Papers Relating to the Foreign Relations of the United States, 1925, Volume I

893.74/516: Telegram

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

Peking, January 23, 1925—1 p.m.
[Received 7:10 p.m.]

39. Your 4, January 7, 4 p.m.

1. Copy of the Japanese Government’s proposal received from Tokyo January 13th and after careful consideration I offer the following comments:

2. The Federal contract constitutes a joint partnership between the American company and the Chinese Government in which the Government enjoys full reversionary rights. Consequently any proposal to pool the contract in a consortium or otherwise admit other interests to participation in its terms would require consent of the Government, which I am inclined to think could not be obtained. See my telegram of October [February] 10, 4 p.m., 1922, No. 44.⁵

3. To recognize that there are any difficulties to compose between the Japanese and American Governments in the matter of the radio contracts concluded with the Chinese Government is to admit that some validity attaches to the monopolistic claim advanced by Mitsui. This has been so often denied by the American Government on the following [sic] open-door principle that any apparent compromise based upon a withdrawal of this claim would be construed in China as a diplomatic defeat for the United States and its contempt and victory for Japan. Moreover if the Mitsui and Federal contracts were to be pooled in the proposed four-nation consortium, the Marconi contracts would presumably demand the same treatment. Hence the consortium would begin operations with approximately 12 million silver dollars of noncollectible indebtedness of the Chinese Government invested in commercially profitless undertakings. See enclosure No. 3, Legation’s despatch 1994, December 23rd, 1923.⁶ I have always felt that in so desperately fighting the Federal contract on the basis of the Mitsui monopolistic clause the Japanese Government had three principal aims: 1st, secure reimbursement of the millions comparatively speaking wasted by Mitsui and the Japanese Government on the Peking station; 2d, secure prestige of diplomatic victory over the American Government; 3d, frustrate independent radio communication between China and America concerning which Japan appears insanely jealous. In consequence of the Department’s stand as expressed in section 2 of the experts’ recommendations⁷ and specifically in the Department’s telegram 128, June 28, 6 p.m., 1923,⁸ rejecting consortium idea, this Legation has categorically stated that independent radio communication was insisted upon by the American Government.

4. Proposed wireless consortium appears to be substantially the same as the combination contemplated in the Viviani resolution⁹ and experts’ Heads of Arrangements¹⁰ with which the Department refused to associate itself. Legation was informed by Schwerin February 12th, 1923, of telegram from the Radio Corporation reporting formation of combination of British, French, Japanese radio interests endorsed by Danish and British cable companies with Telefuhken Company invited to join for wireless operations in China. I suggest present Japanese proposal thinly veiled attempt on behalf of this group to induce the American Government to withdraw objection to American participation.

5. While the Japanese Government’s proposal provides for exclusive control of the contemplated facilities by the Chinese Government it is evident that as a financial safeguard control the stations until paid for would of necessity have to vest in the associated lenders. Under those circumstances I am of the opinion that terms satisfactory to the lenders would never be accepted by the Chinese Government and the sole result of the consortium plan would be to prevent creation of the Federal stations and leave the Mitsui Peking station in sole possession. Japanese allusion to the banking consortium is significant in view of its failure to accomplish anything constructive in four years’ existence.

6. Even if satisfactory consortium arrangement were made it would seem possible for Japan to evade consortium restrictions through stations in South Manchuria Railway Zone or Leased Territory. I believe that by reason of contiguity of territory she would somehow manage to secure independent communication.

7. The Federal Telegraph Company has vested rights as to its contract which the Department probably desires to consult and possibly decision as to the Japanese proposal should be left to the company. From the standpoint of Chinese-American relations I consider acceptance of this proposal would mean advantage for Japan but loss of prestige for the United States in the Orient and in loss also [of] much [of] the closer union with China anticipated from the Federal plan. It would be difficult to explain abandonment of the independent execution of the Federal contract after the unprecedented support hitherto given it by the American Government. In any event I earnestly advise the Department to defer action until Davis and Moss have arrived in Peking, for I still believe the Chinese Government desires purely Chinese-American control trans-Pacific radio even though Federal contract may require modification.

8. Repeated to Tokyo.

Schurman

5. Foreign Relations, 1922, vol. i, p. 846.
6. Not printed.
7. Foreign Relations, 1922, vol. i, p. 840.
8. Ibid., 1923, vol. i, p. 805.
9. Conference on the Limitation of Armament, Washington, November 12, 1921–February 6, 1922, p. 1130.
10. Foreign Relations, 1922, vol. i, p. 842.