893.70/36: Telegram
The Consul General at Shanghai (Lockhart) to the Secretary of State
[Received 11 p.m.]
1074. The organization has been completed of the Central China Telecommunications Company and it has commenced operations as of August 1. It is announced that it “will take control over all telecommunications in Central China”. These will include the former Chinese Government radio administration, the telegraph administration of the Chinese Ministry of Communications, and the various Chinese municipal and long distance telephone systems, practically all of which were officially owned. This would appear to be the final step in the taking over and consolidation of these services under Japanese control and is evidently closely patterned after the procedure followed in Manchuria. Although the immediate effect will be ostensibly to transfer these facilities from Japanese military to civilian hands, it is apparent that control will remain at least semi-official.
The capital is announced to be 15,000,000 yen. Of this amount 5,000,000 yen represents the seized Chinese properties, i. e., largely “contributed in kind” by the “Reformed Government”. 4,000,000 yen is to be contributed by Japanese electrical interests which include the Japanese Telegraph and Telephone Company and the International Electrical Communications Company. The remaining 6,000,000 yen is to be put up by the Central Chinese Development (redirected) Company, the organization of which has not yet been completed. American interests estimate, however, that little actual capital is being paid up at the present time.
Although the new company is said to be of Chinese “Reformed Government” registry, the president and the general manager are to be Japanese and only two Chinese, personal representatives of the “Reformed Government”, are to serve on the Board of Directors. A Mr. Hiroshi Fukuda is president. The head office is at Shanghai. The American radio companies, R. C. A. and Mackay, who had traffic contracts with C. G. R. A. for the operation of circuits to the United States, have been informed by the new company that it does not desire to make new contracts with them but merely to continue the old agreements in force until their normal expiration. Operation of these circuits since the seizure of C. G. R. A. by the Japanese military in January has already been on this basis. Since the Japanese have observed the terms of the contracts to the satisfaction of the American interests, both American companies are now understood to be informing the Central Chinese Telephone Communications Company that [Page 433] they are willing to continue cooperation on the basis of their old contracts with C. G. R. A.
While American radio companies are inclined to complain on the ground of Japanese violation of their rights, they state that they are suffering heavy losses because of the general refusal of the public to use the Japanese controlled radio services and its consequent patronage of the cables. They state that their share in the radio-cable traffic between China and the United States has fallen from about 85 to about 15% since Japanese seizure of C. G. R. A. American electric railway equipment manufacturers expect to suffer since they feel that Japanese control of these services will result in no further purchases by them of American equipment.
Repeated to the Ambassador and Peiping. By mail to Tokyo.