Memorandum by the Assistant Chief of the Division of Far Eastern Affairs, Department of State (Lockhart)
Mr. Secretary: In 1911 the Chinese Government entered into a contract with the Bethlehem Steel Company for the construction of certain naval vessels which, among other things, provided for the [Page 746] sending of American Naval officers to China to teach on board Chinese naval vessels.85 In November, 1913, the Chinese Government requested the American Government to indicate its willingness to provide the assistance above mentioned, and after consultation with the Navy Department, the State Department indicated its willingness to proceed in the matter. In January, 1914, however, the State Department was advised that five British Naval officers were also to be employed. This seemed incompatible with the arrangements previously made for the employment of American Naval officers, and the State Department had under consideration the matter of rejecting the entire proposal. It was finally decided, however, to hold the matter in abeyance.
Inquiry of the Chinese Government elicited the information on June 7, 1921, that the Chinese Government at that time had no contract with any foreign power for the employment of Naval advisers, instructors or organizers in the Chinese Navy and that any such proposals that might have been made previously had been withdrawn owing to the existence of the contract made by the Chinese Government with the Bethlehem Steel Corporation in 1911.
Since early in the summer of 1921 the Chinese Government has been agitating with our Legation at Peking and particularly with the Naval Attaché for the fulfillment of the contract of the Bethlehem Steel Corporation. The Department has been reluctant to encourage the execution of the contract first, because of the Division between the North and South in China, and the joint declaration of the Allied and Associated Powers in May, 1918 ,86 to the effect that they would mutually undertake to restrict the shipment of arms and munitions of war to China until it should be clear that such shipments would not be used for the furtherance of civil strife in China; secondly because it would be bad policy to encourage such expenditures on Naval construction when funds were so greatly needed to carry on the internal administration of the country.
On August 4, 1921 we informed the Chinese Government that the Bethlehem Steel Corporation considered that the preliminary contract of 1911 was still binding and that it was ready to designate a representative to negotiate the supplemental contracts required to execute the contract of 1911. But we instructed the Minister to state to the Chinese Minister of the Navy that in view of the then forthcoming Conference on the Limitation of Armament, this Government considered that the matter of employment of Naval advisers should be held in abeyance.