893.01 Manchuria/1204

The Consul General at Harbin (Adams) to the Secretary of State

No. 51


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Control. The fifty thousand Japanese garrison troops scattered in comparatively small groups at strategic points throughout “Manchukuo” are the immediate source of Japanese power in the country. The hostility toward the Japanese of the large majority of the twenty-eight million Chinese, who comprise more than ninety percent of the population of Manchuria, renders vital the constant presence of military power in support of the “Manchukuo” government which is generally considered by the Chinese to be an agency designed to execute Japanese plans in Manchuria.

The “Manchukuo” government makes no pretense of being representative. There are no elections. The “emperor” was placed in position by the Japanese and he, with the advice and sanction of the Japanese military, appoints the principal officers of government. These principal officers, with the advice and sanction of the Japanese, appoint the subordinate officers and employees of the government. The “emperor” appoints officers of the rank of minister. The prime minister appoints vice ministers or chiefs of the general affairs bureaus in the central government. Lesser officials and employees are appointed by the ministers concerned.

The power of government is actually exercised by the chiefs of the general affairs bureaus. These chiefs are Japanese subjects and are “recommended” by the Japanese ambassador. The Japanese employees of lesser rank are recommended by subordinates or appointees of the ambassador. In 1932, Mr. Tokuzo Komai, Chief of the General Affairs Board of the State Affairs Yuan, stated that the personnel of the central government totaled 1,200 persons, and that of these 265 were Japanese. The proportion of Japanese to Chinese and Manchus is understood to have increased to some extent since that time.

The Japanese administrative control of the “Manchukuo” government is centered to a remarkable degree in one person who holds the three positions of Japanese ambassador to “Manchukuo”, commanderin-chief of the Kwantung army, and governor of the Kwantung Leased Territory. The present incumbent is General Takashi Hishikari. The Kwantung army includes all the Japanese garrison troops scattered throughout Manchuria and those in the Kwantung Leased Territory. [Page 311] As commander-in-chief, General Hishikari, controls the military force which maintains the government. As ambassador he “advises” that government and selects the Japanese appointees to the controlling positions therein. These appointees hold their offices, in effect if not in theory, at his pleasure. As ambassador he also administers the Japanese consular service in Manchuria, including the consular police. As governor of the Kwantung Leased Territory he controls that area and the police of the South Manchuria railway zone. It will thus be seen that the title of “viceroy” or “governor” would be more descriptive of his power than are the three titles he now holds.

Despite this great concentration of power, however, the ambassador has experienced embarrassment in that in matters affecting the Kwantung Leased Territory and the policing of the railway zone he has to consider the wishes of the Overseas Department and in that, in affairs affecting the relations of “Manchukuo” and Japan, he is bound to consider the wishes of the Japanese Foreign Office. In order to cure this situation, the military have succeeded in gaining consent to the establishment in Japan of an organization, responsible only to the Prime Minister, called the “Manchurian Affairs Bureau”. This bureau, under the control of a military chief, will have the power of effective decision in matters affecting Manchuria and the Kwantung Leased Territory.

It is odd that the local newspapers appear to have missed the significance of the transfer of the control of relations between Japan and “Manchukuo” from the Foreign Office to the “Manchurian Affairs Bureau” and to have concentrated on the purely minor matter of the placing of the Kwantung police under a military officer. This last matter is of course important but it is merely a detail in the general scheme of the transfer of authority.

The main effects of the reorganization now taking place will be the transfer of the control of Japan’s relations with “Manchukuo” from a government organization designed to handle foreign relations to one designed to handle colonial or domestic affairs; a partial break-down of the separateness of the Kwantung Leased Territory and “Manchukuo”; the practical elimination of the authority of the Japanese Overseas Department from Manchuria; a reduction in the authority of the Foreign Office over the ambassador in Hsinking; and the consolidation and strengthening of the army’s position in Manchuria.

Another change which will give the Japanese a more effective detailed administrative control in Manchuria is the reduction (now being effected) of the size of the provinces and the modernization of the provincial governments, with Japanese holding the key positions.

The province of Hsingan (consisting of four departments) will be left as it is, out of deference to the Mongols and other inhabitants [Page 312] of that area. The four provinces of Jehol, Kirin, Liaoning, and Heilungkiang are being sub-divided into ten new provinces. Each of these provinces will have a Chinese or Manchu governor. Some of these governors will be appointed by the “emperor”; some by the “prime minister”. Each province will have a “General Affairs Bureau” and the chief of this will be a Japanese “recommended” by the ambassador. In the absence of the governor, the chief of the general affairs bureau will function as governor. There is also to be an increase in the number of Japanese in the lesser provincial positions.

There is a beautiful simplicity and completeness in the two instruments of commercial and economic control possessed by the Japanese in Manchuria. These are the “Manchukuo” customs and the South Manchuria Railway Company.

The customs tariff is fixed and revised, according to requirements, by the Japanese controlled Finance Department of the “Manchukuo State Council”.

The Japanese government owns fifty percent of the stock of the South Manchuria Railway Company; the remainder is owned by Japanese insurance companies, banks, and other financial interests. The stockholders are limited to the Japanese and Chinese (now presumably the “Manchukuo”) governments, and the nationals of those countries.

The Japanese government appoints the president and vice president of the railway and the directors. The latter are chosen from among those stockholders who hold more than one hundred shares of stock in the company. The control of the railway is entirely in the hands of the Japanese government. The tariffs of all the railway lines of “Manchukuo” (excepting the Chinese Eastern Railway) are fixed and revised as occasion demands by the business section of the South Manchuria Railway, subject to the approval of the Board of Directors. There is no other restriction.

The South Manchuria Railway operates or owns substantial interests, to the total amount of more than Yen 100,000,000, in some sixty odd industrial enterprises in “Manchukuo”. These enterprises include coal mines, iron and steel plants, electric light and power plants, shipping companies, glass factories, cotton and woolen spinning and weaving mills, chemical plants, tobacco manufactory, flour mills, bean oil mills, gas company, telephone, telegraph, and radio, aviation, et cetera.

The South Manchuria Railway Company is financing, constructing and operating every mile of railway, excepting the Chinese Eastern Railway, in “Manchukuo”. There seems every reason to believe that the Chinese Eastern Railway will shortly pass into the hands of the South Manchuria Railway Company. When that happens, the South Manchuria Railway will have an absolute monopoly of all rail transportation [Page 313] in “Manchukuo”. There is no competing freight transportation agency of importance. The South Manchuria Railway Company, through its control of freight rates, can promote or ruin any place or industry in the interior of the country. As one instance of this ability, there are beet sugar mills in North Manchuria which are able to operate and supply the North Manchuria market only while railway freight rates on sugar imported through Dairen and shipped to Harbin and neighboring towns remain at their present high level. Any material reduction in the freight tariff on sugar would force the mills to close. As another instance, it may be stated that the South Manchuria Railway is in the process of eliminating Harbin as a soy bean center. In the past most of the soy beans produced to the north of Harbin have been shipped into Harbin, purchased by exporters and consolidated into large shipments for export. This has been a substantial activity. The South Manchuria Railway Company is instituting a sliding freight rate scale (based upon the length of haul) which will make the freight charges for through shipments from points north of Harbin to Dairen or the Korean ports less than the combined rates for shipment from points north to Harbin and from Harbin to the seaboard.

The South Manchuria Railway is able not only to foster or crush independent enterprises, it can milk or feed any one of its own many industrial enterprises to the benefit or detriment of any of the others or of itself, depending upon the interests involved. The railway can also be made the instrument for levying tribute from Manchuria for Japan in such amounts as the Japanese Government may desire to take from the country, up to the limit of what the traffic will bear. At present, however, the railway is being used to its maximum as an agency for financing much of the vast and intense Japanese development in “Manchukuo.”

The above paragraphs summarize the means by which Japan controls Manchuria. In concluding this section it may be stated that in the main centers such as Mukden, Hsinking, and Harbin, there is a passable pretense of Chinese participation in the government of “Manchukuo.” That is the scene disclosed to visiting journalists, commissions, et cetera, from abroad. As one proceeds to the remoter districts, however, this pretense becomes rapidly thinner until it disappears and the Japanese military control becomes bare even to a casual observer.

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Accomplishments. Since September 18, 1931, the Japanese authorities have established a new centralized government for Manchuria thoroughly under their guidance and have fashioned it into a remarkably effective instrument of political and administrative control. [Page 314] They have made considerable progress in the reduction of lawlessness and some headway in the modernization and systematization of taxation. In this same general administrative field they have also, following the formation of a central note issuing bank, brought to an end the monetary chaos previously existing. They have retired the welter of depreciating and fluctuating bank notes, issued by the then military authorities, and have established a central bank currency which has thus far been stable and been received with growing confidence.

Another Japanese accomplishment from which Manchuria derives material benefit is reduction in the number of troops which the country has to support. Prior to the Mukden incident Manchuria had to support regular troops numbering approximately two hundred and fifty thousand and irregulars numbering about one hundred thousand. The Japanese ejected more than two hundred thousand of these troops and irregulars. The remaining hundred thousand were formed into the “Manchukuo” army and supplemented by approximately fifty thousand Japanese garrison troops. It is to be noted that the Japanese garrison troops do not live off the country. “Manchukuo” is, however, contributing about nine million dollars during the current year toward their support.

In the field of transportation the Japanese authorities have obtained an almost complete control and will, judging by present indications, soon have an absolute control. Since September, 1931, the Japanese authorities have, through the agency of the South Manchuria Railway, constructed 1298 kilometers of new railway, and are now engaged in rapidly pushing to completion 1409 additional kilometers of railway. They have also placed in operation 2350 kilometers of commercial aviation service and 700 kilometers of military aviation service. The Japanese have also acquired control over all steamships on the Sungari, through the agency of the “state railways”.

In the field of public utilities and those enterprises which are for “public benefit”, the Japanese army has, through the agency of the “Manchukuo” government, regimented into two monopolies (government controlled and operated but with private shareholders) all telephone, telegraph, and radio facilities in Manchuria and the main electric light and power plants. The large traffic in opium is conducted under a government monopoly. A determined attempt is being made to establish a monopoly enterprise for the sale of the main petroleum products in Manchuria.

The Japanese are buying into most of the bean oil, flour, and sugar beet factories not already under their control, and literally hundreds of Japanese merchants are establishing themselves in enterprises ranging from small retail shops to large scale importing and exporting. [Page 315] The Japanese are also investing heavily in municipal improvements, road building and house and office construction in the main cities of Manchuria. An enormous amount of building, both governmental and private, is going on, particularly in Hsinking, through Japanese financing.

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In conclusion, I am inclined to the opinion that in an economic sense the main significance to the United States of the Japanese occupation of Manchuria and of recent Japanese pronouncements with respect to China is that they constitute a very definite warning of a possible further reduction in areas now open (in the full sense of that word) to American enterprise upon a basis of even competition.

Respectfully yours,

Walter A. Adams