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CHAPTER 3 Zaikabo:Japanese Cotton Mills in China, 1895—1937 Peter Duus A passenger on the starboard side of a steamer sailing up the Whangpoo (Huang-pu) River into Shanghai in the mid-1930s could scarcely have failed to notice the serrated roofs, towering smokestacks, and loading docks of the great cotton mills along the opposite riverbank. At the westem edge of the International Settlement along the southern side of Soochow Creek there was another equally impressive cluster of mills. The observer might have discovered to his surprise that many of these mills were owned byJapanese companies, not British. The British might dom­ inate the clubs and racetracks in the foreign city, but there was no ques­ tion about who dominated its spinning and weaving industry. In 1936, Japanese mills accounted for the production of nearly 40 percent of all China's machine-spun yarn and about 57 percent of all its machinewoven cloth. They had long since overtaken British-owned mills. Indeed, the largest cotton manufacturer in Shanghai was Naigai Wata Company, whose nine separate mills all fronted on Soochow Creek. Close by the mill grounds were mess halls and dormitories for workers, company nur­ series and infirmaries, spacious residential quarters for Japanese employ­ ees, and even a park for the use of employees. Tidiness and order pre­ vailed, and looking down benignly on it all was a bronze statue of Kawamura Rihei, third president of the company. On the eve of the China War, Japanese-owned cotton mills also ac­ counted for a substantial portion of privateJapanese investment in China. According to one contemporary estimate, Japanese investment in China, including loans to Chinese enterprises and loans to the Chinese govern­ ment, amounted to 1.583 billion yen in 1936. Slightly more than half of this amount (about 840 million yen) consisted of direct investment in Jap­ anese-owned business enterprises—banks, development companies, for­ eign trading and shipping firms, real estate, and manufacturing concerns. Of these firms, the most important were engaged in foreign trade and cotton manufacturing, each industry representing an investment of about 66 — Pctcr Duus 300 million yen.1 WhileJapanese trading firms were active in the rest of the world, the Japanese cotton industry sought overseas investment out­ side the formal empire only in China. And it was the only Japanese man­ ufacturing industry to do so on a significant scale. Indeed, zaikabd, as the Japanese-owned spinning industry came to be called, represents the first case of a multinationalized nonservice industry in Japan. All this makes zaikabo exceptional, and perhaps not useful as a case study of the relationship between the metropolitan economy and the in­ formal empire in China. On the other hand, its very atypicality raises a series of interesting questions. When did theJapanese cotton manufactur­ ers begin to invest in China and why? Were they attempting to find out­ lets for "surplus capital" or were they prompted by other motives? And once established in China, how was the industry able to expand so rap­ idly, bypassing the other foreign firms, and competing successfully with a burgeoning domesticChinese industry? DidJapanese enterprise succeed because it was backed by Japanese military and political power, or did it capture such a large share of the China market by other means? The an­ swers to these questions perhaps help us gain a better understanding of just what treaty privileges in China meant for the metropolitan Japanese economy—and what they did not. THE TREATY OF SHIMONOSEKI The Treaty of Shimonoseki threw the gates of the China market wide to Japan. It gavejapan most-favored-nation status, opened new treaty ports, secured navigation rights up the Yangtze River, and allowed Japanese to engage in manufacturing in all open cities and ports. Japanese politicians, officials, and businessmen waxed enthusiastic over Japan's economic fu­ ture there. "Our nation now possesses the same rights and privileges in China as do the various nations of Europe," observed an editorial in the Tdkyd keizai zasshi. "Ah, the battle of arms and men has reached its con­ clusion, and now the battle of commerce begins."2 The cotton industry was ready to joust on the battlefield of commerce, but its leaders were not entirely happy about the acquisition of new man­ ufacturing rights. The Japanese government had sought manufacturing rights not in response to domestic pressure but largely to win support from the Western powers.3 Since the early 1880s, foreign businessmen had been pressing the Chinese government for permission to open...


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