The import of opium from India and Persia to Hong Kong and the whole of China, for the year 1881 was—

Of Malwa, from Bombay 35,729chests.
Bengal, from Calcutta 44,124"
From Persia 6,763"
Total 86,616chests.

of an approximate value of £10,000,000 sterling.

With some slight and unimportant exceptions the whole of this opium, the trade in which it is worthy of note is now practically monopolized by British Indian firms, passes through this harbour, but by far the larger proportion of it can only be classed under the head of Hong Kong trade in the sense in which the traffic through the Suez Canal can be considered as Egyptian trade. About one half of the quantity of opium I have named as the entire import, is immediately sent on either in the original foreign vessels conveying it here, or by other vessels, also foreign, to Shanghai, where it is entered regularly at the Custom House under official foreign superintendence.

Of the remainder, about one half, that is to say, one quarter of the whole, is shipped by foreign vessels to other treaty ports open to foreign trade, where it is duly entered at the Customs. The local trade proper of the Colony, whether for shipment to Macao or Canton by foreign and native vessels, or in native bottoms, to non-treaty ports,—i.e. to ports and places with which foreign vessels cannot trade,—for consumption on the island, and for re-export in a prepared state to California and Australia, or for smuggling purposes, embraces therefore about one fourth of the entire export to China from India and Persia, or say, in quantity about 21,000 chests of an approximate value of £2,500,000, or about £200,000 per month instead of £1,000,000 per month as asserted by Governor Hennessy.

There being no Custom House at this port, it is impossible to obtain thoroughly accurate statistics as to the disposition of the 21,000 chests of opium which form the local trade of the Colony. As regards the local consumption and export in a prepared state, it may be estimated that from 2,500 to 5,000 chests are boiled in the Colony every year, leaving a balance of 16,000 to 18,500 chests to be accounted for. To suppose that this quantity is taken into China by smugglers would be to disregard all the known conditions of the trade and the fact that the preventive service of the Chinese Empire is probably in point of espionage the most carefully organized one in the world. On every road, in every village bordering on a river or waterway, at every port, village, and fishing station along the coast, there is a watchful Customs Station rendering it very difficult for a boat of the smallest size to touch the shore without being overhauled and made to pay levies purporting to be imperial or local dues. To what extent such dues are honestly levied and declared, there is no means of ascertaining. The Customs Stations are believed to be farmed out by the provincial authorities to officials who pay for their appointments, and although a service thus organized would be considered as a demoralized one and its system unreservedly condemned according to Western ideas, it is probable that the receipts of perquisites, and the partial remission of duties by Customs officials who farm the revenue, is a quasi recognized practice acquiesced in by all classes throughout the Empire.

With this system, however, the Colony and merchants of Hong Kong have no concern, and for its results they are in no way responsible. As the vast majority of the junks which leave the mainland with produce or arrive there with imports, undoubtedly obtain from the local Custom Houses port clearances and bills of entry, the large trade, whether in opium or other goods, carried on between this port and places on the coast in native bottoms, being thus subjected to the ordinary fiscal dues levied on the China coast according to the practice of the Empire, is for the most part a strictly legal one.

Smuggling between this island and the mainland in goods other than opium scarcely exists, as an evasion of the low ad valorem duty of five per cent. which is payable on entry at the treaty ports, and is probably the maximum similarly leviable at other ports, would not compensate for the heavy charges which must be incurred by transit over unusual routes even if the ubiquitous Customs officials could be avoided. Opium, owing to its portable character, the facility with which it can be hidden beneath water without serious deterioration, and the high duty imposed upon it, is more readily and profitably smuggled, but the returns which have been received through the Native Custom House at Canton make it nearly certain that the quantity which evades the payment of duty, either at the treaty ports or the ports and places not open to foreign trade, is not greater than 2,000 to 3,000 chests per annum. (See Parliamentary Papers—China No. 2, 1880.) And the quantity thus estimated to be smuggled is not conveyed, as alleged by Governor Hennessy, in junks heavily armed for the purpose, fighting their way to the mainland through the revenue cruisers, but is concealed, a few balls at a time, about the persons, and in the luggage of Chinese passengers by the steamers plying between this port and Canton, and other places on the coast, or in ordinary trading junks and fishing boats of unpretentious character, or fast pulling boats propelled by a number of rowers, or by various devices such as are practised by the persons who evade the duties on tobacco in the United Kingdom. That the revenue cruisers which surround this island keep up an effective blockade which prevents the smuggling of opium on a much larger scale than at present takes place, is probably true, and it is also true that Chinese junks and boats in the estuary of the Canton river, which do not promptly submit to be overhauled by the cruisers, are chased and brought to for examination, if necessary, by being fired upon. The propinquity, however, of this island to the mainland, so far from being a cause of injury to the Chinese Customs Revenue, operates most advantageously for the collection of fiscal levies upon the foreign trade of the southern coast of the Empire. Were the island situated at a greater distance from the mainland than it is, or did not exist in its present conditions as a free port under a foreign government, the difficulties which would be placed in the way of the Chinese authorities, when engaged in checking smuggling in opium, would be much greater than they now are. Opium in that case would probably be shipped in native vessels from more distant depôts, such as Singapore, Saigon or the French mediatized territory of Tonquin, to Chinese ports and places, and it would be impossible for the revenue cruisers to watch the entire line of their own coast as effectively as they are now able to blockade this island in which the trade is centred and controlled.

There is, therefore, no ground for Governor Hennessy’s statement that this Colony is engaged in chronic war with the neighbouring mainland, or for his implied imputation that the course of its trade is injurious to the Chinese fiscal revenue. On the contrary, the facts of the case show that the physical conditions of the island of Hong Kong not only afford the ready means by which the Chinese Government is enabled to protect its legitimate revenue, but also unfortunately place it in the power of the authorities of the province of Quangtung to surcharge the trade in foreign goods, carried on in native vessels between Hong Kong and the southern ports of China, with additional taxation in excess of that authorized by the foreign treaties.

With the view to make a representation to H.M. Government in support of which it may hereafter be necessary to invite the good offices of your Committee, this Chamber is now engaged in an investigation into the facts, so far as they can be ascertained, relating to this alleged surcharge of duties upon the Colonial trade for the collection of which, as well as for the prevention of an illicit traffic in opium, there is reason to believe the blockade of this island by Chinese revenue cruisers is maintained.