893.74/318: Telegram

The Minister in China ( Schurman ) to the Secretary of State

[Paraphrase]

216. With reference to the Department’s telegram no. 103 of June 9, Mr. Schwerin replies to the following effect:

After reading with deep anxiety and concern your telegram no. 103, 1 wish to say that so far as I have authority I place the affairs of my company entirely in your hands but respectfully lay before you the following comments:

Of the long and difficult negotiations which brought to a successful termination in the United States the radio enterprise in China, the Department is aware, and from cables received from China before sailing I had every reason to believe that immediately upon my arrival construction work would commence. It seems that this has been rendered impossible, however, through changes of administration and Japanese influences. I would point out that there have been four changes in the Government administration during the time that I have been in Peking and it was not possible to take up our enterprise before the most recent change which took place about February 1. It was on February 6 that the first meeting occurred with the Ministry of Communications, looking to the purchase of land and proceeding with the work, and there has been continuous effort since that time by our American interests to secure the Chinese Government’s approval to proceed with the work. Japanese influence dominated the Prime Minister of this Cabinet, who was pro-Japanese. What progress was made was shown by the Chinese President’s twice sending to the Cabinet written communications to go on with the Federal agreement; three boards appointed by the Cabinet reported that the Federal contract was very advantageous to China and work should at once begin, and the Premier was forced finally to order the Minister of Communications as follows: “The Ministries concerned are to settle and to execute at once the Federal Telegraph Company’s contract on the basis of this petition.”

The above-mentioned petition was that which the Union of the Chinese Chambers of Commerce submitted demanding that recognition should not be granted the Japanese 30-year monopoly and that the work on the Federal contract should proceed at once to China’s great advantage, and opposing any internationalization of radio in China. On May 23 it was agreed that the Cabinet meeting on May 26 would take favorable action, but the Cabinet refused to act, owing to representations made to the Chinese Foreign Office by the Japanese Legation to the effect that the Chinese Government would receive word within a few days that the United States and Japan had amicably settled everything between them in this matter. Then followed the political crisis of which the resignation of the Cabinet on June 6 resulted and no Cabinet now exists. Therefore, [Page 799] although I arrived here in November, 1922, my time in which to work (and with a Cabinet not at all familiar with the Federal contract) has been but three months. I had the earnest cooperation of the Legation in all this and I think that had this Cabinet remained, it would, with the support of the Union of the Chinese Chambers of Commerce, have given its approval that the Federal construction be gone on with. It will not be possible to make any progress pending the formation of a new Cabinet, and should a Cabinet be organized in which there are any of our old friends or officials who are familiar with the Washington nine-power treaty, I have reason to believe that favorable action can be secured. But, on the contrary, should the American Government take the position (as suggested in the Department’s proposal no. 3) that it would be willing to join with other foreign nationalities in an internationalization of radio in China, it is possible that the Chinese (who are opposed to monopoly and domination by Japanese) might not only be turned against the Federal Telegraph project, but also take such an attitude of opposition to any other combination of radio interests, and thus cause them all to lose by reason of the hostile public opinion fostered by the Associated Chambers of Commerce of China and the guilds.

Your proposal no. 1 is, in my opinion, the one on which we have been working all along. When in Washington during February, 1922, I advised Mr. Brown, of the British Ministry of Posts, that the Federal Company would be willing to enter into satisfactory commercial arrangements, providing the other powers were to join with Japan in their wireless project, and he appeared to be satisfied, and requested only that I should avoid the establishment of such low rates as would destroy their cable project, to which I assented. Of the high financial difficulties encountered by the Federal Company until these were consummated, the Department is well aware. It will not be possible for the Federal Company to go forward alone if these arrangements are now dissipated, and I must recognize the fact that, after a long two years of effort, I must relinquish with regret my part in a project which my original feeling told me was incalculably valuable to the United States and which my further investigations and my sojourn in Peking show to be of a value far in excess of my first estimates.

Providing the Americans interested in this matter continue to work in harmony on the Department’s proposal no. 1, it is my belief that these interests will be safeguarded, and I trust that all concerned in the well-being of this American enterprise in China will see this situation as it exists, and will find it possible to continue the relations now existing, which press forward to the eventual success before us.

My own comments are as follows:

1.
I fully share the Department’s and Mr. Schwerin’s view that it would in every respect be most advantageous if it were possible to go on with the independent execution of the contract held by the Federal Company. I do not consider that the opportunity of so doing has been completely dissipated. It is possible that the next Cabinet may be more immune to influence by Japanese. On one occasion even the lately retired Premier acknowledged to me that the Japanese contract was not good for China and that the Federal contract was. [Page 800] This same view has recently been expressed in the press and elsewhere by Chinese Chambers of Commerce. Accordingly, my own feeling is that more than a gambling chance presents itself to Mr. Schwerin to attain success if his partners do not call time on him, time in China being decidedly not money. I must, however, acknowledge that I am not able to give him much assistance by holding up, as a menace, to the Chinese view, a consortium of international radio, because I have already brought that danger several times to the attention of the Chinese officials. I will nevertheless present this argument to them again, although without reference to the possibility of American participation in such a consortium.
2.
In my opinion, the third possibility, referred to in the Department’s telegram, is open to very grave objections. I fear that dissension between American interests would result and afford the European and Japanese Governments an opportunity, through their business interests, to diminish the influence of American interests. I fear that the California Federal Company, for example, would find it impossible to obtain the capital requisite for the carrying out of its contract, without cooperation with the Radio Corporation or with some other American concern. And yet the Federal contract is in fact the greatest American asset available in the radio situation in this country.
3.
Despite the safeguards with which Japan surrounded it, the third proposal, taken in conjunction with the experts’ recommendations and annexed heads of arrangements,14 would almost surely, in practice, result in contravening the fundamental American policy of freedom and equality of economic opportunity in this country. Paragraph 5 of the experts’ recommendations appears to acknowledge that the Chinese National Wireless Company and the China Electric Company are in fact possessed of preferential rights which we have absolutely denied; and the existence of a cable monopoly is recognized by them in subparagraph 6. I fear that if we give up or qualify the principle of freedom and equality of competition which is the surest guaranty for the development of American economic interests in China, we shall become entangled in the intrigues of the Japanese and Europeans.

I should advise that, if within a reasonable lapse of time after the formation of a new Cabinet, it appears impossible to obtain the carrying out of the Federal contract as an independent project, it would be well to adopt the Department’s first proposal which reserves radio communications between China and the United States for development as a Chinese-American enterprise and excludes European and Japanese entanglements while providing for the slightest [Page 801] possible deflection from the principle of equality of opportunity. In addition, I would very earnestly urge that to obtain united support for the existing Federal contract is essential, the contract being an asset too valuable to allow it to lapse or breed division among our various national interests.

Schurman
  1. Telegram received in two sections.
  2. Foreign Relations, 1922, vol. i, p. 840.