Summary of the December 11 (Mon) Lecture

"Tsingtao's Trade and Economy from the Japanese Occupation in 1914, until the End of the 1920s", by Mr. Wolfgang Bauer

A big Christmas tree on the stage of the hall of OAG House provided a seasonal atmosphere for the last meeting of 1995, at which Mr. Wolfgang Bauer spoke.

Mr. Bauer began his presentation by briefly outlining Tsingtao's growth prior to 1914. Japan's victory in the Sino-Japanese War of 1894-95 was followed by the establishment of the Triple Alliance of Russia, France and Germany, which led to Germany's active engagement in East Asia in the form of the occupation of Kiaochow Bay and the village of Tsingtao in 1898. The purpose of the occupation, and later the lease, of Tsingtao was especially to promote German trade and show off Germany's military capabilities, in particular its navy. (It was the navy that administered Tsingtao for the whole of the period up to 1914.) The lease of Kiaochow, concluded in 1898, included special concessions for the building of the Shantung Railway and for mining within ten miles of the roadbed. Germany's first concern was to develop an infrastructure that would open up the potential market of Shantung. This was accomplished by building a harbour and the railway, together with an advanced city whose population grew from 4,000 to 65,000 during those 16 years. The most important industrial undertaking was the Shantung Mining Co., but the most prosperous was the Tsingtao Brewery; leading German companies did not establish branches because they were never convinced that investment in China was safe. Trade expanded thirty-fold, but the German share was small, and the trade with the hinterland was dominated by Chinese merchants. By 1912 Germany's influence in Tsingtao was dwindling, especially because of rising Chinese nationalism, but also because of international pressure.

By 1914 signs were developing of Japan's intention to seize Tsingtao, and with the outbreak of World War I Japan demanded its surrender. The German forces in Tsingtao capitulated on November 10th, and the lease and the railway were taken over by the Japanese army, which administered Tsingtao right until its restoration to China in 1922, even after the Treaty of Versailles had granted Japan the legal right to the lease. This administration committed itself to continuing the main features of the German administration, while seizing German rights and privileges and encouraging Japanese immigration. During the first three years of the Japanese occupation the economy recovered slowly from the devastations of war and political unrest, and the Japanese population grew from 300 to 25,000, many of these being operators of small businesses with dreams of quick and easy money, such as hoteliers, restaurateurs and hairdressers. At the same time the Chinese business class dwindled from 1,500 to 500, partly due to the Japanese customs barriers, which also affected British, American and Russian companies. Also, other Chinese ports dealt with cargoes from Tsingtao as if they had originated from Japan, forcing Japanese merchants to pay double duty and shifting exports to other ports such as Tientsin and Shanghai. By 1915 Tsingtao presented the aspect of a dead city.

The inability of the military administration to create a thriving business atmosphere was reflected in the political infighting between the War Ministry and the Foreign Ministry. In 1917 the Terauchi cabinet decided to introduce a civil administration under military leadership, with the policy of encouraging industrial development. One method was to offer cheap property to companies. This was effected in three ways: confiscation, renting and forced sales of foreign-owned property. The confiscation and forced sales alienated the foreigners and discouraged foreign trade. The renting of houses from the Chinese meant that it was impossible to invite Chinese to the town as there was no shelter for them. Further steps that were taken were the renting of farmland outside Tsingtao to Japanese companies at a very cheap rate, and the granting of discounts on electric power rates and freight rates on the Shantung Railway, as well as the subsidizing of shipping companies operating between Japan and Tsingtao. The results were soon apparent, and famous companies like N.Y.K., Mitsui, Mitsubishi and Yuasa now became represented in Tsingtao.

Japanese investment in Tsingtao came from two quarters. There was government investment in former German public utilities and civic amenities, and in Japanese-Chinese joint ventures such as steel production and mining. Then there were private investments from banks, spinning mills, trading companies and the like. Two industries in particular which only began to flourish on a big scale after 1916 were salt production and the spinning industry. Before the Japanese occupation, salt production had only been on a scale sufficient to meet local demand, but between 1914 and 1919 Japan acquired over 40 square miles of salt fields, and production rose from 84,000 tons in 1913 to over 300,000 tons in 1919. Salt exports from Tsingtao accounted for about 30 percent of Japan's demand, and after 1922 prolonged negotiations were conducted to reach an agreement which resulted in exports being resumed on the same level as before, and even increasing by the end of the l920s.

The huge growth in the spinning industry, which was operated by the large Japanese companies, was due to four causes. One was the Japanese government's promotion policy. The second was that Shantung was a rich cotton-producing area, the third that there was a large pool of cheap Chinese labour, and the fourth that there was an ideal transport infrastructure in place. The Japanese spinning mills mostly produced for the Chinese market, and the nine mills in Shantung expanded their production capacity in the 1920s from 2 to over 400,000 spindles, and set the pace for the 42 Japanese mills in the whole of China. This provided a striking contrast with the period between 1914 and 1922, when the military administration and the uncertainty of Japan's legal status until 1919 had combined to hinder any fast economic recovery; a further contrast was with the period of the German lease, when there was no noteworthy industrialization.

Here Mr. Bauer referred to graphs, of which he had distributed copies, showing that in the second half of the l920s domestic Chinese trade outstripped foreign trade by a growing margin. By 1925 the German consul in Tsinan was able to report that trade in Tsingtao had doubled since 1919, compared with a slow growth rate in the rest of China, and the consulate in Tsingtao wrote in 1927 that in spite of disastrous conditions trade had still grown by 8 percent. In fact trade only shrank in 1928, following Japanese military intervention to stop the northern advance of Chiang Kai-shek's nationalist forces. At this point the population of Tsingtao stood at nearly 200,000, of which 13,500 were Japanese, and only 219 were Germans. In l92l there were only small German businesses in Tsingtao, but by 1922 German shipping companies had returned, and by 1927 Germany's shipping business was in third place after Japan and Britain. Between 1916 and 1919 foreign trade was exclusively in Japanese hands; during the next three years of the Japanese lease foreign exportation was admitted again, but still the Japanese share exceeded 70 percent; after 1922 the Japanese share, at its lowest, was 37 percent, still twice as high as in the prewar period. In the case of imports, the Japanese share was higher than that of exports, one reason being the relative cheapness of Japan's products at that time. Another interesting point to note is the way the composition of Japan's exports to Tsingtao during this period gradually changed, reflecting Japan's own growing industrialization.

With the return of Tsingtao to China, many small and medium-sized Japanese companies went bankrupt, whereas the bigger ones flourished; up to 1922 the small companies had benefitted from the demand from the military and from protectionist policies. Japanese scholars have maintained that because of these factors Japan lost its influence in Tsingtao after 1922, but Bauer's research had led him to the opinion that a sufficient base had been built up before 1922 to enable Japan to maintain an overwhelming influence on the city even after that, and because of this Japan was prepared to restore Tsingtao to China. In the restoration negotiations Japan secured special export quotas for salt and coal, the salt companies were massively compensated, and Japan still held the majority of the shares in the big mining companies which became Japanese-Chinese joint ventures. Further, the land leases to Japanese companies might be extended for thirty years beyond their original terms. Thus prepared, Japan could afford to restore Tsingtao and accept the internationally demanded open-door policy. At the same time Japan was able to regain political goodwill on the Chinese side, though the German ambassador remarked in 1922 that even though Japan wore the mask of a friend the Chinese always remembered the old Buddhist fable of the animals who kept their distance from the tiger, even though he proclaimed that he had now reformed and become a brother to all the other animals.

Mr. Bauer answered a few questions, and the meeting then closed with a vote of thanks proposed by Mr. Aaron Cohen.
Adapted from "The Asiatic Society of Japan Bulletin No. 1", January 1996, compiled by Hugh Wilkinson.
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