january 1934

Japan in Manchukuo

H. J. Timperley

Volume 12 • Number 2

The contents of Foreign Affairs are copyrighted.©1934 Council on Foreign Relations, Inc. All rights reserved. Reproduction and distribution of this material is permitted only with the express written consent of Foreign Affairs. Visit www.foreignaffairs.com/permissions for more information. JAPAN IN MANCHUKUO

By H. y. Timperley

now over a IT is year since Japan officially recognized Man a to co chukuo, signing protocol under which she agreed operate with the new state in the maintenance of its national to security. During this period, organized opposition the estab new lishment of the government has been crushed; Japan has to been able consolidate her position and initiate plans for the own development of the country in harmony with her economic too to and strategic needs. Although it is early yet make confident we assess predictions regarding the future, may progress and examine the situation as it stands today. In view of the war over not a clouds still hanging Manchuria this may be profitless task. to come The first fact be grasped is that Manchukuo has to to stay. Before long the Japanese may possibly find it expedient a a bring about change in the form of government from nominal as at to a republic, present, limited monarchy, with Mr. Henry Pu Yi restored asManchu Emperor; but nobody believes that the Japanese have the least intention of relaxing the firm control now exercise over the destinies. they country's Manchukuo's vaunted independence exists only in the imagi at nation of Japanese propagandists. As present constituted, the amounts to more a Manchukuo "government" little than polite to fiction invented obscure the fact that Japan has gone in for a imperialism in big way. Japanese officials occupy the key posi tions in the Manchukuo administration and work under direction turn of the Kwantung Army, which in is subordinate, ostensibly at least, to the Japanese Imperial General Staff. Mr. Pu Yi and team his of Manchu and Chinese ministers, commonly spoken of in Manchuria as "the are over phantom cabinet," entirely shadowed by their so-called Japanese "advisers," who in fact constitute the real executive country's authority. an Last spring the Manchukuo Government adopted economic i. program. It indicated the following basic policies and aims: one To prevent any class from monopolizing the benefits arising resources from the exploitation of natural and from industrial 2. To exercise national control over development. important economic activities and to devise rationalization measures. 3.

Council on Foreign Relations is collaborating with JSTOR to digitize, preserve, and extend access to Foreign Affairs ® www.jstor.org 296 FOREIGN AFFAIRS To observe "the of the Door and principle Open equal oppor to tunity," to encourage the investment of foreign capital, and In utilize foreign technical skill and experience. line with these has laid down definite governing principles the government plans for the economic organization of the country, for the develop ment of industry, and for the construction of public utilities. in Progress is being made several directions. One of the most notable developments has been the progress towards the establishment of financial order. Among the gravest was scandals of the former Chinese r?gime the way in which on son Chang Tso-lin and later his and successor, Chang Hsueh for of liang, manipulated the currency the purpose bolstering up was manner. ac their private treasuries. It done in this Having a nota quired virtual monopoly of Manchuria's foreign exports, bly the soya bean, they paid the Manchurian farmer for his notes own known as produce with of their manufacture, feng to for piao. They then sold the produce the foreign distributors The emission of issue after good money, which they pocketed. issue of notes had the natural result of enormously lowering the a to value of the fengpiao. Faced with situation similar that which confronted the German Government in 1924 after the ruin of the old mark, the new Manchukuo Government made one of at rates its first tasks the redemption of this paper currency fixed that the of of exchange. It is officially claimed through agency the Central Bank of Manchukuo, established on June 15, 1932, a of Manchukuo the with capital 30,000,000 yuan, government 60 of the outstand by the end of last July had redeemed percent the end of the ing paper issues. It is hoped that by June 1934 variegated forms of currency previously circulating throughout new cur Manchuria will have been superseded entirely by the as on rency unit known the "Manchukuo yuan," based the silver a ex standard, which has already become recognized medium of this much change. Though deplored by the exchange speculators, needed reform is warmly welcomed by farmers and merchants it has done much to encour throughout Manchuria, where already age trade by eliminating the tremendous currency fluctuations under the old which hampered the transaction of business system. most But it is to railroad development that interest attaches. to For nearly thirty years Japan has been working steadily adapt the Manchurian railroad system to her own economic and efforts in direction have strategic requirements. Her this brought JAPAN IN MANCHUKUO 297 her into frequent collision with the rival aspirations of the Chinese on on the one hand and the Russians the other. Attempts by the to late Chang Tso-lin build lines in competition with the Japa nese-owned South Manchuria Railroad, and his refusal to build were others linking up the Manchurian and Japanese systems, recent conflict. major factors in precipitating the Sino-Japanese a Since Manchukuo was established Japan finds herself in posi tion to proceed unhampered by Chinese opposition. She has also an shown increasing disregard of Russian interests. The publicly announced plans of Manchukuo provide for the construction of 4,000 kilometers of new lines within ten years. new The first railroad to be completed since the Japanese army a assumed virtual control of Manchuria in September 1931, is stretch of about 200 kilometers from Tunhua to the Korean bor on der (see railway map page 294). This line, opened for traffic connect new now in August last, will with the port of Rashin, on under construction the Korean coast, and by joining up with a more the Korean railroads will provide direct communication to between Japan and Manchuria. The Chinese refusal sanction to the completion of this railroad did much quicken Japanese new impatience with the former Manchurian r?gime. Another access to line, due for completion by the end of 1933, will give the fertile country lying north of the Chinese Eastern Railway. This now some west is the line being built from Lafa, 50 kilometers ward of Tunhua, to Harbin, where it will connect with the Hulan Hailin-Koshan-Tsitsihar line. When it has been completed, and new now across when the bridge being built simultaneously the are com Sungari River has been finished, trains which at present to at to pelled trans-ship their goods Harbin will be enabled carry to coast. their inland freight direct the Korean Construction has on also been started another line running northward from Yenki, to about 60 kilometers eastward of Tunhua, through Hailin an center on Sanhsing, important soya bean the Sungari. This railroad (which will take several years to complete) will tap ad can ditional regions, the products of which then be brought down on to ports the Korean coast. Japanese railroad officials claim that these various improvements in their system will have the to status a effect of reducing the Chinese Eastern the of branch line. It is significant that by the completion of the line from to to Changchun the Korean border the haul from Osaka Harbin has been reduced from 2,800 kilometers (via the old Dairen route) 298 FOREIGN AFFAIRS to a 2,060 (via northern Korea), saving of 740 kilometers. Plans are now to a new under way in Japan establish steamship line to or on from the Japanese port of Niigata Rashin Yuki, the a two Korean coast, making possible saving of days in the journey to from Tokyo Harbin. The contracts for the construction of the new railroads have to been given exclusively the Japanese-owned South Manchuria man Railroad Company, which also has been entrusted with the to agement of the existing system. According Mr. Michio Izawa, vice-director of the general railroad directorate established at on man Mukden March 1, 1933, the policy to be followed in the 1. agement of the railroads will be: To promote cooperation be tween Japan and Manchukuo for defense purposes under the 2. To the on an Manchukuo-Japan protocol. reorganize railways ensure efficient basis, eliminating futile competition. 3. To repay to ment of existing indebtedness Japanese interests (notably the South Manchuria Railway), totalling 130,000,000 gold yen, and of loans made in respect of railroads now under construction or the construction of which is pending. Already considerable head way has been made in the rationalization of the 6,000-kilometer system. A through train and ticket service has been established. It is expected that the nine varying freight schedules will have been unified by the end of the present year. It is safe to predict menace can that before long, provided the bandit be removed, the South Manchuria Railway will have the Manchukuo railway a system operating with degree of efficiency inconceivable under the former r?gime. ( Rashin is destined to become the main outlet on the Korean to coast, and that end elaborate harbor construction has already started there. It is estimated that within four years Rashin will be able to tons of handle 3,000,000 cargo annually, and 9,000,000 to tons within ten years. Owing the lack of natural land facilities to a the development of the port is likely prove costly undertak ing, and the expenditure of 30,000,000 yen will be required during the first four years. Part of this sum will be absorbed in the build from to ing of 15 kilometers of railroad Rashin up Yuki, including a more the construction of tunnel than 4 kilometers long which will be the largest in the Far East. Pending the opening up of Rashin, cargo is to be handled through the nearby Korean ports a of Seishin, with capacity of 1,000,000 tons annually, and Yuki, a tons. with capacity of 400,000 It is conceded that Rashin, when JAPAN IN MANCHUKUO 299 to some extent completed, will compete with the Japanese-con trolled port of Dairen, in the Kwantung leased territory, but it is felt that there should be room for both. The fate of Hulutao on a the Pechihli Gulf, where Dutch firm had begun the construction a of harbor for the former Chinese r?gime, remains undecided. Work ceased there some time ago and will be resumed, it is offi cially stated, "if traffic justifies the opening up of the port." The Manchukuo Government's road-building program, which calls for the completion of 4,000 kilometers by June 1934, appears to be getting under way rather slowly, but highways connecting Mukden and Fushun, Jehol and Peipiao, Hsinching and Kirin, serv and Taonan and Solun have been started. Regular daily air are ices already operating between the principal Manchukuo and extensions are cities, planned. to Steps have been taken also bring the communications system under unified control. Details have been given out officially in a Tokyo of merger of the Manchukuo telegraph, telephone and a to radio services, semi-official company having been formed over take the systems hitherto operated separately by the Man chukuo Government and the Japanese Government-General of new the Kwantung leased territory. The company, the majority are shares of which held by the Japanese and Manchukuo Gov to ernments and the remainder confined their respective citizens, at con is capitalized 50,000,000 yen. Government supervision and are trol provided for in the articles of association, and dividends are In restricted. reporting the merger, Tokyo press dispatches out or pointed that it illustrates the methods of state capitalism national socialism by which the Japanese, in developing Man to combine the of chukuo, expect advantages public ownership and private management. In of the field industrial development the lead is being taken by the semi-official South Manchuria Railway Company, half of the capital stock of which is owned by the Japanese Government. In order to for obtain funds the economic exploitation of Man chukuo the has increased its from company recently capital to 440,000,000 yen 800,000,000 yen. The funds raised by the sale of this stock in the will Japanese market be absorbed largely by railway and harbor construction projects but will be used also for an subsidiary enterprises of industrial character. The company's an a plans embrace iron and steel plant at Anshan, chemical at works Dairen capable of producing 180,000 tons of ammonia 3?? FOREIGN AFFAIRS an sulphate annually, and oil-refining plant, also at Dairen. to According the official Manchukuo News Service, additional new to enterprises be launched privately under joint Japanese Manchukuo management include the Manchuria Collieries Com pany (which is to form a merger of all Manchukuo collieries except the large open-cut colliery operated by the South Man churia Railway at Fushun), and the Manchuria Electric Com which to pany, is undertake large-scale industrial enterprises throughout Manchukuo. There is little indication so far of any serious intention to en courage the participation of foreign capital other than Japanese in the development of the country, despite the Manchukuo Gov resources ernment's declaration that "in the work of unlocking and encouraging industries the principle of the Open Door and will equal opportunity be observed." Mention of the "Open Door" in this connection elicits in most in " foreign quarters Manchuria the ironic comment that the door may be open but are too there many Japanese crowding the threshold for anybody else to be able to get even a look-in." Manchukuo officials when on were to pressed for information the point unable suggest an a where, for instance, American capitalist with million dollars a was some to invest might find suitable opening. It hinted that thing might perhaps be done in cooperation with the South so Manchuria Railway Company, but that organization far has no revealed anxiety to share its opportunities with outsiders. It is to be expected that for the time being the implementation as of the economic program will stimulate foreign imports such motor for automobiles, trucks, heavy machinery road-making, etc., but the general outlook for foreign trade, except with Japan, not as is regarded in Manchuria being particularly promising. are Government supplies purchased from Japan wherever possi on ble and railway material mostly is made the spot in the well equipped workshops of the South Manchuria Railway Company. cotton Virtually the whole of the trade in goods has passed into out the hands of the Japanese, who have gradually edged the British from this field. Shops in the principal Manchukuo cities are at crammed with cheap Japanese goods, offered for sale prices or cannot to with which the American British exporter hope a compete. There is good deal in the Japanese contention that economic rather than political factors have been responsible for as the preferred position of Japanese merchandise, Japanese JAPAN IN MANCHUKUO 301 to traders obviously enjoy many natural advantages in addition the low exchange value of the yen. But the complaint ismade by foreign merchants in Mukden, Newchwang and elsewhere that they have also had to contend with unfair business methods. across Goods have been smuggled in large quantities the border a of the Kwantung leased territory from Dairen, which is free control. port under Japanese Also, it is alleged, Japanese dealers have imported huge stocks of piece goods into Manchukuo through the Japanese parcels post, thereby evading payment of duty. as Most of the larger foreign corporations, such the Standard re Oil Company and the British-American Tobacco Company, at are port good business present but wondering how long it will a last. The oil companies view with apprehension the prospect of near at to Japanese plant being erected in the future Dairen refine to crude oil imported from abroad. According South Manchuria Railroad officials, the capacity of the plant will be limited to about one-fifth of Manchuria's total requirements, leaving plenty room to of for the foreign companies continue their operations; but it is feared that this may prove to be merely the thin end of the wedge. The British-American Tobacco Company, also, faces a the possibility of the establishment of tobacco monopoly by the Manchukuo Government. are So much for economic problems. They important; but are even more so. those in the political and strategic realm Japan's to task is twofold: pacify the country, and to attain security against outside interference. For the next few years the adminis must a tration of Manchukuo remain largely military problem; to to every effort will have be bent the task of suppressing ban ditry and establishing order. The prevailing lawlessness con stitutes the chief obstacle to the stability which is so necessary success for the of Japan's great imperial enterprise. It is claimed officially by the Japanese military authorities that the disbanded Chinese soldiers, common bandits and other lawless elements on battening the Manchurian countryside have been reduced within a year from a quarter of a million to about 60,000 and that as the majority of the latter will become peaceful citizens the economic position improves. Observers who have studied the at bandit situation close quarters dispute the Japanese figures. not They estimate that less than 40 percent of the agricultural main to land along the railroads remains uncultivated owing 302 FOREIGN AFFAIRS bandit activities and that it will take two or three years before are even to conditions brought the unsatisfactory pre-Manchukuo level. Japanese military experts have admitted in private that at a to they will require least decade get the situation thoroughly in hand. to An equally difficult task confronting the Japanese is win over to new the native population acceptance of the r?gime. Here to they will have contend less with active opposition, which ap at than with a distrust that pears negligible present, deep-seated can remove. only time and tactful handling It is probable that if a can assure within reasonable period Japan security of life and property and give freedom from oppressive taxation, the peasant, who forms the backbone of the Manchurian social structure, will tolerate the of the invader as the Chinese presence just accepted for centuries the domination of the Manchus. Stabilization of the can to currency and improved communications hardly fail bring a measure ? as a of prosperity in their train and rule prosperity counts more for among the Chinese than the promise of political were to a independence. Even if Japan become involved in major conflict with another Power it is improbable that China would to recover make any serious attempt the territory by armed nor intervention, is it likely that any insurgent movement from to cause an within could gain sufficient strength upset. Hence, the or state of Manchukuo, for better for worse, must be regarded as come to and sooner or later the of having stay, question recogni to At tion will have be considered. present this issue remains in abeyance, the majority of Manchukuo and Japanese officials no matter holding the view that there is great hurry about the to and that it might indeed be embarrassing be saddled with international responsibilities during the stage of incubation. a The problem of security is problem of Russo-Japanese rela tions, for it is from Russia that any threat to the consolidation of on most to come. Japan's position the mainland is likely Within to recent months political observers have begun study seriously the chances of an armed clash between these two countries, each an of which has important stake in the Far East beyond its own borders. In Harbin, merchants have actually gone to contracts to the fear that the length of cancelling owing hos out. tilities might break One of the best-informed consular ob servers in Harbin summed up the situation to the writer in this way: "With the establishment of the new state under Japanese JAPAN IN MANCHUKUO 303 no serves as a military protection, Manchuria longer buffer be now an ex tween Japan and Russia, which face each other along tended frontier. Moscow is not for war and it is clearly ? looking open to doubt whether Tokyo is at least for the present. But utmost the White Russian element in Harbin is doing its by to two propaganda and intrigue stir up trouble between the as we see some countries, and the danger, it here, is that of the are local Japanese commanders, several of whom married to on to start White Russian women, may be egged the ball rolling." an The prospect of armed conflict with Russia is undoubtedly to the prime motive which is impelling the Japanese push rapidly ahead with railroad construction in Manchukuo, though this at same to development is calculated the time bring prosperity to areas at the country by opening up fertile which present remain at unsettled. When the Lafa-Harbin railroad is completed the end of this year the Japanese will have direct transit from the coast to Korean Tsitsihar without using the Chinese Eastern a Railroad and they will be in position to rush troops into North a as Manchuria with considerable saving of time compared with route an the present via Antung. Other projected lines with one obvious strategic significance include connecting Taonan west to a with Solun in the in order give Japan foothold inMon one golia, and running northward from the Hailun-Koshan line to Heiho with the evident purpose of giving the Japanese military access to at a the Russian frontier vulnerable point. Whether these railroads in their military aspect are intended use or a matter for offensively defensively is for speculation, but the likelihood that their construction foreshadows an attempt to no seize Vladivostok and the Maritime Province has by means been overlooked in Moscow. Soviet officials concede that two or even years ago, less, this region might have been Japan's for the taking. Since then, however, Russia has built up in the Far an a East efficient, well-supplied army and still more formidable air force capable of bombing Japan's large industrial cities. The Soviet authorities, while emphasizing the defensive character of those measures, appear supremely confident of their effectiveness. on Commenting persistent reports of military concentrations along the Manchurian frontiers, Soviet spokesmen have admitted that Russia's Far Eastern defenses have been con " strengthened In the event of one siderably. " hostilities," press dispatches quote as official saying, the Soviet military establishment will present 304 FOREIGNAFFAIRS

both offensive and defensive surprises, especially in connection with aviation, as well as our land and sea defenses at Vladi vostok." The great imponderable in the situation is the attitude of the Japanese military authorities. Are they content with the occupa or are tion of Manchuria do they plan further conquests ?There extreme indications that the imperialists within the Japanese army have very definite ideas about the desirability of adding the Maritime Province, including Vladivostok, and Northern Sagha to com lien the Japanese Empire. This would give the Japanese plete control of the Sea of Japan. Soviet naval activity would be so practically eliminated and the frontier would be pushed far to back from the coastline that aerial threats Japan would be greatly lessened. Some of these Japanese extremists would go further, as far as Kamchatka and the shores of the Okhotsk Sea, shutting off Russia entirely from the Pacific, turning the Okhotsk an to Sea into another Japanese lake and thereby putting end the over waters. constant bickering fishing rights in northern But it is doubtful how far the influence of this group extends, even in the army, and up to the present there is little evidence that the na as a a to tion whole would be greatly interested in campaign an acquire territory from Russia. Such enterprise would lack the to sentimental background which enabled the Japanese army drum up public support for the Manchurian adventure. On the we not other hand, must forget that the Japanese people have been made to It is not inconceiva highly susceptible propaganda. a ble that they could be thrown into frenzy of patriotic excite over a to ment the righteous justification of campaign carry the to Rising Sun the shores of Lake Baikal. a war as R Other potential springs of Russo-Japanese just likely as to to become effective any appetite for territory the north of are now Manchuria to be found in the pressure being quietly ap to a plied Russia by Japan in the direction of Mongolia. There is as as very lively interest in Japan, commercial well military, in both Inner and Outer Mongolia. Japanese exploration parties, are including gold and oil prospectors, working westward from Jehol and western Heilungkiang, while Japanese political agents are to busily engaged in endeavoring persuade the Mongols that not Manchukuo is the friend and Moscow. The Soviet's policy of to rest keeping Outer Mongolia hermetically sealed the of the world is resented by the Japanese and it is conceivable that JAPAN IN MANCHUKUO 305

sooner or later some combination of the various elements involved will bring Japan into conflict with the Soviet interest in this region. The Russians would then find themselves called upon to yield or fight. The see as Japanese military plainly as anyone else that, grant war to be it would be to to ing inevitable, Japan's advantage strike before Russia has reached the 01 degree industrial develop ment envisaged by her second five-year plan. But there are other factors to be taken into account. In the opinion of military ex would be to perts, Japan foolhardy precipitate hostilities against Russia until she has swept the Manchurian railroads clear of bandits. Otherwise her main lines of communication would be menaced. constantly Furthermore, the Japanese army is in the midst of two major programs which clearly are intended to im prove her military position vis-?-vis the Soviet. First is that of and the modernizing perfecting organization and equipment of the army so as to enable a well-found force of one million men to take the field within a few weeks. This program is planned to be finished about The 1936. second is the program of railway build as ing which, already pointed out, is designed to facilitate the transportation of troops into North Manchuria, and which also take some to will time complete. On balance, while we cannot exclude the that possibility increasing Russo-Japanese tension lead to an armed seem more may any day conflict, it would likely that major hostilities will be deferred at least for two or three But is a years. it only with very big question-mark that we can leave this, the really big problem in the new Manchuria.