CO129-445 - Public Offices - 1917 — Page 330

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reply to a telegram of enquiry sent by us that this delay is in some way connected with certain investigations being made by the Government. Now, we cannot emphasise in sufficiently strong terms that we are absolutely unconcerned with any such investigations and cannot be affected by them. In the face of a solemn undertaking by the Government to purchase our stocks we cannot bring ourselves to believe that the obligations incurred are an empty formality not intended to be scrupulously fulfilled. We, therefore, respectfully appeal to your Excellency to have the settlement of this matter expedited as much as possible. Any further delay, we respectfully submit, will assuredly place the Government in a very awkward post w IDay also point out that all charges payable on the opium from the 1st of April, such as storage, fire insurance, &c, will have to be borne by the Government. Furthermore, the Government evidently taking its stand on the fact of its agreement with us, arbitrarily closed the Customs against the treaties, to the transportation of opium—a measure against which we have so far not protested relying on the same agreement being scrupulously observed by the Government. We have, no doubt, that once your Excellency's attention is drawn to these grievances from which we are now suffering, the Government will take prompt steps to remove them by taking delivery of the opium bought by it and handing us bonds in payment of the price in order that the agreement mide may be honourably carried out in their entirety to the mutual satisfaction of both parties.

We are, &c.

Enclosure 4 in No. 1.

Opium Agreement: Minutes of Interview with Representatice of Opium Combine.

MR. EZRA with Mr. White-Cooper, and Mr. Macleod, legal advisers to the Opium Combine, called on Mr. Aiston on the 1st May, 1917. Mr. Ker was present.

Mr. Ezra recapitulated the history of the negotiations concerning opium, beginni g with the illegal repressive measures of the Chinese Government, which led up to the agreement of 1911, and describing how after this was signed the same troubles continued, and how His Majesty's Government, in spite of active measures at Anking, in 1913, failed to obtain redress. The opium merchants then formed the combine, a selling agency amongst themselves, and their operations were proceeding successfully when Sir J. Jordan visited Shanghai in December 1914, and gave the opium merchants to understand that they were in a tight corner," that an application had been made for the inspection of Kiangsu, and that if that province were closed, all the remaining stocks must be shipped away from Shanghai. The merchants pleaded that in face of the action taken by the Chinese authorities in the provinces, the retail shops in Shanghai were the only outlet left for disposal of the stocks, of which some 8,000 chests were still in hand, and that Cauron and Shanghai were the last places to be closed, according to the agreement. Sir J. Jordan, however, insisted on his interpretation of the agreement and suggested that their only course was to induce the Chinese authorities to keep the provinces open.

Mr Ezra proceeded to describe how, faced with this danger, the merchants had taken counsel with the brother of Tai Nilang, the opium suppression envoy, himself a holder of opium, and with his assistance, had concluded the agreemont of the 1st May, 1915, by which the Chinese Government, in consideration of a contribution of 3,500 dollars a chest on a guaranteed delivery of a minimum of 6,000 chests, bad called off the inspection of the threatened provinces, and allowed two years' time for the disposal of the stocks at Shanghai. A similar agreement was made regarding the Hongkong stocks, a special proviso being marie for effective suppression of smuggling in Kwangsung, and the envoy agreeing to purchase at a fixed price 1,200 chests, to be cleared by the 31st March, 1917.

Mr. Ezra then narrated the events that ensued in Canton on the revolution in Yünnan, the suspension of deliveries of Indian opium, owing to unchecked smuggling, the execution of Tsai Naibuang at the hands of Yuan Shih-kai's opponents, and the breach of agreement to purchase, only 310 chests of the 1,200 being taken over.

Tsai's brother, now appointed envoy for opium suppression, suggested an extension of the period of the 1915 agreements for nine months, to compensate for the admitted breach of agreement. The Government at Peking made their assent to this proposal conditional on the addition of 1,000 dollars to the contribution per chest, the abandon-

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ment of all claims in connection with the Kwantung stocks, and a loan of 5,000,000 dollars from the opium merchants. The question of a loan of 2,000,000 dollars was considered by the merchants, but abandoned in deference to Sir J. Jordan's advice that no such loan could be safely made to the Government, which was then on the point of collapse.

Then came the death of Yuan Shih-kai and the resumption of negotiations with the new Government. Extension having been definitely refused, and no counter- proposal being made, the combine proposed to stop the contribution of 3,500 per chest, and this threat led to the offer of the Chinese Government to purchase the stocks remaining at the end of March.

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Mr. Ezra described how the negotiations for this purpose were carried on with the help of a Chinese merchant named Wong, who had given valuable assistance in After connection with prevention of smuggling and had been promised reward. prolonged investigations in regard to prices, the purchase price for the stocks was fixed at 8,200 taels, to be paid in bonds which had depreciated by 50 per cent. Mr. Wong's commission was fixed--after the price had been arranged at 800 taels a chest. further difficulty then arose because the Peking Government decided that the total amount to be paid in bonds must not exceed 10,000,000 taels for the Shanghai stocks, a sum which would cover only 1,218 chests. Finally, it was arranged that Mr. Wong should undertake to purchase the surplus left after the Chinese Govern- ment's purchase, at the price of 5,700 taels, payable in bonds similar to those payable by the Government. In consideration of this undertaking Mr. Wong was to receive an additional commission of 1,700 taels per chest, making a total of 2,500 taels on every chest delivered by the combine between the 31st December, 1916, and the 31st March, 1917, and on every chest purchased by the Government under the purchase agreement. Further particulars of the arrangement with Mr. Wong are disclosed in the agreement with him of which Mr. Ezra handled a copy to Mr. Alston.

The agreement with the Chinese Government, Mr. Ezra explained, was at first drawn up so as to be subject to the assent of the Chinese Parliament and of the British Minister, but afterwards, when it was decided to use bonds already issued so as to avoid the necessity of reference to Parliament, the clause for reference to the British Legation was also omitted.

Mr. Ezra proceeded to describe the agitation that subsequently arose for cancelling the agreement. The combine had not protested against the closing of Canton and Shanghai to the importation of opium from the 1st April, because the Chinese had explained this as being part of the measures for taking over the stocks, but he pointed out that the effect of this was to deprive the holders of all power of dealing with their property, while the purchasers still delayed the carrying out of their part of the bargain. He said that the investigators appointed at the instance of the vice-president to examine the charge of fraud in connection with the transaction had reported that there had been no fraud; but the Government

were still He wavering, and there was a danger that the agreement might be cancelled. concluded by making an impassioned appeal to Mr. Alston to press for the fulfilment of the agreement.

Mr. White-Cooper and Mr. Macleod supported Mr. Ezra's arguments, and urged various other considerations. They traversed familiar ground in trying to dispose of the objection that the combine might have cleared the stocks sooner by lowering prices, and they dwelt on the unfair, position in which the merchants were placed by being exposed to action in the British court if they broke their agreements, while the Chinese Government were immune to all action except diplomatic pressure.

At a further interview next day, the 2nd May, Mr. Alston explained to Mr. Ezra and his legal advisers that it was impossible for him to take action in the sense desired. The agreement was the direct outcome of the previous agreement of May 1915 which had never been recognised by the legation, and which was even regarded as a backward step on the part of the Chinese Government in the policy of opium suppression to which His Majesty's Government were committed. Moreover, the circumstances attending the conclusion of the agreement had caused it to become the subject of an acute controversy in Chinese domestic politics in which it was undesirable that His Majesty's Government should intervene. He could not therefore, directly support the agreement in any way unless it was brought to his cognisance by the Wai-chiao Pu. He recognised, however, the hardship of the position in which the merchants were placed, and he was prepared to take such action as lay strictly within the lines of the policy agreed upon between the Chinese and British Governments. The action of the Chinese Government in closing Canton and Shanghai without even

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