The Secretary of State to the Minister in China ( MacMurray )
96. 1. Following is for your information and comments, with reference to Department’s 97 today.59
2. I am very anxious to have this long-standing case settled in such a manner as to protect existing legitimate American interests and to be consistent with our policy of the open door.
3. As I understand it the situation is this: Believing that the Government of China preferred separate understanding with outside countries instead of internationalization of her external communications by radio, the Department has discouraged American radio interests from making arrangements with such other countries as have radio interests in China, and it has given its support to them in direct negotiations with the Government of China. However, events have demonstrated that the influence which the Japanese and British Governments have with the Chinese Government appears to be sufficient to prevent the Chinese Government from completing negotiations with the American company. In your telegram 405, September 21, 1925, 4 p.m.,60 you have informed me that the Chinese Government has insisted that the American interests make some arrangement directly with Japanese interests prior to the completion of the American company’s contract by the Chinese Ministry of Communications. We have refrained from doing this because the American company have no basis for negotiation with the Japanese in the absence of an executed contract. The proposal of the Japanese is that we give authorization to American company to discuss matters, with a view to a consortium, with the French, British, and their own interests. We have also hesitated to do this, believing that Chinese [Page 1059] were opposed to an internationalization of their external radio communications. The matter is at a stalemate therefore.
4. A reply to the Japanese memorandum of June 1 last61 is being considered. In regard to its proposal of a radio consortium, I had thought of informing the Government of Japan that if an arrangement based upon joint cooperation of Japanese, British, French, and American radio interests, and including joint operation of the stations to be set up in accord with the arrangement under the control of China, should prove to be acceptable to the Chinese Government, and, of course, provided it would involve in no way a grant of special privileges bearing a character of monopoly which would operate to prevent independent wireless interests from entering the field, and provided any existing claim to monopoly were given up, this Government would have no objection in principle to the working out of such a plan by the interested private commercial companies.
5. However, on May 12 General Harbord came to consult with me; he handed me a letter62 in which it was stated that in the opinion of the Radio Corporation, a position had been reached in regard to its negotiations with the Chinese where financial retrenchment had become necessary; that its intention was to recall Colonel Davis, who was needed by the company and by his family here; and that Davis would be instructed to turn over any papers to you which were necessary to enable you to continue pressure in behalf of Chinese-American control of the communication by radio between the United States and China.
6. The letter from the Radio Corporation concluded with a statement that unless you were able within six months to bring about definite final action by the Chinese Government, it would then seem wise to the Radio Corporation, by way of preparation to enforce a claim for all damages accrued, to consider recommending to the Federal Telegraph Company that it declare that the Republic of China was in default under existing contracts and the further commitments it made last October.
7. I discussed the situation with Harbord as I outlined it above in paragraphs 2 and 3, with which outline he agreed. He stated that the British and French wireless companies had informed him of their being interested in the Mitsui Station at Peking.
8. I said to him that the Ambassador from Japan was insisting to me constantly that the Mitsui Station was adequate to meet China’s needs in regard to overseas radio communications and that construction of more stations would only increase China’s financial burdens unnecessarily. General Harbord replied that he was not able to [Page 1060] understand how any such claim could be advanced by the Japanese, for according to his information the Japanese station was antiquated and not capable of meeting requirements of overseas communications. He said he believed the Japanese would abandon any such claims in negotiations.
9. I inquired of him whether the Radio Corporation would regard an AEFG arrangement as acceptable, and I informed him of the reply to the Japanese Government which I had considered making, and which I gave above in paragraph 4. His answer was that from the beginning the Radio Corporation had been in favor of an international arrangement, but it had subordinated its wishes in 1921 to those of the Department in the interest of Chinese-American control of radio communication directly between the United States and China. He declared the proposal as I outlined it acceptable to his company, provided it did not involve, as proposed by Japan, a straight loan by the Radio Corporation, which has no interest in financing as such.
10. He suggested it was necessary to get some definite decision from the Chinese Government for Chinese-American control of communication by radio with the United States, or else for an internationalization of such communication which was the only alternative that seemed to offer. He proposed that instructions be sent in accord with the lines of Department’s 97. I agreed to this. Should there be no responsible member of the Government of China in Peking at present to whom you can make the statements in Department’s 97, action should not be taken until such an individual appears. It is understood in any case that the Radio Corporation will require the return of Davis by June 30.
11. My desire is that you carefully consider the proposals now placed before you and give me your frank comment and suggestions concerning the best means of arriving at some settlement that is practical and workable. I would suggest as an alternative proposal to the one I outlined in Department’s 97, whether you should not give the Chinese notification that we are ready to accept the suggestions which the Provisional Chief Executive made to you September 21, 1925,63 and authorize the Radio Corporation to proceed to discussions with the Japanese company.