FOREIGN RELATIONS, 1934, VOLUME III



foreign firms may profitably continue their Manchurian business but
according to all indications those engaged in general business will be
obliged to close down in the face of Japanese competition. Japanese
goods in so far as they are procurable will supply the market; for the
marketing of foreign goods Japanese importers will, in most cases at
least, occupy a more favorable position than foreign firms. Further-
more, wherever possible, indications are that large enterprises will
endeavor to purchase foreign goods direct from the manufacturer
rather than through foreign middlemen. The few foreign interests
which may continue to operate successfully in Manchuria will find it
profitable either to associate themselves with Japanese as copartners
or to secure the services of high-class Japanese employees. This
development is already noticeable. Parenthetically, the Manchurian
adventure has been expensive for Japan and strenuous efforts will be
made to seek compensation in one way or another.
  It is probably true, as some business men observe, that many Chinese
prefer to do business with foreign firms rather than Japanese and
that lines which are marketed mainly among the Chinese will still be
advantageously handled by foreign firms but that where the demand
emanates from the Government or Government controlled enterprises
Japanese firms afford the better representation. However, indications
are that the Chinese market is susceptible to influence in so many
ways that Chinese merchants will only rarely have an opportunity
safely of giving expression to their preferences.
  A re-orientation of foreign business in Manchuria is now taking
place. Not only have some American products, such as for instance
railway and electrical equipment, telephone installation equipment,
et cetera, been supplanted by Japanese manufactures but others are
being distributed in a gradually increasing degree by Japanese agents.
Even such strongholds of American trade as petroleum products and
motor vehicles are to be invaded by Japanese concerns now in course
of organization under "Manchukuo" charter, e. g., The Manchuria
Petroleum Company and the T'ungho Motor Company (an assembly
plant for heavy duty trucks in which Japanese motor car manufac-
turers are interested;-it will be reported upon in the near future).
It is clear that the Japanese are not only aiming at the engrossment
of this market but in so far as possible at the attainment of self-
sufficiency, particularly in industries connected with national defence.
A trade weapon that seems likely to be used in furthering Japanese-
"Manchukuo" economic unity to the detriment of foreign trade is
the
import tariff, comprehensive studies of which are now being made.
Economic progress in Manchuria, however, is bound to occur and it is
reasonable to expect that it will bring about increased world trade in
which American interests, directly or indirectly, should benefit.
  Respectfully yours,                                M. S. MYERS



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