The Economy of Manchukuo- A Colonial Heartland

by Ashton Hinsdale

​Itō Takeo provided a firsthand account of his experiences and observations in Manchuria in his memoir "Life along the South Manchurian Railway: The Memoirs of Itō Takeo,." He later became a general in the Imperial Japanese Army during World War II, indicating his significant role within the military and, presumably, his involvement in the Japanese imperial expansion efforts. On top of his military account, he reflected on his youth, his travels, and his experiences with the South Manchurian Railway (SMR), which was instrumental in Japan's colonization and industrialization of Manchuria.

In July of 1917, Ito Takeo, alongside a few members of his high school classmates, signed their last summer vacation off to undergo a trip to several locations in China. Before they returned to Japan, their final stop was the port city of Dairen at the southernmost tip of the Liaodong peninsula. It's here that Takeo focuses on the developmental state of Manchuria and the South Manchurian Railway (SMR) company's role in the region:

"The factories we observed were, of course, managed by the SMR, as was the restaurant within the park where we escaped from our chaperones. Electricity, gas, water works—all had the SMR markings on them. In our youthful minds the SMR was merely a railway company, and we completely misunderstood its real character." (Itō)

However, Itō's account had taken place in a country already undergoing rapid economic transformation under Japanese stewardship, and he happened to fixate on a few key elements. Manchuria represented an alleged destiny for Japanese imperial expansion of commerce, government, and economy both as a periphery and as a heartland. Dairen alone was constituted of a myriad of institutions and services constructed by SMR, including utilities, hospitals, schools, universities, laboratories, sewage, parks, and squares, etc. ("Dairen" South Manchurian Railway Co.,1935). These hallmarks bear a vague, almost mirrored essence of European city planning and were relatively new during the Russian Dalny period before it became Dairen after the Japanese takeover. 
The Russo-Japanese War ended with the Russian Tsar ceding the Chinese Eastern Railway to Japan, subsequently retitled the South Manchurian Railway (SMR) in 1906. The SMR company linked large swathes of rural Manchuria to economic centers such as Dairen, and between 1906 and 1931, the increased Japanese commercial interests and influence brought about rapid industrial and economic change. The Mukden incident in September 1931, when the Kwantung army soldiers staged a sabotage of the rail line in Mukden (modern-day Shenyang), legitimizing their military expansion and government takeover, establishing the Manchukuo puppet government. This event marked the SMR company officially as a state-building institution, and with critical but supportive aid from the Kwantung military, industrial development and commerce became the prerogatives. 

Imperial Japan set out to expand and expedite industrialization in Manchuria for its economy and to conceptualize the pursuit of colonial wealth. 

The excruciatingly long answer lies in the aspirations of the Japanese empire to compete with their colonial "contemporaries" in the West, such as England, the United States, and the newly established Soviet Union. The Japanese economic policy extended into a few key areas as the initial specialization of agriculture in the traditional financial sectors evolved and provided the base for extensive later investments in heavy industry. Simultaneously, industry and economy were shaped by an educated Japanese managerial and civil servant class to extrapolate cheap Chinese labor and to construct state-building superstructures.


Agronomic Roots and Development

At the beginning of the 20th century, the Manchurian agricultural economy was in a developmental phase of underdevelopment. Under the Qing government, settlement of the area remained limited and tightly controlled. Despite the aggressive tax policies of Qing governor-generals and later local warlords, Chinese settlers (legal or otherwise) began moving into the region and forming pockets of agricultural and economic guilds. They developed close-knit regional trade networks and progressively shifted their agricultural products from subsistence farming to cash crops, such as millet, Kaoliang sorghum (高粱), and soya beans. Farmers increasingly became enmeshed in a trade network consisting of agricultural middlemen, major brokers at collection centers, and exporters or producers of intermediary goods (Bix 432). After the handover from the Russian Tsar, the economy grew in a quantitative sense; agricultural production expanded thanks to the introduction of new technologies such as fertilizer, crop specialization, and the progressive shift to an export economy. When the Kwantung army later invaded and occupied the Liaodong peninsula and northern Manchuria, these economic networks were typically configured around county seats of regional administration, which was conducive to centralized control (Duara 45). Alongside the rail company, the Kwantung-Railway economic zone increased demand for Chinese day laborers and factory workers, shifting the solely agrarian economy into a behemoth of heavy industry situated along the South Manchurian Rail line.


Japan's "Modernized" Manchuria

Itō's initial impressions of Dairen had occurred long after SMR and colonizing Japanese forces had become established in Manchuria. The introduction of Japanese rail drastically increased market globalization and trade following the Russo-Japanese War (1904-05). Japanese banks, textiles, and, most importantly, heavy industry and rail, became crucial focal points of Japanese policy and were interlinked. Ideas circulating around the post-Meiji modernization bled into economic policy and became configured around firms such as the zaibatsu conglomerates and special companies such as SMR in key industries such as mining, coal, steel, timber, banking, and chemicals. Interestingly, Japan remains one of the few imperial powers to locate heavy industry in its colonies, and Manchukuo is an extreme example. Comparatively, the Taiwan colony was only prepared for industrialization towards the end of the colonial period, whereas Manchukuo's industry was expedited to serve Japan's need for self-sufficiency (Cumings 12–13; Duara 61). As production levels increased, so did reliance on the rail systems, factory and agricultural labor, investments, investors, and key research conducted via the SMR (Bix 434). The army's occupation aimed to direct and control heavy industrial development, marshaling resources in preparation for possible conflict with the Soviet Union. The research teams at SMR employed individuals such as Miyasaki Masayoshi to emulate Soviet state-capitalist developmental methods. 


Miyasaki was a prominent expert on Sovietology at SMR and was well-versed in Soviet industrial planning and policy from his education at the University of St. Petersburg. In 1937, the Manchukuo government utilized the "five year plan" devised by Miyasaki to expand iron and steel production in cooperation with zaibatsu conglomerates such as Nissan (Hirata 1078–79). These industrial focuses did carry with them a developmental state, but one that distributed profits unequally to landowning classes and management. Chinese farmers, factory workers, and day laborers were the bulk of the labor force but were largely excluded from the economic benefits. There is even evidence of POW and forced labor being employed in enterprises such as Nissan's Shōwa Steelworks. With financial backing and monetary policy from Japanese banks, the profit motive had long been forlorn in favor of sheer production capacity (Ibid 1079; Cumings 15). The SMR and the Kwantung government employed educated university students like Miyasaki and Ito Takeo to become the Japanese managerial class, civil servants, or researchers and were largely employed by the zaibatsu and SMR to construct research and development of the colonial nation-state of Manchuria. These individuals would become the elements of the state-building project, the super structural elements to solidify Manchuria as a Japanese colonial periphery.


Military Preparedness in a Civil Garb

Separated from Chinese peasantry, the educated classes were to emulate what Gotō Shimpei referred to as "military preparedness in civil garb." By hiring educated Japanese university graduates, Shimpei reasoned that this method, which had worked to some success in Taiwan, could also be enacted through his presidency at SMR. Gotō's policies were rooted in European scientific theory, social, and cultural research, which emphasized capital export via rail. To him, the state and particular "cultural institutions" such as banks, schools, and hospitals were designed to imagine and manufacture a colonial dependency on the imperial core (Itō, sec. Military Preparedness in Civil Garb). Even after Gotō left the company almost two years later, his ideas continued to manifest in SMR's socio-economic research, colonial policy, and industrial planning in the Manchurian colony. However, as the industrial infrastructure became more of a critical need of the army, certain cliques in the social science sections of the SMR research department were less willing to corroborate the army's desire for colonial longevity. Scholars unwilling to provide evidence of this were imprisoned, tortured, transferred, or exiled from Manchukuo. Itō dubs this the "Suppression of Science," and while he personally got away with short-term imprisonment, many of his peers and colleagues were not as fortunate. To Itō, the work originally designed to produce knowledge for the fascist government to enact control did not produce this effect and was subsequently torn down by the system that established it when no longer deemed useful (Itō, sec.The Suppression of Science). 


The Manchukuo government's policies supposedly projected ethnic harmony and anti-imperialist ideals against the West. However, in practice, it was similar to the colonialism that the West practiced worldwide. The effects of this colonial political economy are far-reaching today, and the structures perpetuated by Japanese zaibatsu, government, and management extend into the entire socio-economic structure of East Asia. It's a history of blood and steel with a legacy that was clearly seen along the South Manchurian railway line. 






Bix, Herbert P. "Japanese Imperialism and the Manchurian Economy, 1900-31." China Quarterly, no. 51, 1972, pp. 425–43.
Cumings, Bruce. "The Origins and Development of the Northeast Asian Political Economy: Industrial Sectors, Product Cycles, and Political Consequences." International Organization, vol. 38, no. 1, Jan. 1984, pp. 1–40. Cambridge University Press, https://doi.org/10.1017/S0020818300004264.
Duara, Prasenjit. Sovereignty and Authenticity: Manchukuo and the East Asian Modern. Rowman & Littlefield Publishers, 2003.
Hirata, Koji. "Made in Manchuria: The Transnational Origins of Socialist Industrialization in Maoist China." The American Historical Review, vol. 126, no. 3, Nov. 2021, pp. 1072–101. DOI.org (Crossref), https://doi.org/10.1093/ahr/rhab351.
Itō, Takeo. Life along the South Manchurian Railway: The Memoirs of Itō Takeo. Translated by Joshua Fogel, Routledge, 1988.
South Manchurian Railway Co. "Dairen" · Pacific Asia War Archive. 1935, https://pacificatrocitiesedu.reclaim.hosting/admin/items/show/189.