740.00119 PW/9–2145: Telegram

The Ambassador in China (Hurley) to the Secretary of State

1636. The day following dispatch of Embassy’s telegram 1606, September 17, 5 p.m.,31 we received by courier from Josselyn letter stating that while Shanghai Power Company (American), Shanghai Water Works (British) and Gas Company (British) were being restored to former owners, the Director of Public Utilities, Shanghai Municipal Government, had notified him that on order of the Ministry of Communications the Shanghai Telephone Company would be taken over for nationalization and integrated with the National System of Telecommunications. I immediately made vigorous protest to the Generalissimo32 in personal conference. He agreed to [Page 1395] our position without equivocation, stating that such action was at variance with the policy of the Chinese Government. He reiterated that the policy of his Government was to facilitate not hinder the return of properties to lawful owners. He further stated that if properties were to be taken over for nationalization in accordance with established policy that such action, of course, would be taken only after negotiation and in due process of law. Accordingly, the Generalissimo immediately gave orders to the Minister of Communications directing prompt restoration of the company to its authorized representatives. We are now in receipt of a telegram from Josselyn advising that transfer has been effected.

The Foreign Office explains that the difference in treatment between the other utilities and the telephone company was due to a misunderstanding on the part of an official in the Ministry of Communications. All telephone systems in China with the exception of the Shanghai Company are owned by the Government. The Shanghai Company was granted a franchise to operate in the International Settlement by the Shanghai Foreign Community and French Municipal Council. Extraterritoriality having been abolished and all other telephone companies being owned by the Government, the Ministry of Communications official assumed that the Shanghai Company would also be nationalized immediately and accordingly gave orders to the Director of Public Utilities to take it over for this purpose. Of course the Generalissimo’s order clarifies the situation in so far as the present is concerned but it seems reasonable to expect that sooner or later negotiations will be initiated to include this company in the national system of telecommunications.

  1. Not printed, but see despatch No. 907, November 30, p. 1412.
  2. President Chiang Kai-shek.