CO129-470 - Public Offices - 1921 — Page 323

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companies were prolonged until 1910, and the proviso made that

no other party will be allowed without the consent of both the said parties to land telegraph cables on the coast of China and islands belonging thereto or to work such cables in connee- tion with the Chinese lines or otherwise to establish telegraph connections which might create competition with or injure the interests of the existing lines belonging to China or to the cable companies." In 1900, this proviso was extended till December 1930, and it was further confirmed in an agreement of 1913, and in an exchange of letters between the companies and the Chinese Government in August 1914, supplementary to the Landing Rights Agreement of 1913 between China and Japan. Fuller details of these arrangements could no doubt be obtained from the companies if required.

9. The companies' monopoly has not been rigidly enforced. by an arrangement in 1904, an American company (Pacific Cable Company) and a German company (the Deutsch-Niederländische Telegraphen-Gesellschaft) were admitted to the Joint Purse Agreement and now have landing rights at Shanghai, and Japan acquired landing rights in 1913.

10. In 1911 the Chinese Government took over control of all officially managed land telegraphs in China, and to meet the expenditure thus involved, they borrowed 500,000/ from the British and Danish cable companies, who were given a lien on certain classes of land telegraph traffic as security. It is to this lien that reference is made in the recent Telegraph Loan with Japan, to which allusion will be made later in this memorandum.

(B) Wire Telegraphy.

11. In this there would in ordinary circumstances he no direct British interest. But in April, 1918, Japan concluded her so-called Telegraph Loan" with China for 20.000.000 yen (2,000,000 at normal exchange) for a term of five years, secured on the whole wired telegraph system of China. China's obligations to the cable companies were expressly recognised, but there is the significant provision (articles 10 and 11) that if China alters her arrangements with the cable companies or the Chinese Telegraph Administration contracts any further loans abroad, China will first consult Japan. In forwarding this agreement Sir J. Jordan's comment was as follows:-

While the prior liens of the Eastern Extension and Great Northern companies on the telegraph revenues under the agreements of 1900 and 1911 are specifically recognised by article 9, the Japanese obtain by article 11 a first option on all future foreign loans required by the Chinese Telegraph Administration for wire telegraph purposes, and by Annex 2 a first option on the nomination of foreign experts and on the supply of imported telegraph material. By obtaining these options the Japanese have succeeded in gain- ing a preference which was always refused to the cable companies in the past, and have thus effectively ousted the latter from the position which they bad built up during a period of close relationship with the Chinese Govern- ment dating from 1870."

12. When this loan was årst concluded its terms were kept secret but various reports gained circulation. One of these was that under its provision the Ministry of Communications contemplated the erection of wireless stations at certain places in China, amongst others at Batang on the Tibetan border. Lord Curzon took this up with the Japanese Ambassador and let it be clearly understood that Great Britain could not acquiesce in the erection of such a station by Japan, and Viscount Chinda. on behalf of his Government, eventually stated officially that it would not be proceeded with.

(C.) Wireless Telegraphy and Telephony.

13. Here the position is extremely intricate.

14. Five definite agreements have been made with China dealing with wireless matters. These are (1) the Larsen Contract, the 16th November, 1917; (2) the Mitsui Wireless Contract. the 21st February, 1918; (3) the Marconi Wireless Telephone Contract, the 27th August, 1918; (4) the Marconi Wireless Telegraph Contract. October 1918; (5) the Chinese National Wireless Telegraph Company, the 24th May,

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15. (1) Larsen Contract. Was negotiated by the Minister of Marine, a notorious pro-German, with the Danish subject, Larsen. It was a mere screen for a contract with a German firm, and in consequence of the objections lodged by the British and Japanese Legations the contract was finally disallowed by the Chinese Government.

16. (2.)—Mitsui Wireless Contract. Is practically identical with the Larsen contract. To all intents and purposes the agreement was filched by the Japanese, who knew that we claimed a prior right for Marconi in view of an undertaking given the latter on the 8th April, 1914.

17. The main provisions are the erection of one large wireless station in China (Tungchow, near Peking, has since been selected), capable of communicating direct with Japan. and Europe or America. The amount of the loan is 536,267.. and the term thirty years, during which period China binds herself, by a supplementary declaration of the 5th March, not to permit the construction by anyone other than Mitsui of a wireless station for communication as above, nor may China herself erect such a station. The rights of the cable companies up to 1931 are specifically safe-guarded, but it is clearly indicated that immediately that date is reached Japan means to claim the right to unrestricted wireless communication abroad. In report- ing on this agreement, Sir J. Jordan made the following indignant comment :-

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While the publication of the full text of the agreement does not materially increase our previous knowledge of the details of the transaction, and throws little additional light on the obscure question of the position of the cable companies. it has revealed the all-important fact that the Japanese obtained on the 5th March, 1918-a fortnight after the signature of the agreement a monopoly of China's external wireless communications for thirty years.

It will be remembered that on the 20th February, 1918, I handed to the Japanese Legation a memorandum placing on record the fact that the only wireless telegraph concession which could be said to exist in China at that date was that of the British Marconi Company. It now appears that a fortnight later the Japanese forced the Chinese Government to enter into an undertaking to abrogate the British rights accruing under that conces- sion by giving a monopoly for thirty years to the Mitsui Company, and binding themselves not to erect any other high-power station during that period.

Not only is the description of the Japanese Government's action contained in the penultimate paragraph of my despatch No. 108 of the 5th March, 1918, fully borne out by the official information now available, but it is evident that that description did not go far enough. The Japanese Govern- ment did not confine themselves to snatching the enemy-tainted Larsen Agreement for the Mitsui Company, but they proceeded immediately to make use of the information imparted by me to Mr. Yoshizawa in order to erect a secret barrier in the shape of the monopoly declaration of the 5th March-against any further competition from the prior rights of the British company.

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I trust that His Majesty's Government will decide to inform the Japanese Government that they regard the monopoly declaration of the 5th March, 1918, as an infringement of undertakings previously given to the Marconi Company on the 8th April, 1914, and will authorise me to inform the Chinese Government at the same time that the validity of the declaration cannot be recognised."

22. (3.) - Marconi Wireless Telephone Contract (Annex 2, Enclosure 1) for the purchase of 200 telephone sets, The loan was for 600,0001, of which about half was to be spent on the sets themselves, the remaining 300,0007. being in the nature of a loan to the Ministry of War. In return, China agreed to adopt exclusively the Marconi wireless telephone system for the duration of the loan, and Marconi was to have first claim to establish in China a factory for the manufacture of wireless equipment. (This has since materialised-see (5) below.)

23. (4.)—Marconi Wireless Telegraph Contract (Annex 2, Enclosure 4) for the establishment of wireless communication between Kashgar and Sianfu. There are to be three stations (Kashgar, Urumtehi and Lanchow) and the cost is 200,000.

24. (5.)—Chinese National Wireless Telegraph Company (Annex 3), a joint stock Anglo-Chinese company, formed by the Chinese Government and Marconi Com-

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