[This Document is the Property of His Britannic Majesty's Government:]
OPIUM.
CONFIDENTIAL
во
[73119]
No. 1.
241
April 9.]
SECTION 1
(No. 74.) Sir,
Mr. Alston to Mr. Balfour. (Received April 9.)
Peking, February 26, 1917. I HAVE the honour to forward herewith copy of a despatch from His Majesty's consul-general at Shanghai forwarding a letter addressed to me by Messrs. David Sassoon and Co. on behalf of the British importers of opium, together with copies of the two agreements of 28th ultimo referred to therein regarding the purchase by the Chinese Government of the stocks of opium remaining unsold on the 31st March next.
The principal agreement is a corollary of the original agreement of the 1st May, 1915, whereby, in consideration of a contribution of 3,500 dollars per chest, the Chinese authorities granted facilities for the disposal of the stocks within a period expiring on the 31st March, 1917. The objects of that agreement being unrealisable during this period, the new agreement provides for the purchase by the Chinese Government, at the rate of 8,200 Shanghai taels per chest, of the whole residue of the stock of Indian opium remaining in the hands of the Combine on the 31st March, 1917, excluding the stock of opium in Hong Kong on the 1st January, 1917. The Combine estimates the stock of opium in its possession and control on the 1st January, 1917, to consist of 200,100 chests. The object of the Chinese Government in purchasing is declared to be to secure the opium for medicinal purposes, and not for gain Payment for opium purchases is to be made by 6 per cent. Chinese Government bonds guaranteed by the Chinese Government and secured on the revenue from the stamp duty, over which, however, the Combine are to have no control. The issue of these bonds is limited to 10,000,000 Shangbai taels, and they are redeemable in ten years, redemption, however, not beginning until the sixth year of issue.
The supplementary agreement signed on the same day specifies that the bonds to be used are those of 1912, the issue of which was authorised by Parliament and duly promulgated by the President on the 19th February, 1918, secured on the tax on title deeds and on the stamp duty. Although these bonds are legally redeemable in thirty years, this supplementary agreement provides that those given in payment of opium shall be redeemed within a maximum period of ten years out of the proceeds of the sale of the opium for medicinal purposes or from other sources.
The advantages derived by the opium importers from these agreements hardly require comment. The difficulties and uncertainties attending the successful disposal of their stocks are exchanged for an arrangement by which these stocks, at a handsome valuation, are utilised as capital for a loan bearing 6 per cent. interest and secured ou the credit of the Chinese Government.
The advantages derived by the Chinese Government are less obvious if the declaration that the opium is to be used only for medicinal purposes is to be taken at its strict face value. If, however, it is assumed that this declaration is not entirely sincere, and that the opium will be in some way disposed of for its usual purpose, the transaction appears in an attractive light. The Chinese Government obtains the monopoly of dealing in a commodity of strictly limited quantity, the value of which is limitable only by legislative restrictions within their own discretion to remove. They can, if they please, turn the opium into money, and thus practically obtain the benefit of a loan of 10,000,000 taels (say 1,800,0001.) at 6 per cent., free from all conditions of security or foreign control; a loun, moreover, which, if 1 understand the effect of the two agreements correctly, they need not begin to pay off until five years have elapsed.
As regards this Legation the advantage of the agreements are that we are relieved from the prospect of a recurrence, after the 31st March next, of the situation that existed in 1912-14, when we had constantly to protest against illegal interference with the wholesale dealing in opium sent into the interior in complete conformity with the agreement of 1911. Such protests were invariably futile in face of the common knowledge that His Majesty's Government was precluded by public opinion from taking any effective measures to enforce them, and they would be still more futile in 1917. Even if this situation were changed soon after the 31st of March by the closing of all the remaining provinces and the consequent termination of the 1911 agreement,
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