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

No. 1071

Sir: I have the honor to refer to my despatch of April 13, 1921, No. 1029,50 regarding the China Electric Company.

The China Electric Company is owned half by the Chinese Government and half by foreigners. Of the foreign interests, one half is owned by the Western Electric Company and half by the Nippon Electric Company—the Japanese subsidiary of the parent concern, the Western Electric Company. The Nippon Electric Company is owned 70% (approximately) by the Western Electric Company and 30% (approximately) by Japanese interests. The Japanese share in the China Electric Company is thus about 7½%.

In view of this part Japanese interest in the China Electric Company, it has been the practice of the China Electric Company to keep the Japanese Legation informed of current developments in the affairs of the China company and to receive the support of that Legation with the Chinese authorities. This support, it is understood, has been almost indispensable in the past due to the presence of a Japanese subject, R. Nakayama, a telephone engineer, as adviser in the Chinese Ministry of Communications, Department of Telephones.

In accordance, therefore, with the standing practice, Mr. Minor51 has personally brought the present status of the negotiations to the knowledge of the Japanese Minister and has addressed to him a letter of similar purport to that sent to me under date of April 11, 1921,50 a copy of which accompanied my despatch under reference. Mr. Minor informs me that he was well received by the Japanese Minister, but that, as the present negotiations had not before been called to Mr. Obata’s attention, no definite statements were made by him. It is known, however, that following this interview Mr. Nakayama was summoned to the Japanese Legation and Mr. Minor’s Japanese friends assure him that he may expect favorable consideration and assistance from the Japanese Legation.

I am further informed in strict confidence that it is not known how the prospective sale of wireless telephones to the Chinese Government will be financed, but Mr. Minor presumes it will be with capital secured by the Western Electric Company. If this capital cannot be obtained from America, then efforts may be made [Page 438] to secure funds from Japan. The existing telephone system of the Ministry is now pledged as security for a Yen 10,000,000 loan, which expires during October, 1921, with Japanese bankers. The prospective sale, if made, will be subject to confirmation of the Western Electric Company, to enable them to get satisfactory assurances that payments can be made, before the China Electric Company will be obligated to undertake the work.

I have [etc.]

Charles R. Crane
  1. Not printed.
  2. Clark H. Minor, representative of the China Electric Co., Ltd.
  3. Not printed.