets a bonus on his excess.

7. Various regulations have been published that only persons who have licences may purchase opium, and that licences will only be issued to old people who have the opium habit. Licences are issued by the Government, and a fee is charged; anyone paying the fee can get a licence.

8. The syndicate have purchased at an average rate of over 9,000 dollars per chest, and in addition they have to pay 3,500 dollars tax. Their opium therefore costs them 12,500 dollars per chest. A chest will produce 1,100 taels of fairly good opium. Making some allowance for cost of preparation, we may say that it can be produced at 12.50 dollars a tael. The profit cannot therefore be very great, when it is remembered that 15 dollars, the rate at which they sell, is paid in Chinese sub-coin at a discount of nearly 20 per cent. A profit of 2 per cent. to the sub-companies is also small. The opium as at present sold is of very poor quality, and is not selling well. Steps are, am told, being taken to improve it.

9. The syndicate and the sub-companies are really aiming at something much

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bigger, and there are signs of the whole thing becoming a big smuggling co-operation. Though their supply is supposed to be limited to the 1,200 chests purchased, they intend to sell as much opium as they can get from other sources, and there are a number

ways in which this can be got.

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10. The first point in this general move is the abolition of opium suppression police throughout the province. This started as far back as September, and its result can be seen in the increase in the sales in Hong Kong, Macao sales also appear to have increased, and I think it possible that the Macao farmer will make an application for increased imports. He has already imported since his term, 1st August, 1915, 500 cheats, his full allowance for the year. Opium is also moving freely from Kwangchauwan, but I do not know if it is doing so now more than formerly.

11. The second point is the attempt being made to get raw opium to Canton from various sources. A considerable quantity of Yunnan opium has, I believe, been ready to go in for some time, and it is noteworthy that the chief manager of the combine, Tung Pok-ng, is a native of Yunnan, I have been approached by two sets of people asking whether I could sell privately our stock of confiscated Persian opium. They said that they were working for the Canton syndicate, and I think there is little doubt that in a sense they were. In one case they undertook to take the opium to Canton in a Chinese gunboat.

12. A large quantity of opium has been purchased in India for Mexico. The money for this has been paid by Hong Kong Chinese interested in the syndicate. Joseph Gould, I believe, effected the purchases in Calcutta through M. Sassoon, and both are known to me in connection with Persian opium smuggling. The opium has been shipped to Kobe, and a special steamer is being chartered to take the opium from there. I understand that at some period the opium will be brought to this neigh- bourhood and transferred to Chinese gunboats outside the waters of the colony; 250 chests are now on the sea, and I believe there are 200 chests already in Mexico, for which Canton is the destination. Lee Hyson, of the Yu Hing opium case, is, I believe, at the back of this particular venture.

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13. Attempts are being made to get Persian opium lying in the colony into Kwangtung. The method to be employed is the old one of substitution. One such attempt was made recently, the opium being removed from E. D. Sassoon's godown to Kowloon godowns, for no other reason but to attempt substitution in the harbour. issued a permit, but had the opium conveyed across the harbour in the revenue launch. The applicant accompanied the opium, but had no idea of how to proceed on arriving in Kowloon. I have also heard of negotiations for the purchase of a considerable quantity of opium from Nemazee. This is to go up to Canton in a gunboat, though nominally the export is to London. Nemazee is demanding a price very considerably higher than that which he could get in London, but beyond this will have no share in

the transaction.

14. It is said that supplies will also come from Kwangchauwan and Macao, and that smuggling from these places will have official protection. Some of the Macao Farm have share in the syndicate. The brokers for the Blue Funnel smuggling also expect assistance.

R. O. HUTCHISON, S.I.E.

November 25, 1915.

P.S.-I attach an extract from the "China Mail" with reference to the Yu Hing case. The case occupied the courts for a period of two months, and there are still minor cases outstanding, in addition to an appeal. The case was a very complicated one, but the main idea was that Lee Hyson, the managing director of the Yu Iling Company, juggled with the opium held by the company in the names of two other firms, Li Wa Loong and Shing Fat Yuen. The allegation is, that Lee Hyson simply sold to himself, at a time when the price of opium was rising quickly, and thereby made for himself a big sum of money, which ought to have been made by the Yu Hing Company. The company held 212 chests of certified opium.

R. O. H., S.I.E.

December 2, 1915.

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