Japan's Economic Expansion into Manchuria and China in World War Two (Part 2)

by James Graham

Published: May, 2004

If Japan was able to make some headway in Manchuria it could make little in China proper. Japan entered the China Incident in July 1937 with plans for a three month campaign involving three divisions costing a hundred million yen. By the spring of 1938 the scale of Japan's miscalculation meant that its entire army was readying for indefinite war, twenty new army divisions were being created and 2.5 billion yen had been appropriated. Large scale warfare of this kind made it impossible for Japan to exploit China's economic resources. Japan could gain any real estate it desired but little popular support. If the average Chinese had remained indifferent, Japan could have manipulated the situation in its favour economically. Instead of indifference most Chinese were however openly hostile to the Japanese as evidenced by widespread guerrilla activity against Japanese military and economic targets. This activity forced Japan to station a large number of troops in the rear of China to protect railroads, bridges and other important economic assets. The sheer size of China meant these troops could only ever be spread thinly and therefore they were deployed either in the cities or to put down the numerous flare ups in resistance. Japan could benefit economically from its position in China only through the use of its military, a military insufficient in size for the job.


Japan could set precious few benefits against the above costs. North China, an area where Japan had been increasing its influence over a long period of time, was an important source of supply for Japanese forces in China. Other army campaigns were planned in ways that allowed the soldiers to live off the land. Japanese soldiers on bicycles, presented to the world as evidence of Japan's innovative military tactics can in this light be seen as the weakness it was. Japan simply did not have the fuel for more efficient movements of troops, the local supplies in China having been exhausted by the end of 1937. Thus China was unable to provide the Japanese army with either the majority of its needs or with the fuel that was its most desperate requirement.

Japan's new territorial gains were simply unable to finance their own development. Any industry Japan wished to encourage in them therefore had to be subsidised. Nor could Manchuria and China satisfy Japan's resource demands or operate satisfactorily as markets for Japanese goods. The sole and rather perverse exception was military equipment of which China seemed able to devour much of what Japan could produce. Nazli Choucri, Robert C. North and Susumu Yamakage argue that the Japanese believed their economic problems could be solved by acquiring ever more parts of China, thus increasing Japan's markets and access to natural resources. For this to happen however, the military's share of resources had to increase, leaving Japan with even less surplus capital to invest in its occupied territories. Consequently instead of achieving economic independence Japan's occupation of Manchuria and long war in China created a spiral of self-fulfilling dependency.

The Sino-Japanese War of 1937-1945 not only prevented Japan economically exploiting China but was also a major drain on Japan's economy. Japan by 1938 was manufacturing only a fraction of the material and fuel needed to continue war with China. Rubber, tin, wool and wheat were all being imported from outside the yen block. The situation was even worse in strategic resources; scrap metal, copper and oil were all primarily sourced from the west. The fuel Japan could manufacture domestically was reliant on oil concessions from Soviet-controlled Northern Sakhalin, a supply made insecure by Soviet-Japanese rivalry and border clashes at Changkufeng and Nomohan. The 17,000 casualties and the overall poor performance by its army at Nomohan underlined how expensive Japan's invasion of China was. Forced to wage a full scale war with China and launch its five year drive for economic self-sufficiency simultaneously, it could achieve neither. The mere attempt paralysed Japan's export sector as resources were diverted to military production that ultimately decreased its ability to import needed materials. In 1938 the vital railway and ship building industries were forced to decrease steel use by twenty five and fifteen percent respectively. Heavy restrictions were also placed on luxury goods imports as the foreign currency saved was required to pay for strategic materials. This caused living standards to decline and conditions in Japan's farming and fishing villages thus remained miserable throughout the 1930s. Another direct consequence of the war was that due to US pressure Japan could no longer borrow overseas after 1937. With no foreign investment available and any surplus domestic capital needed to develop Japan's own industrial base, Japan never had a chance of meeting its economic aims in Manchuria and China. The invasion of China therefore left Japan militarily susceptible to Soviet attack and economically reliant on the west.

Manchuria's and China's vast natural resources were considered critical for Japan's continued economic growth and for its ability to fight a total war. Simultaneously the rise of Chinese nationalism and increasingly protectionist trading partners helped to persuade Japan that military action was necessary to achieve its long held dream of an economically self-sufficient empire. This goal Japan spectacularly failed to achieve. While some progress was made in Manchuria, this was short lived and completely undone by Japan's latter invasion of China. By 1940 Japan was more reliant than ever on the West for the resources of war, a West more inclined to side with China than with Japan.

Japan's Economic Expansion into Manchuria and China in World War Two

Japan's Economic Expansion into China in World War 2 (Part 1)
Japan's Economic Expansion into China in World War 2 (Bibliography)