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to international recognition, and must not be held, therefore, to constitute a preference for the supply of telephone and telegraph equipment, and thus invalidate the Marconi agreements of the 27th August, 1918, for the sale of wireless telephone equipment, of the 9th October, 1918, for the establishment of wireless communication between Kashgar and Sianfu, and of the 24th May, 1919, for the formation of the Chinese National Wireless Telegraph Company. Such a proposition would be extremely distasteful to the American Government, which, as above indicated, has itself maintained, and has assumed on the part of His Britannic Majesty's Govern ment, a whole-hearted sympathy in the attitude of scrupulous avoidance of any claims to special or exclusive privileges in China.
In conclusion, the Embassy is informed that the American Government feels that this matter is one of primary importance in the co-operation between the British Empire and the United States in the Far East.
London, February 15, 1921,
(No. 584.) My Lord,
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ANNEX 6.
(Initialled)
Mr. Clive to Eari Curzon (Received November 5.)
B. A. B.
Peking, August 20, 1920.
I HAVE the honour to enclose copy of an agreement for the organisation of the China Electric Company," with the object of manufacturing in China all kinds of machinery, apparatus and materials, more especially for the supply of the needs of the Chinese Telephone and Telegraph Administration.
The agreement was concluded in October 1917 and the signatories include Mr. Yeh Kung-cho, now Minister of Communications, who obtained a half interest in the company on behalf of the Ministry. The other half is equally divided between the American
and the Japanese "Nippon Electric Western Electric Company Company."
The company is incorporated under American law, and has already established a factory at Shanghai for the manufacture of various electrical materials.
Under the agreement (article 11 (a) and (b)) the company secures a monopoly for the supply of apparatus and materials for the Government telegraph and tele phone systems in China. The Telegraph Administration is a national unit, and it is the avowed intention of the Government to nationalise the telephones, though it appears doubtful whether this is practicable. The privileges of this company there. fore amount to a virtual monopoly covering one of the biggest industrial fields of China. It is so big, indeed, that it is unlikely to prove effective in practice. Not even the Western Electric Company can hope to fill all the orders if communications in China show normal developmient
No instance of the assertion of monopolistic rights has been brought to the notice of the Legation, and it appears unlikely that any attempt will be made to assert such rights.
A Sino-British group has indeed been in negotiation with the Ministry of Com munications for some time and expects to secure rights somewhat similar to those of the China Electric Company, with the special object of encouraging the establish ment of telephone installations throughout the country. The Peking Syndicate and various firms in Shanghai and the United Kingdom are interested in this project. but it has not yet matured, mainly in consequence of conflicting interests among manufacturers.
In view of somewhat analagous British projects which have been in negotiation or already brought to a conclusion in recent years, it does not appear useful or practicable to raise any question as to the monopolistic rights indicated in the enclosed agreement. The prohibition of trading monopolies covered by the treaties can hardly be strictly applied to enterprises covering extensive systems of national communication.
Should any hardship ensue to British suppliers owing to the existence of such contracts it appears to me that the most practical step would be to deal with each on its own merits as it arises. The natural effects of supply and demand, of price and facility of delivery, will almost certainly prevent any grave injustice to suppliers of
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any nationality. For, in such vast undertakings as the provision of means of com- munication in China, the natural influence of competition must prove too strong for any restrictive agreements to be effective or to exclude economic competition.
I have, &c.
Enclosure.
R. H. CLIVE.
China Electric Company Agreement, dated October 20, 1917. MEMORANDUM of agreement, made this 20th day of October, A.D. 1017, between his Excellency. Yeh Kung Cho, Vice-Minister of the Ministry of Communi- cations, acting by authority and on behalf of the Ministry of Communications of the Government of the Republic of China (hereinafter called the Ministry "), of the first part, and Gerard Swope, acting by authority and on behalf of the Western Electric Company, Incorporated (of which he is vice-president). a corporation organised and existing under the laws of the State of New York, of the United States of America, and acting by authority and on behalf of the Nippon Electric Company, Limited of which he bears a power of attorney), a corporation organised and existing under the laws of the Empire of Japan, both of the second part, and when both are referred to together, hereinafter called the Electric Company."
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Witnesseth, whereas, the "Ministry is desirous of developing the electrical industries, it has come to a special agreement with the "Electric Company" as set forth below, for the purpose of organising an electric company to manufacture all kinds of machinery and apparatus and materials, in order principally to supply the need of the Chinese Telephone and Telegraph Administration.
Now these presents witnesseth that, in consideration of the premises and of the mutual undertakings and agreements hereinafter set forth, it is agreed by and between the parties as follows:-
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1. Subject to the terms and conditions hereinafter set forth, the Ministry and the
Electric Company shall cause to be organised as soon as possible after the execution of these presents, in accordance with the requirements of the laws of the State of Delaware, of the United States of America, a company, to be called the China Electric Company, Limited " (hereinafter called the China Company "), but it is understood that at any time when the company law of China assumes a reasonable standard of efficiency as compared with foreign standards, and in the opinion of the "Ministry," then the China Company" shall come under the Chinese law.
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2. The articles of association of the China Company," or other charter regulations or documents required for its creation, and the by-laws, shall be prepared by representatives specially appointed by the Ministry and the Electric Company for the purpose, and shall contain the usual and customary provisions found in articles or documents of such character, as nearly as the circumstances of
China Company" and the terms and conditions shall permit.
the
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3. Upon the complete organisation of the China Company," the articles of association, or charter regulations, by-laws and documents as aforesaid, shall be forthwith transmitted by the China Company" to the Ministry for approval and submission to the Chinese Government for registration.
4 (a). The authorised share capital at the outset of the China Company shall be one million gold dollars ($1,000,000.00) United States currency, and shall be divided into ten thousand (10.000) shares of the par value of one hundred United States gold dollars ($100.00) each.
4(b). One-fourth () of the said capital, that is, the sum of two hundred and fifty thousand gold dollars ($250,000.00) United States currency, shall be subscribed immediately upon the organisation of the China Company, and the said subscription and all other partial subscriptions to the capital of the "China Company shall be made as between the parties hereto in the proportion as set forth below in article 5.
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4 (c). The balance of the said capital and additional capital shall be issued as needed, in accordance with the provisions of the charter and by-laws of the China Company at such time as called for by the Board of Directors.
5(a). Of the first issue of the share capital as set forth in article 4, paragraph (b), fifty per cent. (50%) thereof shall be subscribed by the Ministry, and by such individuals as may be approved by the Ministry." The remainder, or fifty
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