CO129-445 - Public Offices - 1917 — Page 246

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the problem of disposing of the residue of opium stocks would still present serious difficulties, for which the present arrangements provide a convenient solution.

So much for the advantages of the new agreement, The disadvantage to the Chinese Government lies in the fact that no one really believes in the genuineness of the scheme for making the opium into pills, and the Government is therefore exposed to the reproach of derogating for the sake of gain, from the high principles which actuated them from the beginning of the opium reform policy ten years ago until the first backward step was taken on the 1st May, 1915. From a political point of view, moreover, exception may be taken by the Young China party to the device of using bon is authorised by Parliament four years ago for a different purpose, and thus evailing the necessity of obtaining Parliamentary sanction to the present deal, and also to the independent action of the vice-president in the matter, which is believed to be at variance with the wishes of the president. The transaction has accordingly been subjected to severe criticism both in Parliament and in the press. It has, however, received the unanimous approval of the Cabinet, and may be regarded as accomplished fact.

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It will be observed that whereas according to the preamble of the principal agreement, it is made between the Shanghai Opium Combine on the one part, and three representatives of the Chinese Government on the other part, article 9 states that the agreement" is executed in sextuplicate for the file of each of the following parties" the Chinese Government, His Britannic Majesty's Minister at Peking, and the four parties above mentioned. The mention of His Majesty's Minister's name in this way, seems to me calculated to convey the impression that the agreements were drawn up with the cognisance and approval of this Legation, and I have, therefore, in replying to the Opivia Combine's communication in the letter of which copy is enclosed, informed them that the use of His Majesty's Minister's name is entirely unauthorised. As I regard it as important to clear the Legation of any suspicion of complicity in an arrangement which however expedient is at least doubtfully consistent with a policy of opium suppression, I have instructed His Majesty's consul-general at Shanghai to publish this letter in the event of the agreements being published with the offending article retained.

I have also informed the Combine in this letter that I can take no cognisance of an action in regard to these agreements unless they are officially communicated to me by the Chinese Government through the Wai-chiao Pu, in which event I shall refer to you for instructions.

I venture to submit that in the event of the agreements being communicated to me by the Wai-chino Pu there would be no harm in my being authorised to recognise them. In doing so, however, I would propose to inform the Wai-chino Pu that the introduction of His Majesty's Minister's name in article was unauthorised; and at the same time to notify the Opium Combine that the recognition of the agreements implied no responsibility on the part of His Majesty's Government to press the Chinese Government in case of default for the redemption of these internal bonds, which the Combine must be held to be accepting at their own risk.

(Copy to India.)

I have, &c.

B. ALSTON,

P.S.--I have the honour to enclose a statement by the vice-president's secretariat in defence of the transaction, which appeared this morning in the "Peking Daily News," as well as a criticism of this explanation published by the "Peking Gazetta"*

B. A.

Sir,

Enclosure 1 in No. 1,

Messrs. Sassoon and Co. to Mr. Alston.

Shanghai, February 5, 1917.

WE have the honour to address you, on behalf of the British importers of opium into China, on the subject of the arrangement which has been made with the Chinese Government, and of which your approval is confidently anticipated.

We would first call your attention to the present position of the British merchants

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now.

and to the reasons why they have been unable to dispose of their stocks of opium ere The restrictions imposed by the Chinese Government on the export of opium from Shanghai, and the competition of native and smuggled opium, forced the merchants to enter into the Agreement of the 1st May, 1915. under which it was agreed that a contribution of 3,500 dollars per chest should be paid in consideration of the Government taking effective steps to stop the importation of illegitimate opium and the sale of the native drug, and further, of opening to the trade the three provinces of Kiangsu, Kiangse, and Kwangtung, which were then closed in spite of the treaties. It is unnecessary for us to say that the measures, if any, which the Government took were wholly ineffectual, while the contribution which British merchants had to provide, and which the smugglers escaped, still further handicapped the trade, and in itself increased the profits to be made by smuggling.

Large purchases of opium were made by the Chinese dealers in 1915, and by February of 1916 the stocks they held were so large that they demanded as of right that the prices should not be lowered until they had exhausted their stock. To this the merchants were compelled to agree, as apart from the dealers they had no outlet for their stocks. The dealers had the shops under their control, and the foreign merchants could not sell to the shops except through the dealers. The result has been that for many months past the merchants have had no opportunity of selling any of their cargo.

The position was made worse by the failure of the Kwangtung Government to take up the 1.200 chests which they had agreed to purchase and of which they have only cleared about 300. So that 1917 found the British merchants still owning a large stock of opium, the prospect of selling which, before the 31st March next, was very remote.

The Chinese Government having declined either to refund the amount contributed towards the suppression of smuggling, or to grant any extension of the period of the 1st May, 1915 Agreement, further discussion took place between the Government and the merchants, and we are happy to state that, subject to your approval, the British merchants have agreed to sell to the Chinese Government all their stocks remaining unsold on the 31st March next, and the Chinese Government has agreed to take over their stocks, paying for them at the rate of 8,200 taels per cliest in 6 per cent. Chinese Government bonds issued in the first year of the Republic and authorised by law duly passed by Parliament and promulgated by the President in the second year of the Republic. As you are probably aware, these bonds are made redeemable in thirty years from date of issue subject to yearly drawings, but as the term is too long we are glad to state that we have succeeded in arranging with the Government that the bonds given in payment of opium if not earlier drawn, must be paid off not later than ten years. The Chinese Government will use the opium for medicinal purposes only, and we understand that regulations have been drawn up which will effectually confine its use to medicinal purposes.

Under the circumstances, the British merchants cousider this to be the only solution of the problem. The result of the agreement will be that. within a few months, all British interests in opium in China will cease, and this trade which has caused so many difficulties during the past will absolutely come to an end.

The agreements made with the Chinese Government are herewith enclosed for your information.

You will notice that the said agreements are made by the Shanghai Opium Combine with the Chinese Government. This was rendered necessary as it was otherwise impossible to include all holders, but we may point out that the great majority of the members of the Combine owning the bulk of the stocks consist of British subjects.

We therefore venture to hope that the above arrangements will meet with your approval, so that the final extinction of the trade may become an accomplished fact at no distant date.

We have, &c.

(Per pro David Sassoon and Co., Limited},

A. HOWARD, Manager.

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(For and on behalf of all British importers of opium.)

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