FO371-23515 — Page 248

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15

ANNEX.

Annual Report on the Kwantung Leased Territory for 1938.

CONTENTS.

Paragraph

Paragraph

I. Introduction

X.--Army and navy

19

II. Local administration and officials

4

XI.-Civil aviation

24

III.-Consular corps

5

XII. Incendiarism

25

IV. British interests

XIII. Police

27

V.--British community

9

VI.-Birthday of His Majesty The King 12

XIV. Health and epidemics

29

VII.-Naval visits ...

XV.-Narcotics

30

13

VIII.—Imperial and official visits

14

XVI. New legislation

31

...

IX.--Press and propaganda

16

XVII.-Shipping conditions

32

I. INTRODUCTION.

The Kwantung Leased Territory continues to be a political backwater under the strictest military supervision. Despite rumours which were freely circulated in July of its impending incorporation into Manchukuo, no step in this direction appears to have been taken, but, although its legal status continues unchanged, its subordination to the military rulers of Manchukuo is becoming more and more pronounced. It is outside the Manchukuo tariff boundary, but with this exception it is a part of Manchukuo from an economic point of view. The laws of Manchukuo relating to trade and commerce are not formally applicable to the Territory, but many of them have their counterpart in the ordinances issued by the Japanese Ambassador to Manchukuo. The Dairen Customs-House is a Manchukuo Government office, and the exchange control authorities in the Territory are so directly subordinate to Hsinking that the exchange control authorities in Tokyo profess to be unable to give them instructions, while the list of products which may not be exported from the Territory without permission is identical with that in Manchukuo and was issued at about the same time. In the recently concluded German-Manchukuo Trade Agreement it is definitely laid down that German imports into and exports from the Territory are to be regarded as imports into and exports from Manchukuo.

2. Despite the non-existence of a customs tariff, the designation of a "free port has, during 1938, become still more unreal as applied to Dairen. The exchange and import control system has been further tightened up, and foreign merchants, especially of "non-recognising" countries, find innumerable obstacles in their way when they attempt to obtain permits.

3. The internal condition of the Leased Territory continues to be peaceful. The Chinese population, superintended by an ubiquitous and all-powerful police force, are outwardly contented, and the country people seem to be well fed, well clothed and prosperous by Chinese standards. Even in the only considerable city, Dairen, there are few signs of acute distress and beggars are not common.

II-LOCAL ADMINISTRATION AND OFFICIALS.

4. At the end of March Mr. Toshio Otsu was appointed head of the Kwantung Bureau at Hsinking, and was succeeded as head of the Kwantung Government Office in Dairen (commonly but inaccurately styled "Governor of the Kwantung Leased Territory") by Mr. Naohiko Miura. Mr. Miura is at all times friendly and approachable, but he is little more than primus inter pares, since the heads of the Home Affairs, Police, Finance and other departments take their instructions not from him, but from the Japanese Ambassador at Hsinking through the Kwantung Bureau. Experience during the past two years has shown

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