322
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pany, with a charter for twenty years; to manufacture wireless telegraph and telephone equipment, &c. The company have no right to operate commercial wireless stations in China, but receive priority for all orders from the Chinese Government for wireless equipment. The company is the direct offspring of the Marconi wireless telephone contract (see 3).
25. The above are the agreements which bear on the questions now before us. And before proceeding further, it should be recorded that both the Japanese and Chinese Governments have been officially warned that His Majesty's Government refuse to recognise the validity of the declaration given to Mitsui debarring any other party from erecting a wireless station for communication with Japan, Europe and America, and that, though both their Governments have refused to recognise the validity of our protests, yet they know that we do not acquiesce in the Mitsui claim.
26. To return to the practical issues raised by the Chinese application to the cable companies and the latter's desire to secure an extension of their monopoly, the views of Mr. Clive, His Majesty's Chargé d'Affaires at Peking, have been obtained and are as follows:-
27.--(1.) The extension of the companies' monopoly is politically desirable, and probably essential if our position in telegraphy in the Far East is to be maintained.
(2.) Our former position has been seriously impaired by Japanese competition, and the recent action of the Chinese telegraph administration in purchasing an unsuitable cable from Japan on the advice of their Japanese employees. and against the advice of the cable companies, shows that Japan is deter mined to take full advantage of the privileged position secured by her under her loan agreement,
28. (3.) Any extension of cable monopoly must, however, take into considera- tion the present-day environments of the commercial community in China. which call for wireless and cable facilities, and such a monopoly must operate as not to preclude the development of wireless by the Chinese Government under British auspices. At the recent conference of the British Chamber of Commerce at Shanghai. the question of wireless facili ties was discussed, and the present opportunity would seem suitable for a reconsideration of the British cable and wireless vested interests in China as represented by the Eastern Extension and Marconi Companies. 29. (4.) It is to be remembered that the cable monopoly in itself only affords partial protection to any British predominance, since American, German, Dutch and Japanese landing rights have all had to be successively admitted, and the interests in Japan of the Northern Company render the latter as a partner of our monopoly especially susceptible to Japanese pressure. More- over, since the headquarters of the Chinese Administration were transferred from Shanghai to Peking in 1911, the Eastern Company have been handi- capped by the lack of a responsible representative in Peking. It is British rather than Danish support which carries weight with the Chinese Govern- ment, and yet in the present negotiations, with their important political bearing, we are dependent on a Danish adviser, M. Eriksen, in London, who is in constant communication with a Danish employee at Peking, while His Majesty's Legation is not yet in a position to ascertain either the nature of the Chinese Government's instructions to M. Eriksen, or the effect on these of the change of Government which has occurred since his departure from Peking.
30. (5.) The Japanese Minister has recently protested to the Wai-chiao Pu against schemes now under consideration for a wireless development by the Chinese National Company on the ground that they conflict with the Mitsui Agreement, and the Japanese may possibly claim the right under articles 9, 10 and 11 of their agreement of April 1918 to be consulted with regard to the present negotiations. In any case. it is safe to assume that Japan aims at predominance in land, cable and wireless telegraph interests in China, and the issue is, therefore, a clear and comprehensive one between the Japanese and ourselves. of which the present cable monopoly extension question is only one phase. On our side, we have the Marconi agreements and what remains of the cable monopoly privileges, while the Japanese have the Mitsui and telegraph loan agreements,
31. (6) Our partnership with the Danes render us vulnerable through the Northern Company's interest in Japan and possibly through Danish
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sympathy for the Telefunken Company, while Japanese interests are practically those of the Japanese Government,
32. (7.) If we are to succeed it would seem essential :--
(a) To amalgamate the Danish and British cable and wireless interests
into as solid a block as possible.
(3.) To obtain our proper share in the leading of negotiations by opening up direct communications between His Majesty's Government and the Chinese Government at Peking.
33. Having reached this stage, a letter was addressed to the various Government offices concerned, enquiring their views on the issues at stake, and on the 7th February the Post Office replied suggesting that in view of the recent preliminary conference at Washington it might be undesirable to seek any exclusive cable or wireless concessions or to suppert British nationals in seeking such concessions save in cases where the traffic was too small to admit of competitive services. Adverting to Sir J. Pender's hint of the possibility of pooling in case of need, the Postmaster General suggested that this might prove the best solution if feasible. In any case, it was hardly desirable to exclude wireless communication between China and Europe; and that being so the exclusive cable rights, in any form in which the British Government could agree to them, would probably mean little to the Eastern Company, who, as regards cable communications might well stand on their merits.
34. The text of the Post Office letter, a copy of which has already been forwarded to the Imperial Communications Committee. forms Annex 4 to this memorandum.
II. Clash between British and American Wireless Interests in China. 35. Since then a further complication has arisen in a clash between the Marconi Company and the American Federal Wireless Company in wireless matters in China. 36. In August 1918, the Marconi Company, as already mentioned, signed an agreement (Annex 2) with the Chinese Government for the supply of 200 sets of wireless telephones. The company lent the Government 600,0007, of which 300,000Z. was actual purchase price.
37. The Chinese Government undertook that until the loan was repaid they would exclusively adopt the Marconi system of wireless telephony, and they further hound themselves in the event of the Government deciding to establish a repair shop or factory for the maintenance of wireless installations in China, or for the manufacture of wireless apparatus, the Government will first open discussions with the company with the view of arranging joint operation of such factory by the Government and the company,"
38. Arising out of this article. the Chinese Government on the 24th May. 1919, signed a subsequent agreement with the Marconi Company (Annex 3) for the formation of the Chinese National Wireless Telegraph Company," a joint stock concern composed of the Chinese Government and the Marconi Company, The object of the company was
the manufacture of wireless telegraph and telephone apparatus, materials and supplies, to deal in such apparatus, material and supplies, and to repair and maintain wireless installations now existing and hereafter established, but nothing in this agreement confers any right upon the Chinese company to operate commercial wireless stations in China. The Marconi Company granted to the Chinese company the right to the use in China of all Marconi patents, rights, designs, drawings and secret processes, past, present and future, for wireless telegraphy and telephony: the Government undertook that if the goods supplied by the company were not lower in quality nor more expensive than those offered by other companies, the Government would purchase exclusively from the Chinese company all its present and future requirements in wireless telegraph and telephone apparatus. material and supplies, and further. if the Government suffered no loss by giving such work to the Chinese company, that company should be exclusively entrusted with the repair and maintenance of all wireless telegraph and telephone apparatus and equipment in China. Finally, the Marconi Company undertook not to grant the use of their patents. &c. to any other person for use in China in whole or in part, nor themselves to sell wireless telegraph and telephone apparatus, &c., except through the Chinese company: the Chinese Government on their part promised to do all in