893.74/652: Telegram

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

25. Supplementing my number 24, January 13, 9 p.m., Davis has given me his views concerning your telegram, and he asks that if you have occasion to discuss this matter with General Harbord you communicate his views to the General. Davis’ views are:

“The Japanese have a contract to build a wireless station for China at an agreed price, the monopoly grant is merely a provision to secure payment. When payment has been made all basis for claim to monopoly [Page 1046] fails; the monopoly is contrary to the open-door principle and violates Japan’s pledges. The Japanese now propose to surrender their contract, objectionable because monopolistic, on condition that the Americans surrender their contracts which are not monopolistic, but the Japanese station has been built as the American have not been. Should the Japanese surrender their contract they would still claim payment for their station. This is the only right they now have save the claim to monopoly which is only security to enforce the right of payment. The monopoly claimed is of doubtful value as security. Peking is no business center; 70 percent of China’s overseas traffic originates in Shanghai; any traffic handled by the Japanese station, other than Peking traffic, would be handled originally by Chinese land lines, incurring thereby additional delay, expense, and liability to mutilation. The Japanese station is neither modern nor technically efficient. Because of its quality, its capacity, and its location the Japanese station is not capable of furnishing effective competition with the cables. This one isolated station probably never could pay for itself even with the advantage of a monopoly. The Japanese would now surrender their claim to monopoly of uncertain value in securing payment for the absolute certainty of payment by a consortium. The price at which the Japanese would sell to a consortium appears not to have been officially stated, but Japanese press reports name a price about three times the contract price named in their contract with the Chinese. Under the consortium proposal the Japanese would be paid in full and probably more, thus realizing the only right they now have, while the Americans would surrender every right they have. One isolated wireless station attempting to work with every overseas wireless station in the world could not give China effective wireless service. The two units of the American-Shanghai station cooperating with the Japanese station, made modern, and all served by the auxiliary stations contemplated by the American project would give China effective service. The American companies) concerned believe such service would pay for itself. Americans know the state of China’s finances and know that if their proposed installations could not pay for themselves, payment would not be made soon, if ever. The American companies have expressed a willingness to cooperate with the Japanese station in establishing a wireless system which they believe will give good service and pay for all the installations. The consortium principle for wireless in China would probably be a failure. Joint management by persons of different nationalities, each of whom is directed from different world centers, would doubtless be a bad management. Wireless stations so managed would likely give poor service at great cost; the Chinese are strongly opposed to a consortium. They state they will never consent to it. Japan’s consortium proposal has been given careful consideration by the other Governments and the companies concerned and has been rejected. It would appear most inopportune to reconsider it now.”

Copy by mail to Tokyo.