The Secretary of State to the President of the Radio Corporation of America ( J. G. Harbord )

Sir: I have received the letter of April 18, 1924, in which you quote a resolution adopted on that date by the Board of Directors of your corporation, with reference to a letter understood to have been addressed on April 8 to the Directors of the Federal Telegraph Company of California by Mr. Rudolph Spreckels, a Director of that company, in which (referring to the contracts originally concluded on January 8, 1921, and September 19, 1921, between the Federal Telegraph Company of California and the Chinese Government, and thereafter assigned to the Federal Telegraph Company of Delaware by arrangement with the Radio Corporation and in accordance with a further agreement with the Chinese Government under date of July 13, 1923) he states that

“After careful consideration, I am convinced that the language used in the Chinese contracts is deceptive in that they create a partnership, but do not disclose the fact that the Chinese Government is to actually provide the entire sum necessary to complete the project.

“I cannot believe that the State Department at Washington has been correctly informed of the true situation in connection with these contracts.”

I have noted that the resolution of your Board of Directors further sets forth that, while your corporation believes that the contracts with the Chinese Government were not concluded without the full understanding of the Chinese Government and of this Department, it is nevertheless unwilling to proceed with the carrying out of these contracts if it be true that the Chinese Government has acted under misapprehension or lack of knowledge and if that Government so asserts; that your corporation would in that case be willing and ready to join with the Federal Telegraph Company of California in cancelling all the contracts in question; and that you are therefore instructed to take steps to ascertain whether the Department of State has been correctly informed of the true situation in regard to these contracts and whether the Chinese Government makes any claim or complaint of having signed these contracts under misapprehension of fact or lack of knowledge.

In reply I am happy to inform you, for the reassurance of your Board of Directors, that I know of no basis whatsoever for the assumptions stated in the letter quoted in the resolution.

As you are no doubt aware, the several contracts between the Federal Telegraph Company of California and the Chinese Government [Page 577] in regard to this matter were all negotiated with the cognizance of the Department of State and in consultation with the American Legation at Peking, were witnessed by officials of that Legation, and were in each case communicated immediately to this Department, which considered the project to be of primary importance to American interests in China as a test of the practical application of the principle of the open door or equality of opportunity in such enterprises in China and as a means of establishing a direct and wholly independent Chinese-American circuit between the two countries.

It is understood that the American interests concerned are to construct the proposed wireless stations for the Chinese Government at a cost to that Government of approximately $13,000,000, $6,500,000 of which is to be paid in bonds and the balance to be paid in cash over a period of ten years from the time of completing the last station; and that during the period to elapse until the cash payments are completed, the contractors are to participate with the Chinese Government, under an arrangement analogous to a partnership, in the operation of the stations. The project thus contemplated has not been the subject of any complaint by the Chinese Government to the Department of State, and I have no reason to believe that that Government misapprehends the arrangement or considers that the contracts establishing it were concluded under any misunderstanding or in ignorance of their scope and meaning.

I am [etc.]

Charles E. Hughes