The Minister in China (Schurman) to the Secretary of State
[Received March 12—3:20 p.m.]
76. My telegram February 28, noon. C. T. Wang, Director of the Commission on Sino-Russian Affairs, presented to the Cabinet on March 8 a long report regarding his negotiations with Karakhan. [Page 480] This report has been discussed since by the Cabinet in long sessions. I had an intimate after-dinner talk with Yen on March 10 and a similar conversation with Koo on March 11. I have also talked with others who are close to Karakhan. The following is the situation:
- China has been affected to a marked degree by British recognition of the Soviet Union.
- Public opinion, so far as it exists in China, has not been hostile at any time to recognition. Forty-seven professors in the National University of Peking quite recently petitioned the Cabinet in favor of immediate recognition. This has stimulated and encouraged the Cabinet members to go ahead with recognition, for this is a country where scholars always have exerted a great influence on the Government and continue to do so, though to a lessened degree.
- The Chinese do not want to be among the last to recognize the Soviet Union and specifically they do not want to be behind the Japanese.
- Karakhan has been exceedingly conciliatory according to all the information I have received.
- The Cabinet approved in substance Wang’s report which is now before the President. The Cabinet will probably consider it again this week.
- The present agreement is preliminary and only lays down the general lines for the final settlement. After recognition detailed agreements are to be signed.
- Apparently agreement has been reached on the following points: reestablishment of full diplomatic relations between China and Russia; formal cancellation by Russia of extraterritoriality; abrogation of old treaties; return of Boxer Indemnity; Russian [recognition] that Mongolia is part of China; withdrawal of all Russian influence from Mongolia, determination of frontiers; drafting of new commercial agreement; drafting of new rules for the navigation of the Sungari and Amur Rivers.
- The chief difficulty has always been the Chinese Eastern Railway. Apparently, however, the general lines of a settlement have been agreed upon. Russia declares that the title to the Chinese Eastern belongs to China and gives up all claims to sovereignty in the Railway Zone. The Chinese may take over the Chinese Eastern by paying for it earlier than the time fixed in the 1896 agreement, which was to be 40 years from that date. Russia is to share equally in the management in the meantime. Probably this will be accomplished by Russia’s merely replacing the Russo-Asiatic Bank in its relation to the railway.
- The purchase price for the Chinese Eastern is to be fixed later. Russia wants China to pay the original cost. Yen told me that Karakhan [Page 481] put this at 1,100,000,000 gold rubles. This figure includes the cost of building the South Manchuria Railway, said to be 400,000,000 rubles. This would make 700,000,000 rubles for the Chinese Eastern alone. Yen thought that the railway could be reproduced today for not more than half that amount.
- Karakhan probably foresees that it will be a generation or more before the Chinese treasury bills to be given in payment for the Chinese Eastern are redeemed and is willing to trust to influence and time for [Russia?] to gain dominant control in effect through China’s [Russians?] 50-percent share in the management, or it may be that the Soviet Union already cherishes an alliance or entente with China. I do not see in any case how Russia can get along without the Chinese Eastern for transporting troops, etc.
- It may be predicted that China will soon recognize the Soviet Union unless some difficulty arises not anticipated at present by either side. …