793.94/1246a: Telegram

The Secretary of State to the Ambassador in Japan (Warren)21

[Paraphrase]

220. Our no. 206, November 30, noon. The delegations of China and Japan have been negotiating regarding the Shantung issue from December 1 until yesterday. On several points agreements have been tentatively reached subject to a general adjustment of the whole question.

The question regarding the Shantung Railway was considered about two weeks ago, the Chinese having pressed to have an early settlement of this issue. At once it appeared that the Japanese proposal to make the railway a joint enterprise shared in by China and Japan was completely unacceptable to the Chinese. Ambassador Shidehara tentatively offered a substitute proposal on December 14. In general this provided that the Japanese would return the railway to China with its branch lines and appurtenances; in order to make payment China would secure from Japanese financiers a long-term loan; and until this loan was paid certain Japanese technical experts should be employed on the railway. Shidehara would recommend this plan to the Japanese Government if it was acceptable [Page 938] to the Chinese. China’s delegates sought a cash payment, but finally proposed to compromise on a plan under which Treasury notes would be issued by China to the Japanese Government. These notes should run for 12 years. China should have the right to redeem all notes outstanding after 3½ years. The Chinese delegation also was unable to accept the appointment of more than one Japanese technical expert, the Japanese asking for three. The Chinese delegates also were unable to agree to the designation of this expert by Japanese interests instead of by the Government of China.

Ambassador Shidehara under these circumstances told the Chinese delegation yesterday that he could go no further without receiving definite authority from the Japanese Government. He said it would be necessary for him to report to his Government for consideration and instructions the counter proposal made by the Chinese.

In the opinion of the Chinese delegates there is only a small difference between the views of the Chinese and Japanese delegations. The Chinese are afraid that the action of Baron Shidehara in referring to his Government is a temporizing move to delay settlement, the purpose being to use the Shantung issue as a weight to aid the Japanese in other Conference negotiations which concern China.

Any information connected with this which you may receive will be acceptable to me.

This telegram should be repeated to our Legation in China for information only as our no. 335.

Hughes
  1. See last paragraph for instructions to repeat to Peking as no. 335.