893.74/714: Telegram

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


365. My 335, August 19.

After further conversation with Minister of Communications and Admiral Tsai, latter presented the Federal question to Cabinet meeting August 26 by a memorandum which requested instructions and which clearly favored the fulfillment of the Federal Company contract, despite the opposition of the Japanese. He has informed me since then that Minister of Communications Chang and Minister of Finance Koo, supported him. The Cabinet decided that there should be discussion of the matter again after settlement of the political situation, in other words, further consideration should not be given until a “regular” government, or as was intimated by Tsai, a “recognized” government, is established.
After I received an intimation that no very mature deliberation had in fact preceded the taking of this decision by the Cabinet, but with rather a casual hope that the Cabinet might arrange to exchange [Page 1076] performance of the contract for an early recognition of their regime by us, I saw Admiral Tsai again and emphasized to him the importance of any action which would necessitate my reporting that we must give up hope definitely that China would carry out her obligations. Thereupon Tsai offered to request reconsideration by the Cabinet at its August 31st meeting. I have just been told by him that at this meeting the Cabinet, although attempting not to close the subject by declaring that their intention was not to end negotiations in this matter, confirmed the previous decision.
This action, taken admittedly in consequence of threats recently reiterated by the Japanese and of intimations of British opposition, I can only consider as definitely putting an end to all hopes of securing from the Peking regime favorable action in regard to the Federal contract. A more favorable conjuncture could not have been hoped for. Chang, who himself had signed the supplementary agreement made in September, 1921,72 was prepared to make the clarification agreement, subject only to its receiving approval from the Minister for Foreign Affairs who probably has the most friendly attitude in regard to the United States of any official of China and personally was most anxious to have the agreement given effect, but who felt compelled, under duress of political circumstances, to bring the matter before the Cabinet. He has assured me he presented the question as a choice between possibly offending the Japanese by failure to observe a monopolistic contract and possibly offending us by failing to meet the test, as our Government regards it, of the policy of the open door and of the sincerity of China in cooperating in that policy. That the Cabinet should on this presentation of the case have repudiated or postponed indefinitely the execution of the Federal contract is, in my opinion, final evidence that reliance can no longer be placed upon the Peking authorities by the American company to effect its rights under their contract. I can no longer recommend therefore that they continue to exert effort along this line.
However, I would advise most earnestly that prior to abandoning possibility of progress upon the basis of the Federal contract, the American interests concerned and the Department [give consideration to?] an alternative plan I have discussed with Davis. This is in essence the following: In view of the lack of active support from the administration in Peking, although already having contractual rights which assures its legal consent to carry out the contract, a practical solution of the difficulties of the American interests should be sought by those interests independently of Peking. Sun Ch’uanfang, who controls the Shanghai area in which it is proposed that [Page 1077] the main station is to be erected, holds the key to the situation. If he could be induced to allocate the necessary land for the station, construction might immediately be started, in confidence that the administration in Peking would have to acquiesce in the various arrangements which would be incidentally necessary. I believe that in regard to the signature of bonds I am justified in thinking that that matter is considered by Davis to be of no consequence since the Chinese Government then existing gave a formal preliminary bond which covered the entire indebtedness. And in regard to the clarification agreement, it would appear that the central administration in Peking—the technical experts of the Ministry of Communications are friendly—will of necessity come to such an agreement in the face of a fait accompli in order to secure the benefits the agreement confers as to equipment and financial arrangements.
If the Radio Corporation after consultation with the Department were to approve this course, I should recommend that I be authorized by you to discuss the matter with Marshal Sun during the trip to the South which I am to make soon. Presumably Moss could later arrange all the necessary details in regard to the land.
  1. See despatch No. 37, Sept. 27, 1921, from the Minister in China, Foreign Relations, 1921, vol. i, p. 450.