DP2013-08

The South Manchu ria Railway Company:an accounting and financial history,
1907-1943*
Masayoshi NOGUCHI
Trevor BOYNSMarch 15, 2013

* The Discussion Papers are a series of research papers in their draft form, circulated to encourage
discussion and comment. Citation and use of such a paper should take account of its provisional character.
In some cases, a written consent of the author may be required.

The South Manchuria Railway Company: an accounting and financial history,
1907-1943
by
Masayoshi Noguchi, Professor
Research Institute of Economics and Business Administration
Kobe University
Email: m-noguchi@center.tmu.ac.jp
andTrevor BOYNS, Professor
Cardiff Business School
Cardiff University
Email: Boyns@cardiff.ac.uk

version 1

The South Manchuria Railway Company: an accounting and financial history,
1907-1943
Abstract
This study examines aspects of the accounting and financial history of the South
Manchuria Railway Company (SMR) from its formation in 1907. In particular we focus
on the 1930s, a period in which the activities of the SMR became increasingly dominatedby the demands of the Kwantung Army which effectively controlled Manchuria. As a
special company, the SMR had always faced the dilemma of pursuing the private interestof shareholders as a business enterprise against the backdrop of the requirement to serve
the national interest. Following the formation of the State of Manchuria in 1932, theKwantung Army placed significant and growing financial demands on the SMR while atthe same time wishing to alter the juridical personality of the company. Such demands
were repelled by the SMR’s management for fear that the change in its legal status would
cause problems in obtaining the finance necessary to carry out the army’s requirements
for new lines and improvements to the existing railway network in Manchuria. This
problem, and its eventual resolution through the State of Manchuria taking an equity
stake in the company in 1940, provides important insights into the impact of military
power and wartime conditions on the operation of special companies. In this way, thisstudy contributes to filling a gap in Japanese accounting and financial history research byexamining the motives, commitments and (inter)actions of the various parties concerned– the company’s management, the Japanese government, the Kwantung Army and theState of Manchuria – and the interaction of such factors with the social, political andeconomic conditions surrounding the SMR’s operations in Manchuria.
Keywords: the South Manchuria Railway; special company; the Kwantung Army; theState of Manchuria; juridical personality
1. Introduction‘Special companies’ (tokusyu kaisha) were semi-private, semi-public institutions which
took part in enterprise management and exerted a significant influence on Japan’s east
Asian colonialism during the early years of the twentieth century. Examples include the
Oriental Colonization Company, the South Sea Colonization Company and the South
Manchuria Railway (SMR). Charged with leading Japan’s economic growth andprotecting, and if possible expanding, the area of its empire, special companies were
engaged in national policy activities of important public interest. While the pre-WorldWar I accounting and financial practices of special companies, including the SMR, havebeen researched by Yamaguchi (1998; 2000; 2001), Takahashi (1986), Kaneko (1991),
Yasutomi (1995) and Kurose (2003), the relationship of such companies with theJapanese army in general, and the implications thereof have not been comprehensively
addressed. One feature which was the subject of major debate after the establishment of
the State of Manchuria in 1932, and which impacted on the finances of the SMR, was thatof its juridical personality. The debate surrounding this issue reveals the changes in thebalance between serving the national interest and that of private-sector investors that1

were faced by the managements of special companies during times of military uncertainty
and war.
By examining the case of the SMR and the changing nature of the relationship, from thelate 1920s, between the company’s management and the Kwantung Army (Kanto Gun),that part of the Imperial Japanese Army stationed in the northeast part of China, thispaper answers the call of Funnell (2009:575) for research into ‘the influences that the
military might have had on business accounting’ in ‘non-Anglophone settings’. In
examining the case of the Louisville and Nashville Railroad during the American Civil
War, Heier (2010: 200) notes that‘[o]ne of the most significant technical innovations[brought about by the war] was use of the railroads for the rapid deployment of troops
and supplies’. In providing the infrastructure needed for military operations, Funnell andChwastiak (2010:150-151) argue that, during periods of war, railway company
managements face ‘a number of challenges that may not have been experienced with[simple] commercial uses’.
In analyzing the financial and accounting features of the SMR, it is necessary torecognise the dualistic nature of the task facing the company’s management: theexecution of ‘national policy’ on the one hand and the pursuit of ‘self-interest’ on theother (Kurose 2003:2). In general, if the former is continuously sacrificed in favour of thelatter, the enterprise is in danger of failing, while attempts to avoid such an outcome may
mean compromising on national policy goals. However, the pursuit of ‘national interest’and ‘self-interest’ by a special company need not be mutually exclusive; indeed, themotivation for the establishment of special companies was to establish an institution
which could reconcile the two aims. However, the balance between the pursuit of selfinterest and that of the national interest can vary, and during times of military uncertainty
and war can change in numerous ways. In the case of the SMR, an important issue ofconcern, both to the company’s management and the Kwantung Army, especially after
the outbreak of the second Sino-Japanese war in July 1937, was the juridical personalityof the SMR. The Army sought to transform the corporate entity of the SMR from a
special company with a legal basis in Japan to one based in the State of Manchuria(Manchukuo), but such changes were resisted by the company’s management since it wasrecognised that this could have a serious impact on the company’s financial position,
especially its reliance on private sector capital. While ultimately the SMR’s juridical
personality remained unchanged, a study of the company’s finances and the debate
surrounding the issue, reveal the nature of the pressures faced by Japanese special
companies and how these changed during war times, as a result of changing social,political and economic conditions.
The study is organized as follows. The next section examines the formation anddevelopment of the SMR as part of Japan’s east Asia colonialism, covering the entire
period of the company’s life starting its formation in 1906 through to its demise
following Japan’s defeat in World War II in 1945. Having thus provided the backgroundcontext for this study, Section 3 examines the data sources used in this paper, explaining
the nature of the accounting information generated by the SMR from 1933 and how thiswas influenced by its relationship with the Kwantung Army. Section 4 analyses theperformance of the SMR, highlighting the factors affecting the operation of thecompany’s core business – the railway. Section 5 examines the financial features of the2

company, in the context of ever increasing intervention by the army, especially its
reliance for funding on the issue of corporate debentures. Section 6 clarifies key factorsthat conditioned and influenced the debate surrounding the issue of the change in thejuridical personality of the SMR and how this was linked to the issue of financing thecompany’s activities. The final section summarizes the key insights gained from thisstudy.
2. The South Manchuria Railway (SMR)
The Kwantung Leased Territory and the establishment of the SMR
In 1898, the Russian Empire obtained a lease for 25 years of territories in the Liáodōngpeninsula from China, a region which included the port of Lüshun (renamed Port Arthurby the Russians and later Ryojun by the Japanese). The Russians immediately developed
the town of Dal’niy to the north, and then constructed a railway northwards from Port
Arthur, through Dal’niy (Dalian) to link with the China Far East Railway at Harbin.
Under the Treaty of Portsmouth (September 1905) resulting from the Russo-Japanese
War of 1904-05, Japan then acquired (1) the leasehold rights to the tip of the Liáodōng
Peninsula, (2) ownership of the Chinese Eastern Railway’s southern branch line
connecting Changchun and Lüshun, (3) ownership of all the properties located in thesouthern part of Sakhalin, and (4) the fishing rights around the maritime provinces andthe Kamchatka coast (Motoki Yamazaki’s South Manchuria Railway related documents,
R-82, management archives of the South Manchuria Railway, part 1 - hereafter MY SMR
R-82, part 1). This territory, which became known as Kwantung, comprised an area of
3,462 sq. kms. and to administer it the Japanese government established the GovernorGeneral’s Office of Kwantung (Kwantung Agency from 1919, following the creation of
the Command of the Kwantung Army1) (MY SMR R-82, part 1).
To operate the acquired railway, and the 62-metre wide strip of land on either side of the
tracks, the Japanese government, through decree No.142 promulgated on 7 June 1906,
established a special company called the South Manchuria Railway Company. In returnfor handing over the railway assets in Kwantung to the SMR, the Japanese government
was allotted 100m. yen of the 200m. yen share capital in the SMR, with the Imperial
Household holding a further 1% stake (Litvin 2003: 93). Article 9 of the decree setting up
the SMR empowered the Japanese government to appoint the top executives, thereby
providing an element of state control of its actions, whether this be financial, economic or
political. The SMR, which formally commenced operations on 1 April 1907, was placedin control of railway routes totalling 1,142.3 kilometres (MY SMR R-82, part 1), and a
total land area of 250 square kilometres, on which it was required to establish settlements
and economic activities. In effect, the SMR became responsible for the management of
the Kwantung territory, and securing and protecting the special rights and interests which
Japan held there.

1

This was the garrison of the Governor-General’s Office of Kwantung which was formed to undertake thedefence of the Kwantung Territory.

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The headquarters of the SMR were established in Dalian (renamed Dairen) and Count
Goto Simpei, formerly Japanese Governor of Taiwan, was appointed as first president of
the company. The SMR converted the track to standard gauge (4ft. 8½ ins.), imported US
rails, signalling equipment and locomotives, and quickly set about improving its networkand developing repair shops for the purpose of ensuring the maintenance of thelocomotives, rolling stock and tracks. Warehouses were built for freight storage,
additional harbour facilities were added, and Japanese immigration was encouraged
through the building of townships complete with schools, libraries, hospitals and public
utilities. The employment of Japanese and Chinese workers by the SMR increased rapidly
from 9,000 and 4,000 respectively at the end of 1907, to 35,000 and 25,000 respectively
by 1910.
During the next 20 years, as part of its mission to enhance the economic power of Japanthrough developing Kwantung, the SMR became involved in a number of activities in
addition to operating the railway network, including the establishment of electricitygenerating plants, the manufacture of oil and fat, flour milling, sugar refining, glass andchemical manufacture, shale oil plants, coal mines and the manufacture of iron and steel.
From time to time some of these activities were spun off as wholly-or partly-owned
subsidiary companies. Between 1908 and 1930, as a result of the expansion of its railway
and other operations, the company’s assets rose from 163m. yen to over 1 billion yen,making the SMR by far the largest corporation in Japan.
Between its founding in 1906 and 1928, when the Huanggutun Incident occurred, inwhich the local Chinese warlord, Zhang Zuolin, was assassinated by members of the
Kwantung Army, who blew up the SMR train on which he was travelling, the SMR had‘managed to conduct its business by relatively peaceful means’ (Litvin 2003: 87).
Thereafter, however, the company became embroiled in the battle within Japanesepolitical circles between those who wished to enhance the Japanese Empire throughcooperative diplomacy and trade, which included the majority of the SMR’s directors,
civilian bureaucrats and the Japanese foreign ministry, and those who favoured a more
assertive approach, not least some members of the Japanese military and, in particular,
the leaders of the Kwantung Army (Litvin 2003: 100). In September 1931 the army took
matters into its own hands, embarking on a takeover of the region. The so-called‘Manchurian Incident’ led to the army establishing the puppet State of Manchuria in
1932.2 This was nominally ruled by Pu Yi, the Chinese emperor who had been deposed in
1912, but was, in effect, controlled by the Kwantung Army, which not only controlled
Manchuria but increasingly attempted to assert its authority over the SMR (Litvin 2003:
108). An economic plan drawn up for Manchuria in 1932 stated: ‘[i]n view of the evils ofan uncontrolled capitalist economy, we will use whatever state power is necessary tocontrol that economy’ (quoted in Litvin 2003: 108).
The supervisory mechanism was also transformed in 1934 with the Kwantung Agency
being replaced by the Kwantung Bureau, which was newly established under the power2

As a result of the unilateral declaration of the foundation of the state of Manchuria, Japan subsequently
seceded from the League of Nations in March 1933. There was a rapid expansion of military expenditure tobuild up the country’s armaments, resulting in the Japanese economy in general experiencing a boom whichbrought about rapid inflation and a sharp fall in the exchange rate.

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of the Ambassador Extraordinary and Plenipotentiary resident in Hsinking, capital of theState of Manchuria. The Ambassador Plenipotentiary was, in fact, an additional post heldby the Commander of the Kwantung Army (Mantetsu-kai 1986: 100-101), and heassumed responsibility for supervising the work of the Kwantung Bureau, whose
activities included supervision of the operations of the SMR (Mantetsu-kai 1986, 101).
With the power of the Kwantung Army increased, the SMR came to operate the whole of
the railway network in Manchuria from 1933 (see next section), while in December 1937
many of the SMR’s other activities and subsidiaries, including its industrial holdings,
with the exception of coal, were transferred to the newly created Manchuria Heavy
Industry and Development Co., Ltd. (Litvin 2003: 108). This completely separate special
company was established as part of the revision of the five-year industrial plan for
Manchuria undertaken following the outbreak of the Second Sino-Japanese War (seebelow).3
The development of the railway network
From its inception, the SMR controlled not only the trunk line connecting Changchun and
Lüshun but also the Anpo line connecting Andong and Mukden (present-day Shenyang)and other branch lines, covering 1142.3 kms. in total (MY SMR R-82, part 1). The extent
of the railway network controlled by the SMR remained largely unchanged up to 1933,
but major developments were to occur thereafter (see Table 1).
[insert Table 1 about here]
Following the Manchurian Incident in 1931 and the foundation of the State of Manchuria
in 1932, the Empire of Japan requisitioned all Chinese railways and postal administration
services within the territory, in order to establish a national railway system for the newstate (Mantetsu-kai 1986: 34). The task of managing and expanding the maintransportation systems of the State of Manchuria, consisting mainly of 2968.5 kilometresof the National Railway of Manchuria (NRM), were consigned, through the mediation of
the Kwantung Army, to the SMR in 1933 (Yasutomi 1995: 164). In addition, later thesame year the management of the North Korean Railway (NKR), including the harboursof Ch'ŏngjin and Yuki (Sŏnbong), were entrusted to the SMR, this time through aconsignment made by the Korean Governor-General’s Office (Mantetsu-kai 1986: 22).
With the addition of the NKR lines to the network, and the simultaneous development of
the port of Rajin, the SMR gained a connecting route, through the eastern part of Korea,
to Japan (Mantetsu-kai 2007: 178). The development of this route through the Sea ofJapan led to a decline in the importance of Dairen, which had been the main port of entry
into Kwantung since the company’s foundation in 1906 (Mantetsu-kai 2007: 137).
Over the years to 1939 more than 400 kms. of new line were added to the NRM’s
network each year under ‘a direct command from the army’ (Mantetsu-kai 1986: 163;
Jilin Province, the Academy of Social Science, the Archives of the South Manchuria
Railway, 20083 - hereafter JP, ASS, SMR 20083). When the North Manchuria Railway
3

Amongst the most significant of the activities handed over was the Showa Steel Works, which had beenoriginally established in 1918 as the Ansan Steelworks. It had been reformed and spun-off in June 1933 andwas subsequently transferred from the SMR to the Manchuria Heavy Industry and Development Co. Ltd.

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was acquired in March 1935 from the Soviet Union in exchange for a payment of 170 m.
yen, a further 1,721.4 kms was added (Mantetsu-kai 1986: 255). This was incorporated
into the system of the NRM and immediately consigned to the SMR for management
purposes. As a result, the SMR came to control the whole of the railway network in
Manchuria, which continued to expand up until 1945 when Japan’s military defeat,following the bombings of Hiroshima and Nagasaki, led to the SMR’s ultimate demise.
At the time of Japan’s defeat, the SMR managed a total distance of 12,493.2 kilometresof lines (Mantetsu-kai 1986: 168), more than 10 times the original distance which it had
controlled when established in 1906. Under the occupying forces of the allied powers, theSMR, like many other special companies, was designated as a close-down institution andits assets and the railway network were returned to China and North Korea.
The SMR’s relationship with the military
As in the case of other special companies, the decree under which the SMR was
established contained provisions through which the Japanese government could exert
influence over the management of the company. Thus, the decree setting up the company
included the following clauses:
Article 7: The company shall have one president, two vice presidents, four or more directors, andthree or six inspectors…
Article 9: The government appoints the president and the vice presidents of the company bydecree. The term of office is assumed to be five years. The government also appoints the directorsof the company. The term of office is assumed to be four years.
(South Manchuria Railway Company, Establishment Decree No. 142, 7 June 1906 - hereafter
SMR decree)

From its commencement, the SMR was required, under instructions from the ministries
of Communication, Finance and Foreign Affairs, to have its business plan for theforthcoming year approved by the Japanese government (SMR decree, Article 20). The
Ministry of Finance was specifically concerned with the financial aspects of the SMR’s
operations, as set out in its annual budget plans and financial accounts, whereas the
Ministry of Communication and Transport was concerned with the practical aspects ofthe company’s railway operations, especially the maintenance of an effective and securetransportation network. Legally, supervision of the company’s operations came under thePrime Minister’s jurisdiction, but the primary supervisory role was in fact carried out by
the Governor-General’s Office of Kwantung (thereafter the Kwantung Agency andsubsequently the Kwantung Bureau) as the direct supervisor of the colony (Mantetsu-kai
1986: 97). In 1919, a revision to Article 13 of the SMR’s decree was made, in which it
was provided that ‘the Commander [of the Kwantung Army]…can issue instructions
relating to the operation of the company for military purposes, and can issue militaryorders relating to the operation of the company when at war or in relation thereto’.
Despite such revision, for much of the company’s first 20 years of existence, SMR was
managed at arms-length from both the Japanese government and the Kwantung Army.
The ability of SMR’s management to act autonomously, however, became increasingly
difficult from the late 1920s, not least because of the impact of the Great Depression andthe growing power of the Kwantung Army in Manchuria. As the establishment of a war
regime progressed, the army made ever-increasing demands of the SMR and exerted a6

growing influence over its affairs. This created something of a conflict for SMR’s
management: on the one hand, as a business enterprise there was the need to satisfy theshareholders’ demands for dividends but, on the other hand, as a special company it was
required by the army to carry out activities which ran somewhat counter to this aim. In
particular, the need for increased capital expenditure on lines required by the army raised
issues of financing, while at the same time undermining the company’s ability to financesuch expenditure, both internally and externally, since such lines increased operating
costs without necessarily generating a concomitant increase in operating income. This
undermining of net income from the railway department affected the company’s ability toboth maintain dividend and interest payments, while at the same time reducing theavailability of funds for extending the railway network.
On handing over the management of the NRM’s network to the company in 1933, theKwantung Army instructed the SMR to establish, independently of the company’s own
headquarters in Dairen, the General Railway Bureau through which the NRM’soperations would be controlled (Mantetsu-kai 1986: 153). Similarly, the SMR was
required to establish a separate North Korean Railway Administration Bureau to oversee
the operation of the NKR system. Having three separate administrative bureaus, however,
was not conducive to the smooth operation of the entire network and so, in 1936, the
SMR’s management established the Total Railway Bureau in Mukden to form a single
unified structure for overseeing the management, improvement and extension of theentire railway system of Manchuria (Mantetsu-kai 1986, 154). This not only enabled therailway operations to be streamlined but also helped the SMR’s management counterattempts by the army to intervene in the operation of the network, something which
increased following the drawing up of a five-year industrial plan for Manchuria.
The five-year industrial plan for the State of Manchuria
In August 1936 an ‘outline of the economic construction for the State of Manchuria’ wasissued by the headquarters of the Kwantung Army, under which a joint defence system
between Japan and the State of Manchuria was to be established. In this plan, thedevelopment of fundamental industries such as iron, coal, oil and electricity was stressed.
Following deliberations between the Kwantung Army, the State of Manchuria and the
SMR, the frame of a five-year plan was rapidly formed in October 1936. This madepossible the release, on 25 January 1937, by the headquarters of the Kwantung Army
‘The essentials of the five-year industrial plan of the State of Manchuria’. The section of
the plan dealing with minerals and industry, while envisaging the establishment ofmunitions industries such as armaments, airplanes, cars and vehicles, also stressed thedevelopment of fundamental key industries such as iron, liquid fuel, coal and electric
power. It was also noted that railways and ports would need to be improved if theindustrialization envisaged in the plan was to occur. The plan foresaw a total expenditureof about 2,600m. yen, 1,400m. yen of which was earmarked for minerals and industry.
A key component of this plan to enhance the economic development of Manchuria was
the strengthening of the economic connections between the state and Japan. To realise
this plan, especially the movement of large quantities of coal, required a securetransportation system, and this had important implications for the railway network

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controlled by the SMR. Following the outbreak of the Second Sino-Japanese War in July
1937 and a further increase in Japanese military expenditure, the operations of the SMR
more than ever came to be dictated by military needs. The Japanese National
Mobilization Law (Kokka Sodoin Ho), promulgated in April 1938, strengthened thegovernment’s control over the Japanese economy and a general mobilization plan was
accordingly established in June 1938. In the following year a material mobilization plan
was formulated for the State of Manchuria. As a result, the scale of the transportation ofmunitions between Japan and Manchuria, through both China and Korea, increased
rapidly. Moreover, reflecting the ‘Third Strategic Instruction’ which had been issued in1936 by the Commander of the Kwantung Army (JP, ASS, SMR 20083) for military
purposes, the SMR was required to implement a programme of reinforcement of its
railway facilities in order to enable a significant increase in the amount of militarytransportation. Although the SMR’s management recognised that, as a special company,
it had an obligation to observe such a ‘supreme order of the nation’ (JP, ASS, SMR
20083), the demands of the army significantly impacted on the ability of the company’s
management to dictate its own operations.
Before examining the impact of such demands on the financial history of the SMR, we
first consider the accounting data sources available.
3. Data sources
As a special company set up to operate railway lines in Manchuria on behalf of theJapanese government, the SMR was required to submit information to the government
and the National Diet. At the end of the SMR’s financial year on 31 March, thecompany’s management was required to submit figures on its operations and performance,
while financial accounts, together with a proposed dividend plan, normally had to besubmitted by the end of June. In addition, the company was required to submit, normallyby the end of November, a budget for the forthcoming financial year. This budget, which
had to be approved by the government by the end of March, formed the basis of thecompany’s operations for the forthcoming financial year commencing on 1 April. In themain, this study utilises the accounting information which has survived in various
archives and which was prepared by the SMR and submitted to the government infulfilment of these requirements. In addition, we utilise non-financial data such as theamount of freight carried and the number of passengers transported contained in theannual Statistical Yearbook produced by the SMR between 1907 and 1939. Thus the bulkof the data presented in this paper, whether financial or non-financial, are taken directlyfrom the SMR’s archives or the Statistical Yearbooks; percentage figures and othersimple calculations found in the various tables presented in the paper have usually been
added by the authors.
The changes to the administrative structure of the SMR following the consignment of the
management of the NRM and NKR networks in 1933 complicate the interpretation of thefinancial data for the SMR. As previously noted, the SMR was required to set up two
additional administrative bureaus separate from the company’s own headquarters: theGeneral Railway Bureau for the NRM in Mukden and the North Korean Railway
Administration Bureau for the NKR in Ch'ŏngjin. In part this reflected the fact that the8SMR was required to keep separate accounts for the NRM (from 1 April 1933) and for
the NKR (from 1 October 1933). Separate budgeting procedures for each network also
had to be conducted, although the methods used to construct the budgets appear to havebeen the same. Despite the similarities, the method by which the SMR managed the NRM
differed from that employed in the case of the NKR. Management of the NRM was
performed under authority from the Kwantung Army, and hence most of the profits
earned from the operation of the NRM lines (after deducting interest accruing to thecompany on loans made to the State of Manchuria and other items) were transferred tothe army to cover its own military costs (see Hirai (2012) for further details), while
profits from the management of the NKR, entrusted to the SMR by the Korean GovernorGeneral’s Office, were incorporated into the accounts of the SMR itself as an item of‘other’ income. In effect, both the NRM and the NKR remained separate entities with
their own special accounts, the main difference being the transfer to the SMR’s own
accounts of the net income of the NKR, i.e. the difference between its operating income
and expenses (Nagahiro 1933:351; Mantetsu-kai 1986: 330). In relation to capital
expenditure, all construction expenses incurred in relation to the NRM system were
processed as advances to the State of Manchuria. However, the bulk of the capital
expenditure for the NKR was covered by the Korean Governor-General’s Office,although a small part was incurred directly by the SMR itself and treated in its accounts
alongside construction expenses for its own network (Mantetsu-kai 1986: 328).
Thus for the period from 1933 through to 31 March 1940, there are three sets of accounts:
for the SMR’s own network (hereafter CON); for the NRM; and for the NKR. From 1
April 1940, with the agreement of the Kwantung Army, the accounts and budgets of theentire network managed by the SMR, including the NRM and the NKR, were in large
measure integrated into a single accounting system. Following this reform, current assets,
debts, and operating income and expenses became unified, and thus net income of the
NRM was consolidated into the SMR’s accounts in exchange for the company paying
annually a fee to the State of Manchuria of 15m. yen (Yasutomi 1995: 185-186). 4
However, capital expenditure on the NRM system, which continued to be processed asloans to the State of Manchuria, remained outside of this integration process (Mantetsukai 1986: 547). The basis of SMR’s managerial control of the NKR was also changed inJuly 1940 from that of a commission into a management lease. Thus, from July 1940
(until finally becoming part of the SMR on 1 April 1945), all of the management and theconstruction work of the NKR became the company’s own responsibility, in exchange forthe company paying the Korean Governor-General a sum equal to a fixed fraction of theamount of investment already made in the NKR lines (Mantetsu-kai 1986: 328).
These changes mean that it is possible to obtain data for CON from 1907 through to 1939,
but thereafter it is only possible to obtain data for the network as a whole. The existenceof separate data for most aspects of the operation of each network between 1933 and1939 enables us to reconstruct data for this period on the same aggregate basis as from4

In addition, it was also agreed that the loans which the SMR had already provided to the State ofManchuria for construction of new lines and improvement of existing lines were assumed to be non-interest
bearing and, if there remained any unpaid interest, the state was exempted from the need to repay any debt
extending back to the date of agreement by which management rights over the NRM had been assigned to
the SMR (Yasutomi 1995: 185-186).

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1940, thereby providing evidence on the network’s performance over a longer period oftime. Unless otherwise indicated, Tables (e.g. 2, 5, 6a) containing data both before andafter 1933, reflect the SMR as legally constituted in each particular year. Where data
have been aggregated for 1933-39 (e.g. Tables 1, 4, 6b, 7), this will be so indicated. In
some cases (e.g. Tables 3a-3c), for purposes of comparing the performance of theindividual networks, we provide the same information for each network as available in
the original sources. Although our main focus is on the railway operations of the SMR,
we also present some data (Tables 8-11) relating to the financial structure of the entire
company, while Table 12 examines the financial performance of each of the SMR’s main
operating departments.
4. Operation and performance of the SMR and its railway department
While the main activity of the SMR was running the railway, as already noted it was also
engaged in numerous other activities connected with managing and developing the areaof Kwantung on behalf of the Japanese government. Activities such as developing
schools and hospitals, conducting colonial management, etc., were carried out by the
SMR’s local administration department. This involved the company in significant
expense (see Table 12), which was largely paid for out of the net income generated by therailway department. Hence the success of the railway department was vital to the overall
success of the company and the development of Kwantung and prior to the impact of theworld slump in 1930 and 1931, which led amongst other things to a sharp fall in the valueof silver coinage, the financial performance of the railway department was one ofconsistent success. Following the Manchurian Incident and the establishment of the Stateof Manchuria, the company’s performance recovered quickly as the development ofManchuria gathered pace (South Manchuria Railway Company 1938: 575). However, thecompany’s net income began to stagnate after 1937 and in 1941 was slightly below thatrecorded in 1937 (see Table 11). Following the outbreak of the Pacific War, however, net
income grew sizably in both 1942 and 1943.
Rates of return
In this section we report two measures used to assess the performance of the SMR and its
railway department: (1) the rate of return on invested capital (ROIC), calculated as net
income divided by the accumulated capital (construction) expenses incurred by thecompany;5 and (2) the rate of return on sales (ROS), calculated as the ratio of net income
to operating income. As noted above, constructing financial data series for the whole
period of the company’s life is complicated by the changing nature of the arrangements
by which the SMR was required to account for its activities, in particular the construction
expenses of the NRM. Before considering the performance of the railway department wefirst provide an overview of that of the company as a whole.
(i) Performance of the SMR
5Since the company inherited the existing assets of the railway, these figures do not reflect the return on the
total investment in the railway from its inception, but simply the return on the investment carried out by thecompany following its taking over of those assets.

10

Figures for the ROIC of the SMR, as constituted at different dates, are presented in Table
11. As the business developed the ROIC rose to over 5% in 1917 and then fluctuatedbetween 5% and 7.62% between 1917 and 1929. During the world slump ROIC fell tounder 2% in 1931, but then fluctuated around the 4% level for the rest of the 1930s,
before falling to under 3% in the 1940s. The fall in the 1940s is accounted for by theaggregation of the accounting figures which occurred in 1940, but it should be noted thatthe post-1940 figures, like those from 1933-1939, overestimate the ROIC since the totalof fixed capital is understated since it does not include the loans made by the SMR to theState of Manchuria in connection with the expansion of the NRM network carried out
from 1933.
Since the overall performance of the SMR depended crucially on the performance of therailway department, we focus in the remainder of this section on the latter.
(ii) Performance of the railway department
As Tables 2 and 3a and Figure 1 indicate, after the first few years of the SMR’s existence
the ROIC for the CON was remarkably constant between 1917 and 1929, averaging morethan 28% per annum, and once the effect of the world slump was overcome it again
averaged 26.5% per annum between 1933 and 1939. Table 3a suggests that the ROIC
improved in the early 1940s, but this is a statistical illusion created by the fact that whilst
the net income of the NRM has been added to that for the CON (including the NKR), theconstruction expenses of the NRM were still not integrated into the accounts of the SMR
and continued to be treated as advances to the State of Manchuria. Table 4 indicates that
if the construction expenses for the NRM were accounted for in the same way as were
those for the CON, the ROIC of the entire network controlled by the SMR actually
declined to below 10% after 1940. This reduction reflects the fact that the NRM andNKR systems recorded much lower ROICs than did the CON, that for the NRM being
less than 5% (see Tables 3b and 3c). Accordingly, after the consignment of the NRM in
1933 the financial performance of the entire network operated by the SMR only averaged
11.6% over the period up until 1939 inclusive, before falling further in the early 1940s(see Table 4).
[insert Table 2, Figure 1 and Tables 3a-3c and 4 about here]
The high ROIC figures for the CON over most of its lifetime pale into insignificancewhen compared with the ROS figures, which averaged over 60% between 1908 and 1937,
as indicated in Table 5 and Figure 1. From 1940, however, when the SMR figures include
those for the NRM, the ROS figures fall dramatically to just over one-third of thoseexhibited up to 1937, mainly due to the fact that the NRM exhibited a much lower ROS
than the CON during the 1930s (see Tables 3a and 3b).
[insert Table 5 about here]
The above data relating to the performance of the SMR’s railway department, asmeasured by ROIC and ROS, clearly indicate that its overall performance, which wasvery good until the world slump, deteriorated after the company was required to take overthe management of the NRM and NKR systems from 1933. The key influence here was11the much lower performance levels returned by the NRM system.6 Despite the fact thatthe performance of the SMR’s railway department never recovered its previous levels, the
CON nevertheless performed exceptionally well over its lifetime, and continued togenerate, after 1940, an ROS for the entire network in excess of 20%.
Income structure
The figures for the operating income and expenses of the railway department of the SMR,
especially those for the CON, presented in Tables 3a-3c and 5 indicate that, whenmeasured in terms of operating income, the railway operation grew steadily between
1907 and 1939, save for the problems experienced during the world slump of 1929-32.
Until the late 1930s the growth of net income mirrored the trend of operating income, but
this link became increasingly tenuous following the outbreak of the Second SinoJapanese War in 1937 (see Figure 2). The effects of the war were to cause a rise inaccumulated capital and operating income. Although net income in 1943 was almost
triple that of 1936, it had grown much less rapidly than operating income due to the much
faster increase in operating expenses. This picture of developments in the later 1930s andearly 1940s is, however, not only complicated by the wartime conditions but also, as
already noted, by the method of presenting accounting data on the company’s operations.
The separate figures for the CON, the NRM and the NKR networks from 1933 to 1939
indicate clearly that the last of these was very small by comparison with the other two(see Table 3c). Moreover, it can be seen that the relative sizes of the two former systems
changed dramatically between 1933 and 1937. In 1933 the total operating income of the
NRM was less than 50% of that of the CON but by 1937, as a result of the expansion
which the SRM was required to undertake by the Kwantung Army, the NRM’s operating
income came to exceed that of the CON (see Tables 3a and 3b). Thereafter it continued to
grow more rapidly, so that in 1939, the last year for which separate figures are available,
the NRM’s total operating income, at almost 300m. yen, was almost 30% greater thanthat of the CON.
[insert Figure 2 about here]
The rapid growth in the scale of the NRM following its coming under the management of
the SMR also had an impact on the relative importance of different sources of income.
The income of the SMR’s railway department emanated from three sources: passengers,
freight transport and ‘other’ miscellaneous sources, including dining cars, hotels andhospitals. Prior to 1924 it is not possible to determine the breakdown of the operating
income for the SMR’s own lines between freight and passenger transport due to the lackof data, but throughout the 1920s and early 1930s freight was clearly dominant,accounting for 80% or more of total operating income, with passenger transportationaccounting for up to 16% and ‘other income’ for less than 7% (see Table 6a).
[insert Tables 6a and 6b about here]

6

The NKR, due to its very much smaller size than either the CON or the NRM, had little effect on theoverall performance ratios.

12

In contrast, the contribution of passengers and freight to the income of the NRM wassomewhat different, over 25% of operating income coming from passengers and onlyaround two-thirds from freight (see Table 3b). The rapid expansion of the NRM networkin the late 1930s therefore resulted in a rise in the proportion of the aggregate operating
income of the SMR provided by passengers from 22.52% in 1938 to more than 30% by
the early 1940s (Table 6b). With the onset of the Pacific War it grew even faster,reaching 42% in 1943. With ‘other’ income also rising to between 15.8% and 16.2%
between 1940 and 1943, the relevance of freight as a source of income had declined by1943 to under 42%, in marked contrast to the 80% exhibited in the 1920s and early 1930s.
Thus the impact of the SMR taking over the NRM network, together with that of the
Sino-Japanese and Pacific Wars, resulted in the relative importance of passenger andfreight traffic being reversed.
The share of income represented by passenger transportation is, of course, the result of a
combination of passenger numbers and the average fare paid by each class of passenger,
while that of freight transport is a combination of the amount carried, the distance it iscarried and the rates charged. The growth in the railway network, especially thatbelonging to the NRM, led to a rapid increase in the number of passengers and amount offreight transport carried by the SMR: freight carriage increased over 50% from 42.11m.
tons in 1936 to 64.51m. tons in 1940, while the number of passengers transported rose byalmost 200% over the same period, from 34.68 million persons to 97.82 million(Mantetsu-kai 1986: 163). In addition to the Renkyo line (connecting between Dairen andHsinking via Mukden), the trunk line of the CON, increases in the Hosan line (connecting
Mukden and Shanhaiguan), the Keito line (connecting Hsinking and Tumen) and the
Hokitsu line (connecting Mukden and Jilin), all of them being in the system of the NRM,
were particularly remarkable, providing a trunk line connecting the northern end of Korea
through Manchuria, especially Mukden, to the northern part of China (Mantetsu-kai
2007: 198, 200).
Tables 3a-3c indicate, for 1933-39, the average income per passenger and average
income per ton of freight carried for each of the three networks operated by the SMR. On
the CON, where average income per passenger had fallen between 1928 and 1930, it thenremained fairly constant until 1938, with the exceptions of 1932 and 1933, at between 1.4
and 1.5 yen. In 1938, following the outbreak of the Second Sino-Japanese War, it
increased rapidly and between 1940 and 1943 average income per passenger rose fromless than 2 yen to more than 2.6 yen (see Table 3a). The increase between 1939 and 1940
(1.67 to 1.99 yen) is accounted for by the integration of the accounting systems in 1940,
the NRM recording an average income per passenger of over 2 yen for most of the late
1930s. 7 By contrast, the average income per ton of freight of the CON, which had
declined from 5.967 yen in 1926 to 4.588 yen in 1931, stayed below the level of 5 yen for
most of the remaining period, except for sporadic jumps in 1932, 1941 and 1944 (seeTable 3a). Interpreting the data is complicated by the fact that the pre-1940 figures are
only for the CON, not the whole network, but since the average income per ton of freight7

The NRM had passenger numbers in 1939 which were 50% above those of the CON. If we consolidate
the data for 1939 for the whole network, it is found that the average income per passenger rose only
marginally between 1939 and 1940 from 1.973 to 1.992 yen.

13

on the NRM was slightly lower than that of the CON before integration in 1940, it
probably imparted a downward bias on aggregation of the data in 1940.
Performance under war conditions
Strengthening economic ties with Japan was an indispensable condition for economic
development in Manchuria and securing the means of transportation was an importantfactor for the purpose, which naturally affected the management policy of the SMR, notleast decisions concerning freight rates. A fundamental revision of freight rates was madein February 1936 reflecting concerns over the cost of transportation. Instead of theconventional method of charging for agricultural products, such as soya beans, on thebasis of a certain amount per kilometre transported, a system was introduced by which
the unit price per kilometre declined with distance. A specific freight rate system for farm
products was also enacted at this time to promote the development of the hinterland in thenorthern part of Manchuria. These changes caused the operating income of the SMR tofall in 1936 compared with the previous year, despite an increase in traffic volume. Thus,
the ROS declined from 62.39% in 1935 to 59.49% in 1936 for the CON and from 42.45%
to 38.28% for the entire system including the NRM.
The five year industrial plan for the State of Manchuria originally put in motion in
January 1937 was soon subjected to a major revision, as the demand for supplies in Japan
increased sharply after the outbreak of the Second Sino-Japanese War in July. In response,a revised plan, which doubled the targets of the original plan, was set out initially in
December 1937 and finalised in May 1938.8 A key component of the revised plan for the
SMR was a further change in the system by which freight rates were determined. Underthe revised plan, the SMR in October 1938 adopted a uniform long distance reducing farestructure for freight transport on both the CON and the NRM, an action which resulted ina further significant decrease in operating income per ton in 1939 (see Tables 3a-3c). The
ROS figures for the CON fell to 50.3% in 1938 and 46.6% in 1939, while those for theentire network fell to 34.7% and 29.2% respectively (see Tables 6a and 6b). Moreover,the specific freight rate system was vastly extended by the 1938 reforms to coverproducts such as cereals, livestock, wood, coal and ore (Mantetsu-kai 2007: 51), with asignificant reduction in the rates for coal and ores being made in order to promote theirproduction (Mantetsu-kai 1986: 218-219). This led to a remarkable jump in the carriageof coal and ores, in contrast to that of farm products, including soya beans, which
stagnated after 1937 (see Table 7).9 Following the outbreak of the Second Sino-Japanese
8

The revised plan greatly differed from the original in its size and nature. The total necessary funds wereincreased from about 2,600 m. yen to about 5 billion yen, with that available for minerals and industry
being increased from 1,400 m. yen to about 4 billion yen. The revised plan also recognised the need for abusiness entity to administrate the overall development, the Manchuria Heavy Industry and Development
Corporation being established in December 1937 for this purpose. The Nissan group, one of the emerging
zaibatsu, played a key role in this process. Under the revised plan, the SMR was required to transfer manyof its industrial enterprises, but excluding the railway and coal businesses, to the newly establishedcompany.
9

The transportation of soya beans had been a major source of income for the SMR, half of the world’s
supply of soya beans coming from Manchuria by 1927. The SMR’s attempts to encourage the expansion of
production and transporting the produce to the ports for export prior to the 1930s represents a classic

14

War, the transportation of war materials also significantly increased, as did that of thecompany’s own cargo (mainly consisting of coal as fuel) (see Table 7).
[insert Table 7 about here]
In order to respond to the increased demand for freight transportation and simultaneously
to reduce operating expenses, enhanced efficiency was called for. In addition to the use of‘open wagons’ and ‘loading in bulk’, ‘increased loading’ of 10% was performed fromabout September 1938 in order ‘to load as much cargo as possible’ but only ‘as long as
the loadable capacity of a freight car allows’ (Manchuria Daily Newspaper 23.9.1938).10
In spite of these efforts, the SMR was unable to suppress a sharp increase in operating
expenses (see Table 5).
The material mobilization plan for the State of Manchuria, put into effect in January 1939,
further influenced the operation of the SMR. With the initiation of this plan, thecontrolled economies of Japan and the State of Manchuria were even more closely linked
with Manchuria being required to vastly expand the supply of materials, such as coal andiron, to Japan to aid the war effort. As a result, the general principle for economic
development in Manchuria envisaged in the original five-year plan was abandoned andinstead it was converted after May 1940 to the ‘priority principle’, giving top priority toincreasing the production of steel, coal, water-power generation, nonferrous metals, etc.
in order to increase the supply of basic materials to Japan. This switch of emphasis
further enhanced the need for transporting coal and iron, which in turn severely affected
the operating income of the SMR since, as indicated above, in October 1938 the company
had adopted a uniform long distance reducing fare structure for specific priority items
including coal and minerals.11
Since operating expenses tended to increase with the rise in the price of coal and otherforms of energy, not to mention increases in personnel costs, the SMR increasingly felt
the need to modify the decreasing system of long distance fares and instead increase
tariffs (Chugai Commercial Newspaper12.6.1941). Accordingly, a modification to limit
the application of this system was implemented in December 1940 but because it was
only minor in nature it proved insufficient to cover the damage that income from freighttransport had suffered. Therefore, the SMR simultaneously revised passenger fares, thefirst time on the CON since 1917, with the aim of increasing its operating income(Mantetsu-kai 1986: 203). Such fare increases had to be agreed by the Japanese
government, and the SMR used the budgeting process to justify such increases (seeNoguchi and Boyns (2013)).

example of an extractive colonial economy dependent on a single product (Young 1998: 31-32).
10

According to Keijo Daily Newspaper (11.7.1942), ‘reinforcement of transportation capacity is planned at
the SMR through a supplementary budget of 30m. yen. The transportation is currently being carried out
through a ten percent increase in the volume per freight car [of 30-ton loading], i.e., 3 tons’.
11

It was reported in June 1940 that ‘long distance transportation of specific goods (iron ore and charcoal) iscongested by the ‘priority principle’ adopted in coping with the mobilization of resources executed in theState of Manchuria’ (Chugai Commercial Newspaper 12.6.1941).

15

5. Financial structure of the SMR
Fund raising and use
As indicated in earlier sections, capital expenditure during the 1930s was increasingly
dictated by the needs of the Kwantung Army. Expansion of passenger and freighttransportation from the mid-1930s was facilitated through an enlargement of the carrying
capacity of each train, not least through the utilization of larger locomotives designed forlong-distance transportation of freight (Mantetsu-kai 1986: 163). The use of such
locomotives, however, necessitated increased capital expenditure for replacing andstrengthening of the tracks (Mantetsu-kai 1986: 163).
From 1933 the SMR came to need large sums of money for two main purposes: theexpansion of the railway network; and for the development of coal and other enterprises
under the industrialization plans for Manchuria. Moreover, under the wartime conditions
from 1937, the SMR came to be charged with strengthening the railway networks formilitary purposes and securing the network against enemy sabotage, besides undertaking
the construction of double-track lines in specific regions and of new lines within
Manchuria (Mantetsu-kai 1986: 164). In fact, as revealed in Table 8, the demand forfunds by the SMR rapidly increased after the commencement of the Second SinoJapanese War in 1937. Improvements to, and the expansion of, lines in operation were
performed in response to instructions from the Kwantung Army which pushed theestablishment of a war transportation system, the construction of new lines being
advanced on a large scale (JP, ASS, SMR 20083). Of particular importance in this respect
was the development of the lines belonging to the NRM system, the financial loans
advanced to the State of Manchuria by the SMR for construction purposes increasing
significantly, quickly reaching in excess of one billion yen in 1940 and exceeding 2.5
billion yen in total by the end of the war in 1945 (Mantetsu-kai 1986: 566).
[insert Tables8 and 9 about here]
The principal part (48.3%) of the funds required for the above expansion was supplied
through the issue of corporate debentures, as indicated in Table 9. Although the SMR wasentitled to issue debentures up to the limit of twice the amount of paid-up equity capital,12from September 1937 the issue of corporate debentures in Japan was placed under state
control through the promulgation of the Law for Temporary Funds Adjustment (Rinji
Shikin Chosei Ho), necessitating government approval in advance. The issue of SMR
debentures was initially underwritten by a syndicate comprising Japan’s major first-classbanks and trusts with a high credit capability and expertise, including the Industrial Bank,
Yokohama Specie, the Bank of Korea, Daiichi, Mitsui, Mitsubishi, Sumitomo, Yasuda,
etc. However, in March 1938, faced with the necessity of increasing the amount of funds
raised annually from 300m. to 500m. yen, the SMR’s management became uneasy about
continuing to rely so heavily on corporate debentures. There were several reasons forsuch concern. First, the management of the SMR regarded the issue of debentures as
uncertain in nature ‘since debentures do not have legal force unlike the collection of
payment of equity capital’ and because an issue ‘could succeed or not depending on the

12

The limit was raised to three-fold in January 1945 (Mantetsu-kai 1986: 543).

16

conditions of the financial market’ (JP, ASS, SMR 20260). Indeed, in 1937 sales of thecompany's debentures were very low (see Table 9).
Second, although the bond flotation market had recovered due to the monetary easing
measures taken by the Japanese government after the outbreak of the Second SinoJapanese War, dependence on the issue of debentures and underwriting by the first-classsyndicates was not something limited to the SMR but also applied to other special
companies recently formed in connection with the administration of the State ofManchuria, such as Manchuria Colonization (formed in 1935) and Manchuria Heavy
Industry and Development (1937). The debentures of these companies, together with thenational bonds of the State of Manchuria, were also underwritten by almost the same
syndicate as those of the SMR. Furthermore, while the payment of both the principal andinterest of the debentures of these companies was guaranteed by the state, this was not thecase for those of the SMR (JP, ASS, SMR 20344; 105835). As long as their activities
were consistent with the aims of the Law for Temporary Funds Adjustment, i.e. they met
war purposes, the allocation of funds was preferentially assigned to the debentures ofthese companies, regardless of their financial performance, with the result that the issueof debentures by the SMR was to some extent constrained (JP, ASS, SMR 20344).
To cope with the uncertainty surrounding the issue of corporate debentures, themanagement of the SMR sought to undertake two important measures. One was tostrengthen the system of underwriting: the SMR sought to avoid reliance on the mainbanks and trusts alone by adding regional banks and savings banks to the existing
syndicate, while simultaneously planning to set up a more comprehensive organization ofunderwriting, through incorporating credit unions and Treasury deposits based on postal
savings (JP, ASS, SMR 20344). The other measure was to seek another source of funds,
i.e. equity capital.
Equity capital
Initially the SMR examined the possibility of raising equity capital directly from theJapanese government, not least because the state continued to be a major shareholder inthe company. However, as Table 10 shows, by 1934, the paid-up equity held by private
investors exceeded that held by the government. Moreover, due to the large number ofother special companies which had been established in the second half of the 1930s,
many related to the administration of the State of Manchuria, the SMR judged that little
could be expected of the government (JP, ASS, SMR 20260). The SMR thus sought anincrease in equity capital from the private sector.
[insert Table 10 about here]
In planning for an increase in its capital, the SMR was concerned about the company’s
share price. In March 1938 it was 59.10 yen (for a common share with a face value of 50
yen and an 8% payout ratio), below that of shares in all the other main railway companies
in Japan which had similar payout ratios of between 7% and 10%. Thus, Hankyu shares
traded at 90 yen while the price of Nankai Railway shares was 86.30 yen (JP, ASS, SMR
20260). Under such competitive circumstances the management of the SMR determinedthat it would be necessary to attain a share price of 70 yen or more if a successful issue of17

new share capital was to be made. In its attempts to maintain and possibly enhance theshare price, the SMR’s management emphasised the importance of maintaining the levelof dividend payments.
[insert Tables 11 and 12 about here]
Table 11 shows that dividend payments to the government and other shareholders wereconstant throughout much of the SMR’s existence. After 1920, with the exception of1931, the SMR paid a dividend of 4.3% or more to the government, and 8% or greater toother shareholders. Despite, as noted above, the entire business of the SMR suffering adeclining ROIC after 1932, maintaining dividend levels was necessary to induce
investors to continue purchases shares and debentures in the company (JP, ASS, SMR
20260). As the amount of paid-up equity capital rose, the maintenance of stable dividend
payments required a steady growth of net income. As already noted, the overall
performance of the SMR depended on the profitability of the railway department. Thiswas where the bulk of the company’s net income was generated (see Table 12), andhence the performance of the railway department formed the basis for the SMR’s
dividend payments.
Net income also played an important role as one of the principal financial sources for the
SMR, totalling almost 1,400m. yen from 1932 to 1943 for the railway department. Thissum more than covered the deficits of other departments, such as that of the local
administration department, yielding a net income for the company as a whole of morethan 800m. yen (see Tables 11 and 12; see also JP, ASS, SMR 20083). This figure wasthen used to cover total dividend payments of about 540m. yen during the same period oftime, leaving a residual net income of 260m. yen.13 Thus we can see how the net income
generated by the railway department was important not only for covering the interest
payments accrued on the increasing amount of debentures outstanding but also achieving
the goal of maintaining and improving the share price.
In March 1938, the SMR’s management was somewhat optimistic about the future
profitability of the railway department, expecting operating income would increase with‘the active movement of goods’ resulting from the implementation of the State ofManchuria’s five-year industrial plan (JP, ASS, SMR 20260). However, the managementof the SMR was anxious that investors would be distrustful of the company’s ability to
pay dividends as a result of the onset of the Second Sino-Japanese War. Many investors
were concerned that, as a special company, the SMR would have to construct and operate
unprofitable lines for military purposes, and might be subjected to fare reductions,
thereby undermining its ability to continue to pay dividends at the traditional rate of 8%
or more (JP, ASS, SMR 20260). To retain investor confidence, the SMR’s management

13

A newspaper article emphasized the importance of net income as a source of funds as follows: ‘[i]n the
SMR, two businesses of ammonium sulphate and steel will be started as new businesses, in addition torailway construction…Since the net income from most businesses will be appropriated for the cost ofrailway improvement next year, construction expenses for these, i.e. 79m. yen for railway, 5m. yen forammonium sulphate and 13m. yen for steel (all are to be continuing operations for two to three years),
totaling 97m. yen for all, will be divided between 3 separate enterprises, and will all be financed by theissue of debentures’ (Osaka Asahi Newspaper 13.10.1932).

18

determined to try to maintain recorded net income at a level sufficient to maintaindividend payments.
It was against this complicated background that the issue of a possible change in thejuridical personality of the SMR began to develop amongst the three key stakeholders:the company’s management, the Kwantung Army and the State of Manchuria.
6. The issue of change in the juridical personality of the SMR
Following the establishment of the State of Manchuria in 1932, all special companies
subsequently formed within Manchuria were set up, on the joint initiative of the
Kwantung Army and the bureaucrat of the State of Manchuria, as corporations having thejuridical personality of Manchukuo, rather than Japan (Manchurian Newspaper
28.8.1934; 22.9.1934). As a special company established in Japan, the position of the
SMR was therefore at odds with that of the other special companies operating in
Manchuria from 1932. With the outbreak of the Second Sino-Japanese War, thecompany’s position became further complicated since the extra-territoriality of Japan and
the Japanese within the State of Manchuria was abolished in December 1937, while at thesame time the army wished to strengthen its supervisory powers over the company(Manchuria Daily Newspaper 6.11.1937).
Recognising the importance of the SMR, the company was afforded temporarily thejuridical personality of foreign citizenship under an exceptional provision of the Foreign
Companies Act promulgated at the same time. Technically such status was to be reserved
for corporations established under treaty, but it was extended to the SMR even though it
had not been established in this way (Hochi Newspaper 10.10.1937). However, for the
Kwantung Army, this solution was unsatisfactory:
The issue of change in the juridical personality of the South Manchuria Railway is a very
important matter related to the preparation for war. It is an issue of whether the railway should be
regarded as a strategic arm for war purposes or not.14 Since the State of Manchuria (Manchukuo)
was established and raised as a state for the national security of Japan and the railway has a close
relationship indivisible from the politics and economics of Manchukuo, it is unnatural for it toremain outside the control of the Manchukuo government as a foreign corporation originating inJapan. The juridical personality [of the SMR] should be changed and put under supervision andinstruction of both of the governments of Japan and Manchukuo as a joint corporation. (Kojima,
2007: 112)

The army was also of the view that:
The railway should be considered as a strategic arm to be integrated with the army. The railway,
which executes operations in conjunction with the army under the supreme command of Japan,
during times of peace should be instructed to, and should undertake preparations so that it can beused freely by the Japanese army. This is natural. (Kojima, 2007: 112)

In contrast, the management the SMR was opposed to the proposed change in thecompany’s juridical personality, fearing that this would have direct and indirect
14

In fact, it was stated in ‘the Fundamental Policy of the Greater East Asia Traffics’ adopted by theJapanese cabinet on 1 July 1942 that ‘transportation facilities need to be considered for conversion to war
purposes, [because] the government should give priority to taking measures to enhance the national defense
and secure the circulation of [military] goods’ (Mantetsu-kai 1986: 164).

19

consequences on the financing of the company, which had become paramount followingchanges to the industrial plan for Manchuria and the move to the priority principle fortransport movements (see sections 4 and 5 above). Of particular concern to SMR’s
management was that a change in its juridical personality would restrict access to funds.
Given former clashes between the company on the one hand and the Kwantung Army andthe bureaucrat of the State of Manchuria over the control effected by the General Railway
Bureau between 1933 and 1936, the SMR’s management was fearful that it would finditself in an inferior position in respect of access to funds compared with other special
companies established in Manchuria (JP, ASS, SMR 20344). In particular, the SMR’s
management was apprehensive that economic control effected by the State of Manchuria
would make it more difficult to raise the funds, both internally and externally, needed tocarry out the construction of new lines and improvements to the existing network which it
was being required to undertake.
As has already been noted, residual net income (i.e. net income after dividend and interest
payments) was vital to the process of internal financing, and so the SMR’s management
was keen to avoid being subjected by the State of Manchuria to policies which might
restrict net income, such as controls over fares. As a foreign corporation, the SMR
remained outside of the price controls which were implemented by the State ofManchuria following the rapid rise of prices at the start of the Sino-Japanese War in 1937
(JP, ASS, SMR 20344). However, with railway fares having an important impact on
prices throughout the economy, there was pressure to change the SMR’s legal status, anaction strongly resisted by SMR’s management which recognised that both internal andexternal funding depended on maintaining high levels of residual net income. With
freight transport still remaining as the most important source of net income it was
important to avoid further reductions in freight rates, and hence the SMR’s management
resisted attempts to alter its juridical personality (JP, ASS, SMR 20344). The SMR’s
management was particularly fearful that any such change, leading to the operations of
the company being subjected to government policy aims, would lead a fall in investor
confidence and hence its ability to raise external funding, whether from debentures or
equity capital (JP, ASS, SMR 20260).
The SMR’s management was also concerned that any change in its juridical personality
would affect the traditional remittance route by which the company received funding
from Japan. Up to this time, the SMR had remitted funds raised in Japan to Manchuria
through the Bank of Korea, using such funds to invest in both its own activities and thoseof its affiliated companies in Manchuria. However, a priority of the government of theState of Manchuria, in cooperation with the Kwantung Army (JP, ASS, SMR 105835),
was to concentrate the remittance of funds between Japan and Manchuria through theCentral Bank of Manchuria (JP, ASS, SMR 105835; JP, ASS, SMR 20344). If the SMR
became a corporation of the State of Manchuria it would have been required to change its
remittance route, thereby losing the preferential treatment received from the Bank of
Korea, namely loan advances based on the security of the amount to be raised through theissue of debentures and low interest rates (JP, ASS, SMR 20344). Although thegovernment of the State of Manchuria offered alternative preferential treatments to the
SMR, comprising dividend guarantees and low interest rate loans, in compensation forlosing its traditional funding route, the management of the SMR concluded that thebenefits of the traditional route, built up over 30 years, more than outweighed the20

potential benefits offered by the untried mechanisms proposed by the State of Manchuria(JP, ASS, SMR 105835). In particular, the SMR’s management viewed the proposedchanges as destroying the traditional relations with the banks, which would be
detrimental to the company’s plans to strengthen the syndicate organization which had todate underwritten the issue of the company’s debentures (JP, ASS, SMR 20344).
All in all, the SMR’s management concluded that ‘no matter what opinion was currently
indicated for change in the juridical personality it has serious defects. Since what is to belost by this change would be greater than the gains to be obtained, the company should
absolutely be opposed [to such an opinion]’ (JP, ASS, SMR 105835). In the end, anarrangement was agreed between the SMR and the State of Manchuria by which a small
portion of the company’s equity was assigned to the government. This occurred in
January 1940 when the company finally succeeded in increasing its capital, and provided
the State of Manchuria with a means of being able to exercise some influence over the
management and railway operations of the SMR through the appointment of one of thedirectors (Yasutomi 1995: 181; Osaka Asahi Newspaper 9.12.1939; 10.12.1939).
7. Summary and Conclusion
This study has examined aspects of the accounting and financial history of the SMR,
especially those during the 1930s, in the light of the shifting balance between thecompany, the Kwantung Army and the State of Manchuria. The formation of the State ofManchuria in 1932, the military uncertainties of the mid-1930s and the Second SinoJapanese and Pacific Wars all impacted heavily on the operations of the SMR between
1932 and 1943. In examining these events and their impact on the financial history andjuridical personality of the SMR, we fill a gap in Japanese accounting and financial
history research.
Until it was hit by the deep slump of 1930 and 1931, the SMR, largely as a result of theperformance of its railway department, had returned consistent and successful financial
results. Prior to the late 1920s, SMR’s management had largely been able to keep itself at
arms-length from the Japanese government and the Kwantung Army, but such
autonomous management became increasingly difficult from this time, especiallyfollowing the Manchurian Incident and the declaration of the State of Manchuria. The
growing power of the Kwantung Army in Manchuria, together with the consignment of
the management of the NRM and NKR networks to the SMR from 1933, not only
reduced the overall performance of the SMR’s railway operation but also brought about
the transformation of its income structure. Transportation of minerals, industrial products
and military goods increased, while that of agricultural products fell. However, due tostate control of freight rates, operating income from freight transportation did not increase,with the result that passenger transportation became increasingly important to the SMR.
As military conditions worsened, the Kwantung Army required the SMR to undertake
construction work and make improvements to the railway network, in particular the NRM
network, for military purposes. This pressure grew particularly following the outbreak of
the Second Sino-Japanese War in 1937. Since it heavily relied on the issue of debentures
for financing construction, the SMR’s management was worried by controls on the bondmarket introduced through the promulgation by the Japanese government of the Law for21

Temporary Funds Adjustment in September 1937. To overcome such difficulties, theSMR attempted to reinforce the system of underwriting its bond issues by increasing thenumber of members of the syndicate used for such purposes. However, government profit
controls worried investors with the result that the company’s share price remained at alow level. To help dispel investor fears, the SMR needed to keep recording high levels of
net income in order to maintain dividend and interest payments.
It was against this background that the issue of a change to the juridical personality of the
SMR arose, potentially impacting on the balance between the company’s activities as a
private business enterprise and its public duties as a special company. The Kwantung
Army wished to place the operation of the SMR under its sole control by transforming the
SMR into a corporation with a juridical personality in Manchuria. However, the SMR’s
management was concerned about the potential harmful effects, direct and indirect, ofsuch a move on the financing of the company. Against the background of the Second
Sino-Japanese War, a resolution to this issue was of great importance, and intensive
exchanges took place. In the end, the matter was settled through the State of Manchuria
taking an equity stake in the SMR in 1940.
Despite the uncertainties faced by the company during the period from 1932, it was able
to undertake substantial investment in the railway network which it controlled. The SMR
required funds for construction works on the CON and the NRM, the expenditure on thelatter being treated as loans to the State of Manchuria, for investment in non-railway
activities and the payment of dividends. As Table 8 shows, the amounts required annuallyfor these purposes more than doubled between 1934 and 1943, from 261.9m. yen to over609m. yen. Despite the financial and other pressures it faced during this period, the SMR
was able to raise large amounts of finance between 1934 and 1943 (see Tables 9 and 11)
mainly due to the continued growth in net income of the SMR’s railway department,
which increased from 73.2m. yen to 229.6m. yen between 1934 and 1943. This enabled
the company to increase its paid-up equity capital from 548.2m. yen to 1,216.2m. yen
over the same period, while maintaining dividend payments at traditional rates (thepayments rose from 33.3m. yen to 72.3m. yen between 1934 and 1943). The growth innet income from the railway department also enabled the amount of debenture capital
outstanding to increase even more rapidly from 537.6m. yen in 1934 to 2,167.1m. yen in
1943, over 200m. yen being added to the total annually from 1939 to 1943.
In this way, the SMR’s management was able to fulfil its responsibilities, both to theprivate sector investors in the company and to the Japanese state. The case of the SMR
illustrates how the balance between national and private interests, an important feature ofJapanese special companies, could be a source of conflict and create particular problems,
especially under war conditions. Nevertheless, it also shows that it was possible toresolve such conflicts successfully and enable a sufficient inflow of funds into thebusiness to satisfy the requirement of all stakeholders.

22References
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Manchuria Railway)
20083, Mantetsu Zaisei Kinkyo (Recent financial position of the South Manchuria
Railway Company), 1940.
20260, Mantetsu Shorai no Shikin Taisaku Ikan (How to finance the future necessary
funds of the SMR), Tokyo Shisha Keiri-Ka (Department of Accounting, Tokyo
Branch), 1938.
20344, Mantetsu no Shikin Chotatsu Kiko oyobi Shikin Chotatsu Jokyo ni kansuru
Kenkyu (A study on the financing mechanism and financing situation of the SMR),
1940.
105835, Mantetsu Keiei Hoshin Kenkyu Gaiyo (The outline of the study on the
management policy of the SMR), 1938.
MY SMR R-82 (Motoki Yamazaki’s South Manchuria Railway related documents, R-82)
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archives of the South Manchuria Railway).
South Manchuria Railway Company
Business Reports 1933-43.
Establishment Decree No. 142, 7 June 1906.
Explanatory notes for the Imperial Diet1938, reprinted by Ryukei Shosha, 1986.
Yearbook of Statistics1927-1928; 1930; 1932; 1934; 1936; 1939, reprinted by Ryukei
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Chugai Shogyo Shimpo (Commercial Newspaper)12.6.1941.
Hochi Newspaper 10.10.1037.
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Keijo Nippo (Daily Newspaper)11.7.1942.
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Manchuria), Kondo, Tokyo.
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Litvin, D. (2003) Empires of Profit – Commerce, Conquest and Corporate Responsibility,
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Mantetsu-kai (1986) Minami Manshu Tetsudo Kabushiki Kaisha Dai 4 Ji 10 Nenshi (The
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Mantetsu-kai (2007) Mantetsu 40 Nenshi (The 40 years of the South Manchuria Railway
Company), Yoshikawa Kobundo, Tokyo.
Nagahiro, R. (1933) Mantetsu no Kaikei (The Accounting at the South Manchuria
Railway Company), Mantetsu Employee Association, Tokyo.
Noguchi, M. and Boyns, T. (2013) Budgets and their role at the South Manchuria
Railway, c.1928-1944 (working paper in preparation – available from authors onrequest).
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1907-1928, reprinted by Yushodo Press, Tokyo, 2004.
South Manchuria Railway Company (1938) Minami Manshu Tetsudo Kabushiki
KaishaDai 3 Ji 10 Nenshi (The Third 10 years of the South Manchuria Railway
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Takahashi, Y. (1986) ‘Tetsudo Shihai to Mantetsu (The Governance of Railway and theSouth Manchuria Railway)’, Asada, K. and Kobayashi, H. (eds.) Nihon Teikoku Shugino Manshu Shihai (The Governance of Manchuria by the Japanese Imperialism)’,
Jicho-Sha, Tokyo.
Yamaguchi, F. (1998) Nihon Yusen Kaikeishi—Zaimu Kaikei Hen— (Accounting Historyof Japan Mail Steamer: Financial Accounting), Hakuto Shobo, Tokyo.
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History of Japan Mail Steamer: Budget and Cost Accounting), Hakuto Shobo, Tokyo.
Yamaguchi, F. (2001) Asset valuation and accounting strategy within the Japanese
shipping industry c. 1876-c. 1950, Accounting, Business & Financial History, 11(3):283-92.
Yasutomi, A. (1995) ‘Mantetsu no Shikin Tyotatsu to Shikin Tonyu—‘Manshukoku’ Ki
wo Chushin ni (The finance and investment of the South Manchuria Railway
Company: at the time of ‘the State of Manchuria’), Jinmon Gakuho (The Journal of
Humanities), the Institute for Research in Humanities, Kyoto University 76: 155-228.
Young, L. (1998) Japan’s Total Empire: Manchuria and the Culture of Wartime
Imperialism, University of California Press, California.

24

Table 1. Average length of lines operated by the SMR and open to traffic during the years 1925-1943
Year Kilometres
1925
1118.2
1926
1116.1
1927
1111.7
1928
1111.7
1929
1111.8Year Kilometres
1930
1122.1
1931
1125.1
1932
1127.1
1933
4621.01934
5210.5

Year Kilometres
1935
7758.4
1936
8962.6
1937
9814.4
1938
9943.1
1939
10099.9

Year Kilometres
1940
10848.5
1941
10975.6
1942
11366.1
1943
11941.2

Source: South Manchuria Railway Company 1929: 81; Mantetsu-kai 1986: 171; 257-261; Mantetsu-kai 2007: 258-259.

25

Table 2. Construction expenses and ROIC of the SMR’s railway department (CON), 1907-1941

Year

Amount of
expenditure

Sharedamount ofadministration
costs

1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941

9099914.08
2171596.22
7925152.61
14088657.91
11082502.20
4778056.07
2276820.23
1431350.55
1098842.30
2082021.64
1471593.94
5931555.81
26068976.59
26338575.70
12826938.87
9832248.91
8429633.13
11796117.95
8942295.36
9425785.13
18502827.74
17374955.40
19054060.16
13228051.57
8002614.75
4683164.59
10256409.27
27572187.53
23956201.49
17600939.92
11358364.05
22320625.73
37928656.90
42250474.60
32776268.07―
805878.54
437157.10
656766.49
622579.62
248469.63
116037.58
86200.58
73267.11
86497.61
171380.99
229407.79
947011.19
1500732.27
855611.50
833229.25
1091400.91
1114732.24
554196.19
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―

Amount of increase (yen)Amount ofAmount ofproperty
Conversion
government
arrangementfrom otherinvestment(revaluationaccounts
propertyof property,
etc.)
―
―
―
331.92――421522.21―
9648.321507.38―44387.45
1087398.68――-62490.86――
8325.56――
397.70―8590.90173794.71――
9364.33―
207735.51
1633742.20―
41134.69
22263210.82
―
―
―
―
―
―
―
7537070.28
―
―
―
―
―
323527.65―――――
591000.42――52380.17――
108915.93― 33794455.43―――
1294349.38――
1179310.30―
23383.17―――――48158.59
2629041.79―
28428.21――
62317.60
144593.43―
114473.92――
56043.46
3382646.83―
166201.59――
462954.56 50337277.11―
204285.70
257535.58―8052364.92―
116617310.15

Total

Amount ofabolition

Amount ofremoval9099914.08
2977806.68
8793480.24
14791319.23
12792480.494964034.85
2401183.37
1526539.73
1345904.12
2385619.09
3317851.82
28424174.43
27015987.78
35376378.25
13682550.37
10989005.81
9521034.04
13501850.61
9548871.72
9534701.06
52297283.17
18669304.78
20233370.46
13251434.74
8002614.75
7360364.97
10284837.48
27779098.56
24070675.41
21039630.21
11524565.64
73120857.40
38390478.18
50302839.52
149393578.22―
7479.44416409.00
243641.79
744924.64
227357.29
213318.41
79058.17
74092.8045860.41
66790.23
71813.92
403859.45
674716.49
33217.35
58920.50
6254.56
42995.93
26257.52
824935.70
464949.92
1012144.90
504162.17
523721.8686040.32
105745.462908084.55
837794.75
1231407.70
166821.73
304773.98
590725.13
354920.52――

612.752084.49
100401.32
450960.54
222188.64
194283.79
160150.58211553.68
99422.37
569984.08
629448.67
766460.93224491.70
534613.00
109369.13
161305.72
133921.90
124788.56
190842.08
3152298.96
2772952.06
3426632.96
3213065.95
2366431.75
1237072.59
673787.06
1403663.55
2513720.59
1126441.80
768367.98
2055144.95
6782315.14
4551525.42

Amount of decrease (yen)Amount ofproperty
Amount ofarrangement
depreciation(revaluationof property,
etc.)
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
1306961.04―
3294893.03 30944767.73
4045223.63―
4336993.35―
199431.40―
4609759.37
105931.27
5022949.27―
5348418.23―
8898851.56―
5605697.85―
5202078.75―
5561595.66―
6349796.83―
9242190.90―
7297312.49―
8872498.31―

Conversion
to otheraccounts

Total―
1851.38――
15421.19
36015.68
65123.96―478477.88――
4551.65494167.31―
917903.30―
874135.87―――
341163.69――
1813267.20
89414.69―
40106.15―
687094.20―
62362889.94――――

612.7511415.31
516810.32
694602.33
982534.47
457656.76
438592.96
290611.85
651993.05
615844.49
696238.90
842826.51
1122518.46
1209329.49
1060489.78
220226.22
1014312.33
167784.49
217099.60
5284195.70
37818726.43
8484001.49
8054221.47
4902852.21
6128218.24
5802481.79
9700272.48
12250366.90
8650641.55
6137268.46
14157804.53
13722837.10
14148636.84
7297312.49
8872498.31

Amount at thedate ofclosingaccounts

Accumulated
amount

Net income

9099301.33
22510759.38
8276669.92
14096716.91
11809955.02
4506378.09
1962590.41
1235927.89
693911.07
1769774.61
2621612.92
27581347.92
25893469.32
34167048.76
12622060.59
10768779.59
8506721.71
13334066.12
9331772.12
4250505.36
14478556.74
10185303.29
12179148.99
8348582.53
1874396.51
1557883.18
584565.00
15528731.66
15420033.86
14902361.75-2633238.89
59398020.30
24241841.34
43005527.03
140521079.91

9099301.33
31610060.70
39886730.62
53983447.53
65793402.55
70299780.64
72262371.05
73498298.94
74192210.01
75961984.62
78583597.53
106164945.46
132058414.78
166225463.54
178847524.13
189616303.72
198123025.43
211457091.55
220788863.67
225039369.03
239517925.77
249703229.06
261882378.05
270230960.58
272105357.09
273663240.27
274247805.27
289776536.93
305196570.79
320098932.54
317465693.65
376863713.95
401105555.29
444111082.32
584632162.23

3600756.7
7375734.8
9808706.7
8805510.910240595.911245113.0
13390906.4
13752940.7
14639549.1
18212035.5
22001956.1
26095444.3
33881053.2
47350106.5
46337477.2
55962258.1
58121452.8
59386685.0
62448994.9
67876905.2
68008345.2
74281024.4
74890234.9
58562153.8
48185482.2
65050664.8
75766354.0
73243744.2
84030381.9
79597220.6
89712967.4
97117065.7
105922122.2
144944831.0
150589397.3

Source: South Manchuria Railway Company, Yearbook of Statistics 1939: 50-53; Business Reports 1940-41; Mantetsu-kai 1986: 565.

26

Table 3a. Business performance (ROIC, ROS) of the SMR’s railway department (CON), 1925-1943
Year

1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

Construction
expenses(yen)
220788863.67
225039369.03
239517925.77
249703229.06
261882378.05
270230960.58
272105357.09
273663240.27
274247805.27
289776536.93
305196570.79
313667457.54
300114129.65
357299551.57
379249287.81
444111082.32
584632162.23
627806000.00
684271000.00

Income frompassenger
transportation(yen)
14530941.59
15216352.54
16102953.35
17619293.34
17451585.31
11461175.32
9135663.19
14812045.02
18757363.98
20332876.15
22412222.40
22302298.56
24877527.35
33940296.53
50206761.29
194843000.00
223381000.00
307691000.00
436025000.00

Total numberof passenger
transportation(person)9109004
82900858263089
970211910410579
8115808
6331760
861015911633875
13786403
15122922
15749786
17515000
21001612
30825386
97822000
103683000
132153000
163544000

Passenger
transportation
income perperson (yen)
1.595
1.835
1.949
1.816
1.676
1.412
1.443
1.720
1.612
1.475
1.482
1.416
1.425
1.616
1.629
1.992
2.154
2.328
2.666

Income fromfreighttransportation(yen)
80535820.25
89513059.01
94040818.67
97738146.93
101089474.20
77936687.75
70897755.74
85022314.40
94263019.12
101489276.22
103362261.44
103165249.11
115558375.07
135088530.64
153151204.99
318876000.00
391354000.00
418454000.00
429076000.00

Company’s own lines
Total number
Freight
of freighttransportation
Other income
transportation
income per(yen)*(ton)
ton (yen)
13649089.0
5.900
2328465.70
15000728.0
5.967
3194154.98
16717678.0
5.625
3100408.13
17530324.0
5.575
3281649.32
18562959.0
5.446
3562683.13
15193272.0
5.1305932867.24
15454213.2
4.588
5442878.79
16572815.7
5.130
4012152.41
18850840.2
5.000
6656357.92
21671341.7
4.683
4703223.68
20980701.3
4.927
8911692.14
21365653.1
4.828
7565242.01
24331000.0
4.749
9899849.18
26994205.8
5.00423378011.94
32038198.3
4.780
26471724.57
64506000.0
4.943
96260484.42
74576000.0
5.248
108698448.62
84441000.0
4.956
137775702.00
84984000.0
4.931
167178539.00

Total operating
income (yen)Total operating expenses(yen)97395227.54
107923566.53
113244180.15
118639089.59
122103742.64
95330730.31
85476297.72
103846511.83
119676741.02
126525376.05
134686175.98
133032789.68
150335751.60
192406839.11
229829690.85
609979484.42
723433448.62
863920702.00
1032279539.00

34946232.59
40046661.28
45235834.93
44358065.16
47213507.72
36768576.44
37290815.48
38795846.98
43910387.01
53281631.83
50655794.08
53885245.03
61340050.12
95628871.81
122744282.13
465034653.45
572844051.28
667659835.00
792643067.00

Net income
(yen)

ROIC
(%)

ROS
(%)

62448994.95
67876905.25
68008345.22
74281024.43
74890234.92
58562153.87
48185482.24
65050664.85
75766354.01
73243744.22
84030381.90
79147544.65
88995701.48
96777967.30
107085408.72
144944830.97
150589397.34
199260867.00
229636472.00

28.28
30.16
28.39
29.75
28.60
21.67
17.71
23.77
27.63
25.28
27.53
25.23
29.65
27.09
28.24
32.64
25.76
31.74
33.56

64.12
62.89
60.05
62.61
61.33
61.43
56.37
62.64
63.31
57.89
62.39
59.49
59.20
50.30
46.59
23.76
20.82
23.06
22.46

Net income
(yen)

ROIC
(%)

ROS
(%)

3654502.00
15942624.00
20099457.00
21795440.00
28186454.00
43336863.73
48171671.94

―
4.37
3.21
2.89
3.23
4.46
4.16

6.77
22.10
18.17
16.68
18.04
20.40
16.15

Table 3b. Business performance (ROIC, ROS) of the NRM, 1933-1939
Year

Construction
expenses (yen)

1933
1934
1935
1936
1937
1938
1939

208434848.00
364417870.00
626949667.00
754744376.00
872640857.00
971706644.42
1157040761.84

Income frompassenger
transportation(yen)
14711341.00
17851909.00
28678252.00
33539720.00
41561353.00
57217719.84
100181693.68

Total number ofpassenger
transportation(person)78691158814508
13279957
16758775
18731000
28893819
45390000

Passenger
transportation
income perperson (yen)
1.870
2.025
2.160
2.001
2.219
1.980
2.207

Income fromfreighttransportation(yen)
36081524.00
50513474.00
72833515.00
85475065.00
101804542.00
131105669.48
167211924.47

National Railway lines
Total number
Freight
of freighttransportationtransportation
income per ton
(ton)
(yen)
8917826.0
4.046
11873101.5
4.254
14956210.7
4.870
18658198.8
4.581
21050000.0
4.836
27792256.1
4.717
37050640.9
4.513

Other
income(yen)*

Total
operatingincome (yen)3212027.00
3784120.00
9119130.00
11633576.00
12837372.00
24079886.56
30972182.23

54004892.00
72152603.00
110630897.00
130648362.00
156203267.00
212403275.88
298365800.38

Other
income(yen)*

Total
operatingincome (yen)102498.16
327377.35
478437.04
416901.87
507871.00
570321.95
888810.79

1743443.49
3955122.00
5004932.08
6720540.30
8119636.00
10969772.58
13519600.85

Total
operatingexpenses(yen)50350390.00
56209879.00
90531440.00
108852922.00
128016813.00
169066412.15
250194128.44

Table 3c. Business performance (ROIC, ROS) of the NKR, 1933-1939
Year

1933
1934
1935
1936
1937
1938
1939

Construction
expenses
(yen)
―
―
―
6431475.00
17351564.00
19564162.38
21856267.48

Income frompassenger
transportation(yen)
506500.621126757.26
1175059.74
1516619.16
1789763.00
2317288.79
3736686.54

Total number ofpassenger
transportation(person)7468901611337
17181702169513
1991000
30596784509259

Passenger
transportation
income perperson (yen)
0.678
0.699
0.684
0.699
0.899
0.757
0.829

Income fromfreighttransportation(yen)
1134444.71
2500987.39
3351435.30
4787019.27
5842003.00
8082161.84
8894103.52

North Korea Railway lines
Total number ofFreight
freighttransportationtransportation
income per ton
(ton)
(yen)
519238.0
2.1851122588.0
2.2281474439.0
2.273
2088842.0
2.2922432000.0
2.402
3085369.2
2.620
3957201.1
2.248

Total
operatingexpenses(yen)1641075.22
3842249.13
4485873.01
5435018.79
6557092.00
9461907.09
13482812.36

Net income
(yen)

ROIC
(%)

ROS
(%)

102368.27
112872.87
519059.07
1285521.51
1562544.00
1507865.48
36788.49

―
―
―
19.99
9.01
7.71
0.17

5.87
2.85
10.37
19.13
19.24
13.75
0.27

27

Note: Other income comprises income generated by other non-railway operations of the SMR’s railway department, e.g. income from dinning cars, hotels andhospitals. The figures of net income for the CON during the period from 1936 to 1939 shown in Table 3a differ slightly from those indicated in Table 2. This isdue to changes made in the classification of elements of operating income and operating expenses between departments. The figures of net income for the CON
in Table 2 are based on the classification effective in each year while the figures of operating income and operating expenses in Table 3a are based on theclassification in practice at the beginning of 1940. However, the differences are only minor.
Source: South Manchuria Railway Company, Yearbook of Statistics1927: 34-35; 66-70; 1928: 54-55; 104-108; 1930: 54-55; 124-128; 288, 290-291, 295, 305;
1932: 62-63; 148-149; 292, 294-295, 299, 307; 1934: 60-61; 138-140; 278, 280-281, 284-285, 293, 947; 950-951; 952-953; 957; 960-961; 962-963; 1936: 68-69;
146-150; 276; 278-279, 282-283, 293, 983-4, 990-993, 1015; 1018-1023; 1939: 72-73; 142-148; 194-195; 198-199; 224-227, 290-295; 330-332; South
Manchuria Railway Company, The Third 10 years of the South Manchuria Railway 1938: 462-464; 517-518; 576-577; ; 1156-1157; 1207; 1428; Mantetsu-kai
1986: 205, 211-212, 224; 275, 278, 336; Mantetsu-kai 2007:252; South Manchuria Railway Company, Explanatory notes for the Imperial Diet, 1938: 128-129.

28

Table 4. Construction expenses and net income of the entire network operated by the SMR 1925-1943 (yen)
Year
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

Construction expenses
CON
NRM
Total
220788864
220788864
225039369
225039369
239517926
239517926
249703229
249703229
261882378
261882378
270230961
270230961
272105357
272105357
273663240
273663240
274247805 208434848
482682653
289776537 364417870
654194407
305196571 626949667
932146238
313667458 754744376
1068411834
300114130 872640857
1172754987
357299552 971706644
1329006196
379249288 1157040762
1536290050
444111082 1415000000
1859111082
584632162 1630000000
2214632162
627806000 1797000000
2424806000
684271000
N/A
N/A

CON
62448995
67876905
68008345
74281024
74890235
58562154
48185482
65050665
75766354
73243744
84030382
79597221
89712967
97117066
105922122
144944831
150589397
199260867
229636472

Net income
NRM

3654502
15942624
20099457
21795440
28186454
43336864
48171672

Total
62448995
67876905
68008345
74281024
74890235
58562154
48185482
65050665
79420856
89186368
104129839
101392661
117899421
140453929
154093794
144944831
150589397
199260867
229636472

ROIC
(%)
28.28
30.16
28.39
29.75
28.60
21.67
17.71
23.77
16.45
13.63
11.17
9.49
10.05
10.57
10.03
7.80
6.80
8.22
N/A

Note: Data for the amount of construction expenses for the NRM are not available for 1943.
Source: As for Tables 2 and 3b; Yasutomi 1995: 211.

29

Table 5. Operating income and expenses of the SMR’s railway department (CON), 1907-1943 (yen)Operating expenses

Year

1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

Operatingincome9768887.11
12537142.42
15916198.08
15671604.84
17526287.86
19907456.28
22275132.04
23216721.52
23894203.79
27815348.54
34457922.72
44992871.67
67060720.03
85316806.02
78204132.38
87813029.33
92269703.67
92561732.31
97395227.54
107923566.53
113244180.15
118639089.54
122103742.64
95330730.31
85476297.72
103846511.83
119676741.02
126525376.05
134686175.98
133482465.69
151053017.54
192745937.54
229829690.25
609979484.40
723433448.60
863920702.00
1022279539.00

Normalexpenses

6101614.87
4925118.65
5789560.47
6092451.82
6690936.767653630.98
7752437.27
8133226.78
8074167.42
7864697.09
10568184.30
16273036.88
30218709.30
32119733.85
25891138.58
26031280.60
26320438.18
27002783.43
26860667.01
29603887.35
31674737.26
30832456.46
33171800.82
27628471.91
26202838.83
27942342.46
31955367.70
36245906.22
37269081.55
39843952.27
45384867.23
69327155.70
92560995.35――――

Weight ofnormalexpenses tototal
expenses
(%)
98.92
95.42
94.79
88.73
91.84
88.36
87.26
85.94
87.24
81.90
84.84
86.11
91.08
84.60
81.25
81.73
77.08
81.39
76.86
73.92
70.02
69.51
70.26
75.14
70.27
72.02
72.77
68.03
73.57
73.94
73.99
72.50
74.70

Special salaries

Depreciation and removal expenses

Bonuses

Retirement
servicebonusesCompany
housesexpenses

Total

Depreciation
expenses

Amount ofremoval

66515.54
233907.58
263450.66
287631.55
310927.44
326894.16
350939.49492384.33
457737.48
520532.25
622553.82
740179.49
1195799.19
1823907.82
2167058.49
2191163.48
2425539.49
2385381.61
2009038.01
2052603.98
2181613.61
2345934.95
2456578.59
2541282.39
1676721.90
1794927.46
2326719.71
2633590.56
2881950.76
3098715.87
3236273.25
4472944.38
8063301.67
―
―
―
―

―
―
25707.55
35822.83
66410.66
62897.73
61291.98
71507.36
75793.98
98193.84306350.79
309343.68
309699.34
1496483.39
242260.20
791133.62
2465283.83
767102.01
1817452.69
1153759.00
2921949.71
944884.30
1461349.05
2021795.65
1491345.64
1852018.41
1824862.28
1306275.76
1027402.53
1684155.32
1667309.62
1723463.15
1351859.85
―
―
―
―

―
―
―
―
―
425628.46558045.77
554602.85
546602.77
548647.61
668327.89
809747.32
1145230.67
1577575.87
1845077.31
1749795.07
1861385.112027915.59
1695096.74
1929491.87
2335326.15
2796056.66
2703577.97
2073051.05
2107127.69
1816999.28
1962281.40
3158679.08
3551245.42
3554469.08
3668585.73
7423983.55
8420729.11――――

66515.54
233907.58
289158.21
323454.38
377338.10
815420.35
970277.24
1118494.54
1080134.23
1167373.70
1597232.50
1859270.49
2650729.20
4897967.08
4254396.00
4732092.17
6752208.43
5180399.21
5521587.44
5135854.85
7438889.47
6086875.91
6621505.61
6636129.09
5275195.23
5463945.15
6113863.39
7098545.40
7460598.71
8337340.27
8572168.60
13620391.08
17835890.63
―
―
―
―

―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
3152298.96
3280081.54
3998747.19
4296212.95
142073.224595524.55
4714484.92
4729441.57
7443004.43
4857039.72
4961834.29
5335379.48
6121382.88
8979896.69(19195421.80)(25446773.60)―――
2381.32
28772.63
450187.70
217417.02
193291.87
161511.10
212059.43
100352.97
571242.18
290549.73
765119.96
310228.26
948998.51
1721120.57
1087398.41
1075604.19
991864.63
2563978.14
2154620.12
2297648.41
2858442.97
2735433.40
2361784.42

―
―
―
―

Extra
depreciation
expenses

Total

Total
expenses

―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
―
544478.25
581542.63
388554.94
117.801217256.87
675074.45
1111714.35
2494175.78
1069074.10
742118.20
2047634.81
6559942.15
4530785.32
―
―
―
―

―
2381.32
28772.63
450187.70
217417.02
193291.87
161511.10
212059.43
100352.97
571242.18
290549.73
765119.96
310228.26
948998.51
1721120.57
1087398.41
1075604.19
991864.63
2563978.14
5306919.08
6122208.20
7438732.79
7420201.29
2503975.44
5812781.42
5389559.37
5841155.92
9937180.21
5926113.82
5703952.49
7383014.29
12681325.03
13510682.01――――

6168130.41
5161407.55
6107491.31
6866093.90
7285691.88
8662343.20
8884225.61
9463780.75
9254654.62
9603312.97
12455966.53
18897427.33
33179666.76
37966699.44
31866655.15
31850771.18
34148250.80
33175047.27
34946232.59
40046661.28
45235834.93
44358065.16
47213507.72
36768576.44
37290815.48
38795846.98
43910387.01
53281631.83
50655794.08
53885245.03
61340050.12
95628871.81
123907567.99
465034653.50
572844051.30
667659835.00
792643067.00

Net income orlosses

ROS(%)

3600756.71
7375734.87
9808706.77
8805510.94
10240595.98
11245113.08
13390906.43
13752940.77
14639549.17
18212035.57
22001956.19
26095444.34
33881053.27
47350106.58
46337477.23
55962258.15
58121452.87
59386685.04
62448994.95
67876905.25
68008345.22
74281024.43
74890234.92
58562153.87
48185482.24
65050664.85
75766354.01
73243744.22
84030381.90
79597220.66
89712967.42
97117065.73
105922122.26
144944831.00
150589397.30
199260867.00
229636472.00

36.86
58.83
61.63
56.19
58.43
56.49
60.12
59.24
61.27
65.47
63.85
58.00
50.52
55.50
59.25
63.73
62.99
64.16
64.12
62.89
60.05
62.61
61.33
61.43
56.37
62.64
63.31
57.89
62.39
59.63
59.39
50.39
46.09
23.76
20.82
23.06
22.46

Note: The figures of net income for the CON during the period from 1936 to 1939 shown in Table 5 above differ slightly from those indicated in Table 3a. This is due to changes made in theclassification of elements of operating income and operating expenses between departments. The figures of net income for the CON in Table 5 are based on the classification effective in each year while
the figures of operating income and operating expenses in Table 3a are based on the classification in practice at the beginning of 1940. However, the differences are only minor.

Source: South Manchuria Railway Company, Yearbook of Statistics 1939: 108-109; Business Reports, 1940-43; Mantetsu-kai 1986: 568.

30

Table 6a. Income structure of the SMR’s railway department (CON), 1925-1943 (yen)Year

Income frompassenger
transportation

Percent

Income fromfreighttransportation

Percent

Other
income*Percent

Total
operatingincomeNet income

ROS
(%)

1925
1926

14530942
15216353

14.92
14.10

80535820
89513059

82.69
82.94

2328466
3194155

2.39
2.9697395228107923567

62448994.9
67876905.2

64.12
62.89

1927
1928

16102953
17619293

14.22
14.85

94040819
97738147

83.04
82.38

3100408
3281649

2.74
2.77

113244180
118639090

68008345.2
74281024.4

60.05
62.61

1929
1930

17451585
11461175

14.29
12.02

101089474
77936688

82.79
81.75

35626835932867

2.92
6.22

122103743
95330730

74890234.9
58562153.8

61.33
61.43

1931
1932

913566314812045

10.69
14.26

70897756
85022314

82.94
81.87

5442879
40121526.37
3.8685476298
103846512

48185482.2
65050664.8

56.37
62.64

1933
1934

18757364
20332876

15.67
16.07

94263019
101489276

78.76
80.21

6656358
4703224

5.56
3.72

119676741
126525376

75766354.0
73243744.2

63.31
57.89

1935
1936

22412222
22302299

16.64
16.76

103362261
103165249

76.74
77.55

891169275652426.62
5.69

134686176
133032790

84030381.9
79147544.6

62.39
59.49

1937
1938

24877527
33940297

16.55
17.64

115558375
135088531

76.87
70.21

9899849
23378012

6.59
12.15

150335752
192406839

88995701.4
96777967.3

59.20
50.30

1939
1940

50206761
194843000

21.85
31.94

153151205
318876000

66.64
52.28

26471725
96260484

11.52
15.78

229829691
609979484

107085408.7
144944831.0

46.59
23.76

1941
1942

223381000
307691000

30.88
35.62

391354000
418454000

54.10
48.44

108698449
137775702

15.03
15.95

723433449
863920702

150589397.3
199260867.0

20.82
23.06

1943

436025000

42.24

429076000

41.57

167178539

16.20

1032279539

229636472.0

22.25

For Note and Source see Table 6b below.

31

Table 6b: Income structure of the entire railway network operated by the SMR, 1925-1943 (yen)Year

Income frompassenger
transportation

Percent

Income fromfreighttransportation

Percent

Other
income*Percent

Total
operatingincomeNet income

ROS
(%)

1925
1926

14530942
15216353

14.92
14.10

80535820
89513059

82.69
82.94

2328466
3194155

2.39
2.9697395228107923567

62448995
67876905

64.12
62.89

1927
1928

16102953
17619293

14.22
14.85

94040819
97738147

83.04
82.38

3100408
3281649

2.74
2.77

113244180
118639090

68008345
74281024

60.05
62.61

1929
1930

17451585
11461175

14.29
12.02

101089474
77936688

82.79
81.75

35626835932867

2.92
6.22

122103743
95330730

74890235
58562154

61.33
61.43

1931
1932

913566314812045

10.69
14.26

70897756
85022314

82.94
81.87

5442879
40121526.37
3.8685476298
103846512

48185482
65050665

56.37
62.64

1933
1934

33468705
38184785

19.27
19.22

130344543
152002750

75.05
76.51

986838584873445.68
4.27

173681633
198674879

79420856
89186368

45.73
44.89

1935
1936

51090474
55842019

20.83
21.18

176195776
188640314

71.82
71.54

18030822
19198818

7.35
7.28

245317073
263681151

104129839
101392661

42.45
38.45

1937
1938

66438880
91158016

21.67
22.52

217362917
266194200

70.91
65.76

2273722147457899

7.42
11.72

306539019
404810115

117899421
140453929

38.46
34.70

1939
1940

150388455
194843000

28.47
31.94

320363129
318876000

60.65
52.28

57443907
96260484

10.88
15.78

528195491
609979484

154093794
144944831

29.17
23.76

1941
1942

223381000
307691000

30.88
35.62

391354000
418454000

54.10
48.44

108698449
137775702

15.03
15.95

723433449
863920702

150589397
199260867

20.82
23.06

1943

436025000

42.24

429076000

41.57

167178539

16.20

1032279539

229636472

22.25

Note: Other income comprises income generated by other non-railway operations of the SMR’s railway department, e.g. income from dinning cars, hotels andhospitals.
Source: The same listed for Table 3a-3c.

32

Table 7. Principal items of freight carried on the entire network under the control of the SMR, 1924-1941 (000 tons)

Private cargo
Year

Soya beans
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1936
1937
1938
1939
1940
1941

1775
2130
2446
2566
2991
2002
2923
3142
2558
2768
2440
2139
2125
2643
2952
2207
1350
1406
1519

Foxtail millet,
wheat, and cereals
493
583
611
539
457
356
405
377
445
529
477
459
406
1168
1140
1344
669
1004
674

Wood

Coal

Iron ore

Minerals

Others

Total

474
417
421
557
475
291
234
292
480
657
531
490
537
1706
2090
3189
3572
3438
3414

6380
7269
8011
8680
8937
7800
7326
7304
8653
9300
9571
9749
9512
11050
11890
12055
13110
15795
17212

87
78
80
109
163
126
125
149
183
314
383
551
591
615
843
1052
1229
1783
2563

141
227
277
310
351
366
289
290
404
462
735
803
1062
0
0
874
1057
820
1114

3442
3494
3803
3656
3737
2875
2862
3580
4726
5558
5165
5604
6276
11460
13984
16493
16523
15413
17853

12792
14198
15649
16417
17111
13816
14164
15134
17449
19588
19302
19795
20509
28642
32899
37214
37510
39659
44349

Weight ofprivatecargo(%)

Military
cargo

Weight ofmilitary
cargo(%)

Company's
own cargo

Weight ofcompany's
own cargo
(%)

Total

93.73
94.65
93.61
93.65
92.18
90.94
91.65
91.32
92.56
90.39
92.00
92.65
84.29
71.39
68.75
63.12
59.18
53.18
52.52

19
8
14
26
14
14
275
821
442
441
349
381
1834
3968
7070
9539
11898
20517
21968

0.14
0.05
0.08
0.15
0.08
0.09
1.78
4.95
2.34
2.03
1.66
1.78
7.54
9.89
14.77
16.18
18.77
27.51
26.02

837
795
1055
1087
1438
1363
1015
617
960
1642
1330
1190
1989
7512
7886
12208
13979
14400
18126

6.13
5.30
6.31
6.20
7.75
8.97
6.57
3.72
5.09
7.58
6.34
5.57
8.17
18.72
16.48
20.71
22.05
19.31
21.47

13648
15001
16718
17530
18563
15193
15454
16572
18851
21671
20981
21366
24332
40122
47855
58961
63387
74576
84443

Note: Data to 1936 apply just to the CON; following the creation of the Total Railway Bureau by in October 1936, data refer to the entire network operated by
the SMR, i.e. including the NRM and the NKR.
Source: Mantetsu-kai 2007: 250-251.

33

Table 8. Major expenditure items requiring funding by the SMR, 1934-1943 (yen)YearConstruction
expenses

Percent

1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

70,270,632
55,950,273
51,749,004
50,280,013
79,583,615
94,221,391
115,971,706
91,441,963
128,810,000
91,773,000

26.83
21.96
26.39
26.86
25.72
21.63
28.06
22.21
26.30
15.06

Average

24.10

Annual increase inloans (including thoseto the State of Manchuria)
131,746,565
122,717,638
103,872,056
143,757,057
179,794,227
237,415,938
202,512,545
226,953,696
257,631,722
411,698,324

Percent

Annual increase
in investments

Percent

Dividend
Payments

Percent

Total

50.31
48.18
52.97
76.79
58.11
54.51
49.00
55.11
52.61
67.56

26,583,892
39,907,976
1,433,006-49,285,291
5,128,968
57,435,730
43,672,614
35,860,262
38,484,995
33,621,054

10.15
15.67
0.73
-26.33
1.66
13.19
10.57
8.71
7.86
5.52

33,270,014
36,150,014
39,030,014
42,463,461
44,901,121
46,453,435
51,104,749
57,546,121
64,758,782
72,305,501

12.70
14.19
19.90
22.68
14.51
10.67
12.37
13.97
13.22
11.87

261,871,103
254,725,901
196,084,080
187,215,240
309,407,930
435,526,493
413,261,614
411,802,042
489,685,499
609,397,878

56.52

4.77

14.61

Note: Construction expenses are gross except for 1943, where they are the net increase after the deduction of depreciation.
Source: South Manchuria Railway Company, Business Reports, 1933-1943.

34

Table 9. Major sources of funds raised by the SMR, 1934-1943 (yen)Year

Annual increase in
the amount ofPercent

paid in capital
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
Average

36,000,000
36,000,000
36,000,000
56,000,000
20,000,000
40,000,000
120,000,000
100,000,000
130,000,000
130,000,000

Annual increase in
the amount ofPercent

debentures
12.88%
16.12%
14.89%
32.03%
6.93%
9.46%
25.99%
21.44%
26.84%
24.60%
19.12%

160,275,000
114,775,000
124,775,000
20,775,000
153,875,000
215,165,000
237,355,000
270,755,000
236,305,000
255,655,000

57.35%
51.38%
51.59%
11.88%
53.30%
50.90%
51.40%
58.06%
48.80%
48.37%
48.30%Net income
for the year
46,467,457
49,624,142
50,173,971
73,929,495
72,875,185
77,848,456
76,711,108
72,131,419
84,888,309
92,956,889

Percent

Depreciation

Percent

Annualincrease inarears

16.63%
22.22%
20.75%
42.28%
25.25%
18.41%
16.61%
15.47%
17.53%
17.59%
21.27%

28,109,580
26,585,203
20,062,522
26,548,866
34,800,438
49,800,763
16,284,810
19,278,845
24,884,000

10.06%
11.90%
8.30%
15.18%
12.06%
11.78%
3.53%
4.13%
5.14%
0.00%

8616500-3614431
10833583-2406647
712097039940559
11419489
4204410818757049922279

Percent

Total

3.08%
-1.62%
4.48%-1.38%
2.47%
9.45%
2.47%
0.90%
1.69%
9.45%
3.10%

279,468,537
223,369,914
241,845,076
174,846,714
288,671,593
422,754,777
461,770,407
466,369,674
484,264,879
528,534,168

Note: The amount of depreciation for 1943was offset against to the amount of construction expenses for the year as indicated in Table 10.
Source: South Manchuria Railway Company, Business Reports, 1933-1943.

35

Table 10. Composition of the paid-up equity capital of the SMR, 1909-1943 (yen)
Year
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

Payment made by the government

Payment made by the private sector

amountpercent

amountpercent

100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
100,000,000
147,186,568
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
217,156,000
244,673,159
256,207,991
256,207,991
256,207,991
268,701,151
291,221,693
326,262,641
386,235,395
441,221,693
513,742,257
593,803,634

98.04
98.04
98.04
91.74
85.00
80.86
79.37
76.92
71.60
65.79
60.18
62.35
70.24
68.04
67.62
67.62
67.06
64.41
62.73
60.55
56.09
56.09
56.09
53.78
50.93
48.32
45.25
42.54
41.29
42.13
44.92
47.61
48.16
49.46
50.80

2,000,000
2,000,000
2,000,000
9,000,000
17,640,457
23,666,663
26,000,000
30,000,000
39,666,663
52,000,000
66,166,670
88,876,710
92,000,000
102,000,000
104,000,000
104,000,000
106,666,670
120,000,000
129,000,000
141,506,845
170,000,000
170,000,000
170,000,000
186,666,663
235,768,725
274,000,000
310,000,000
346,000,000
382,000,000
400,000,000
400,000,000
424,931,513
475,000,000
525,000,000
575,000,000

1.96
1.96
1.96
8.26
15.00
19.14
20.63
23.08
28.40
34.21
39.82
37.65
29.76
31.96
32.38
32.38
32.94
35.59
37.27
39.45
43.91
43.91
43.91
46.22
49.07
51.68
54.75
57.46
58.71
57.87
55.08
52.39
51.84
50.54
49.20

Total

102,000,000
102,000,000
102,000,000
109,000,000
117,640,457
123,666,663
126,000,000
130,000,000
139,666,663
152,000,000
166,166,670
236,063,278
309,156,000
319,156,000
321,156,000
321,156,000
323,822,670
337,156,000
346,156,000
358,662,845
387,156,000
387,156,000
387,156,000
403,822,663
480,441,884
530,207,991
566,207,991
602,207,991
650,701,151
691,221,693
726,262,641
811,166,908
916,221,693
1,038,742,257
1,168,803,634

Note: The amounts in this table have been calculated on basis of dividend payments made to each category and the rate of such dividend.
Source: South Manchuria Railway Company, Yearbook of Statistics 1939: 48-49; Business Reports, 1940-43; Mantetsu-kai 1986: 573.

36

Table 11. Paid-up capital, corporate debentures, net income and dividend payments of the SMR, 1907-1943 (yen)Paid-up capital

Corporate Debentures

Year

Accumulated
amountAnnual net
increase

Accumulated
amountAnnual net
increase

Total amount of
fixed capital
accumulated

1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

102000000
102000000
102000000
102000000
102000000
112000000
120000000
124000000
128000000
132000000
142000000
154000000
180000000
309156000
309156000
321156000
321156000
321156000
337156000
337156000
355156000
387156000
387156000
387156000
387156000
412156000
512208000
548208000
584208000
620208000
676208000
696208000
736208000
856208000
956208000
1086208000
1216208000

000010000000
8000000
4000000
4000000
4000000
10000000
12000000
26000000
129156000
0120000000016000000
018000000
3200000000025000000
100052000
36000000
36000000
36000000
56000000
20000000
40000000
120000000
100000000
130000000
130000000

39052000
78104000
78104000
136682000
117156000
117156000
117156000
117156000
117156000
117156000
127356000
137156000
197156000
145000000
175000000
195000000
219052000
254052000
243752000
268452000
278152000
277627000
277102000
296577000
316052000
389527000
377350000
537625000
652400000
777175000
797950000
951825000
1166990000
1404345000
1675100000
1911405000
2167060000

39052000
058578000-19526000
0000010200000
9800000
60000000-52156000
30000000
20000000
24052000
35000000-10300000
24700000
9700000-525000-525000
19475000
19475000
73475000-12177000
160275000
114775000
124775000
20775000
153875000
215165000
237355000
270755000
236305000
255655000

141052000
180104000
180104000
238682000
219156000
229156000
237156000
241156000
245156000
249156000
269356000
291156000
377156000
454156000
484156000
516156000
540208000
575208000
580908000
605608000
633308000
664783000
664258000
683733000
703208000
801683000
889558000
1085833000
1236608000
1397383000
1474158000
1648033000
1903198000
2260553000
2631308000
2997613000
3383268000

Net income

Net income ofrailway
department

Weight ofrailway
department

ROIC ofthe entire
SMR (%)

201658521135825771699
37083163667428
4926045716727975410918080499
10107608
14925643
2219317124374964
27391985
31386139
35080244
34795592
34552914
34865280
34157884
36274323
42552861
45505857
21673462
12598620
61287725
42920554
46467457
49624142
50173971
73929495
72875185
77848456
76711108
72131419
84888309
92956889

3600757
7375735
9808707880551110240596
11245113
13390906
13752941
14639549
18212036
22001956
26095444
33881053
4735010746337477
55962258
58121453
59386685
62448995
67876905
68008345
74281024
74890235
58562154
48185482
65050665
75766354
73243744
84030382
79597221
89712967
97117066
105922122
144944831
150589397
199260867
229636472

178.56348.97169.94237.45279.23228.28186.83
182.37181.17180.18147.41117.58139.00172.86
147.64159.53167.04171.87179.12
198.72
187.48174.56164.57270.20382.47106.14176.53157.62
169.33158.64121.35133.26136.06188.95208.77234.73247.04

1.43
1.17
3.20
1.55
1.67
2.15
3.02
3.13
3.30
4.06
5.54
7.62
6.46
6.03
6.48
6.80
6.44
6.01
6.00
5.64
5.73
6.40
6.85
3.17
1.79
7.64
4.82
4.28
4.01
3.59
5.02
4.42
4.09
3.39
2.74
2.83
2.75

Dividend payments
Government
Rate of paidAmountup capital
(%)
0
0
0
0
2500000
2.50
1500000
1.50
1800000
1.80
2000000
2.00
2500000
2.50
2500000
2.50
2500000
2.50
2500000
2.50
2500000
2.50
3500000
3.50
3500000
3.50
5445903
3.709337708
4.30
9337708
4.30
9337708
4.30
9337708
4.30
9337708
4.30
9337708
4.30
9337708
4.30
11509268
5.30
11509268
5.30
9337708
4.30
4343120
2.00
9337708
4.30
10765619
4.40
11350014
4.43
11350014
4.43
11350014
4.43
11903461
4.43
12901121
4.43
14453435
4.43
17110228
4.43
19546121
4.43
22758782
4.43
26305501
4.43

Other shareholders
Rate of paidAmountup capital(%)
1200006120000612000061200006120000654000061234832
7
189333382080000
8
2400000
83173333
85200000
10
661666710888767110
9200000
1010200000
1010400000
1010400000
10
10666667
1012000000
1012900000
1015565753
11
18700000
1113600000
810200000
614933333
8
18861498821920000
824800000
827680000
830560000
832000000
832000000
833994521
838000000
842000000
846000000
8

Total
amount
1200001200002620000
1620000
1920000
2540000
3734832
43933334580000
4900000
5673333
8700000
10116667
14333574
18537708
19537708
19737708
19737708
20004375
21337708
22237708
27075021
30209268
22937708
1454312024271041
2962711633270014
36150014
39030014
42463461
4490112146453435
51104749
57546121
64758782
72305501

Source: South Manchuria Railway Company, Yearbook of Statistics 1939: 48-49; Business Reports, 1940-43;Mantetsu-kai 1986: 573.

37

Table 12. Operating income and expenses of major departments of the SMR 1907-1943 (yen)
Year
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
Year

Operating income
9669
77.09fs%
12537
71.17%
15017
64.97%
15672
63.25%
17526
62.25%
19907
59.34%
22275
52.51%
23217
51.97%
23894
54.57%
27815
53.08%
34458
49.63%
44993
46.74%
67061
43.79%
85317
48.83%
78204
53.16%
87813
51.67%
92270
49.69%
92562
47.67%
97395
48.31%
10792450.05%
11324449.12%
11863949.34%
12210450.67%
95331
50.68%
85476
45.70%
10384742.22%
11967748.26%
12652546.75%
13468644.57%
13348244.64%
15105342.54%
19274649.75%
22983052.13%
60997976.31%
72343377.15%
86392178.09%
1022280
78.85%
Operating income

1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938

5277
3884
6962
7957
8517
11190

2.13%
1.43%
2.30%
2.66%
2.40%
2.89%

Railway
Operating expenses
6102
57.97%
5161
33.29%
5818
33.55%
6543
31.06%
6908
28.21%
7847
27.42%
7914
22.45%
8345
22.48%
8175
22.90%
8436
19.95%
10859
19.92%
17038
23.00%
30529
23.71%
36760
24.95%
33173
28.67%
34169
25.33%
35788
23.72%
36553
22.90%
38801
23.27%
45952
25.32%
45236
23.28%
44358
22.42%
47214
24.15%
36769
22.09%
37291
21.38%
38796
21.01%
43910
21.41%
53282
46.66%
50656
20.06%
53885
21.65%
61340
21.82%
95629
30.40%
12390834.13%
46503464.36%
57284466.18%
66766065.37%
79264365.86%
Oil
Operating expenses

4452
3413
5911
7035
7030
8930

2.17%
2.99%
2.34%
2.83%
2.50%
2.84%

Net income
3696
183.33%7622
360.72%9198
159.38%9471
255.42%10618
289.48%12060
244.82%14361
200.38%14871
197.20%15720
194.55%
19379
191.74%23599
158.12%27955
125.96%36532
149.87%48557
177.27%45031
143.47%53644
152.92%
56482
162.33%56008
162.09%58595
168.06%61972
181.43%68008
187.48%74281
174.56%74890
164.57%58562
270.21%
48185
382.45%65051
106.14%
75766
176.52%73244
157.63%84030
169.33%79597
158.64%89713
121.35%97117
133.27%105922136.06%144945188.95%150589208.77%
199261
234.73%229636247.03%Operating income
573
4.57%
1021
5.80%
1381
5.97%
1213
4.90%
1257
4.46%
1689
5.03%
1912
4.51%
2291
5.13%
2293
5.24%
2502
4.77%
3500
5.04%
4533
4.71%
6070
3.96%
7304
4.18%
7581
5.15%
8675
5.10%
7893
4.25%
8763
4.51%
9656
4.79%
9931
4.61%
10276
4.46%
10785
4.49%
12276
5.09%
8559
4.55%
8358
4.47%
11406
4.64%
13034
5.26%
15730
5.81%
14394
4.76%
15229
5.09%
17724
4.99%
23084
5.96%
28974
6.57%
26174
3.27%
30046
3.20%
31806
2.88%
26887
2.07%

Net income

Operating income

Ports
Operating expenses
564
5.36%
846
5.46%
1134
6.54%
1102
5.23%
1160
4.74%
1489
5.20%
1729
4.90%
1964
5.29%
1922
5.38%
2138
5.05%
3107
5.70%
4494
6.07%
7405
5.75%
7867
5.34%
6912
5.97%
7392
5.48%
7819
5.18%
8687
5.44%
9023
5.41%
8937
4.93%
9306
4.79%
8324
4.21%
8719
4.46%
6738
4.05%
7069
4.05%
8367
4.53%
9817
4.79%
12150
10.64%
10799
4.28%
11282
4.53%
12773
4.54%
17189
5.46%
26031
7.17%
24504
3.39%
28683
3.31%
31850
3.12%
33132
2.75%
Iron
Operating expenses

1581
3607
3387
3704
4431
3987
6897
9223
9741
8940
6641
7709
10711
3040

8003
6481
6585
5945
7386
7707
10703
9381
8525
8397
7308
10689
14611
3584

825
472
1051
922
1487
2260

1.92%
1.02%
2.12%
1.84%
2.01%
3.10%

0.90%
2.45%
1.99%
1.99%
2.28%
1.98%
3.20%
4.00%
4.05%
3.71%
3.53%
4.12%
4.36%
1.23%

5.43%
5.60%
4.88%
3.94%
4.63%
4.62%
5.90%
4.83%
4.31%
4.30%
4.39%
6.13%
7.91%
1.75%

Net income
154
7.64%
175
8.28%
248
4.30%
111
2.99%
97
2.64%
200
4.06%
183
2.55%
327
4.34%
371
4.59%
364
3.60%
393
2.63%
39
0.18%
-1335
-5.48%-563-2.06%
669
2.13%
1282
3.65%
74
0.21%
76
0.22%
633
1.82%
994
2.91%
970
2.67%
2462
5.79%
3557
7.82%
1821
8.40%
1289
10.23%
3039
4.96%
3217
7.50%
3580
7.70%
3595
7.24%
3946
7.86%
4951
6.70%
5895
8.09%
2943
3.78%
1670
2.18%
1364
1.89%
-44
-0.05%-6244-6.72%Net income

-6422
-2874
-3198
-2241
-2955
-3720
-3807
-158
1216
543
-667
-2980
-3900
-544

-23.44%-9.16%-9.12%-6.44%-8.55%-10.67%-11.15%-0.44%
2.86%
1.19%-3.08%-23.65%-6.36%-1.27%

MiningOperating expenses
Net income
931
8.84%
553
27.43%
1675
10.81%
1028
48.65%
2796
16.12%
1230
21.31%
4082
19.37%
1667
44.96%
4285
17.50%
2179
59.41%
7347
25.67%
1847
37.49%
12572
35.67%
1801
25.13%
11859
31.94%
2217
29.40%
10641
29.80%
2007
24.84%
13896
32.85%
2077
20.55%
15048
27.61%
5320
35.64%
25515
34.45%
7082
31.91%
47779
37.11%
13422
55.06%
54868
37.24%
5802
21.18%
36708
31.72%
3296
10.50%
46424
34.42%
6716
19.14%
59837
39.65%
4078
11.72%
60595
37.96%
8103
23.45%
61986
37.18%
6467
18.55%
70665
38.94%
5489
16.07%
73039
37.59%
9748
26.87%
75565
38.19%
11603
27.27%
72090
36.88%
12275
26.97%
60628
36.43%
1813
8.37%
52715
30.22%
17
0.13%
54946
29.76%
538
0.88%
65960
32.16%
5016
11.69%
75134
65.79%
10391
22.36%
79862
31.62%
12698
25.59%
75694
30.41%
12250
24.42%
80672
28.70%
10505
14.21%
89206
28.36%
16579
22.75%
80090
22.06%
11260
14.46%
68159
9.43%
13487
17.58%
80322
9.28%
14021
19.44%
97167
9.51%
14393
16.96%
113190
9.41%
5105
5.49%
Total
Operating income
Operating expenses
Net income
12543
10527
2016
17615
15502
2113
23114
17343
5771
24777
21069
3708
28155
24487
3668
33546
28620
4926
42417
35250
7167
44671
37130
7541
43786
35706
8080
52402
42295
10107
69429
54504
14925
96258
74065
22193
15313312875824375
17473814734627392
14710111571431386
16995713487635080
185698150903
34795
194182
15962934553
20159816673334865
21561518145734158
23055919428436274
24042819787542553
24099819549245506
188104
166431
21673
18705417445612599
245941
18465361288
248002205082
42921
27066911420246467
30215925253549624
29904424887150174
35504828111973929
38741231453672875

Operating income
1484
11.83%
2703
15.34%
4026
17.42%
5749
23.20%
6464
22.96%
9194
27.41%
14372
33.88%
14076
31.51%
12648
28.89%
15973
30.48%
20368
29.34%
32597
33.86%
61201
39.97%
60670
34.72%
40004
27.19%
53140
31.27%
63915
34.42%
68698
35.38%
68453
33.96%
76154
35.32%
82787
35.91%
87168
36.26%
84365
35.01%
62441
33.19%
52732
28.19%
55086
22.40%
70976
28.62%
85526
31.60%
92560
30.63%
87944
29.41%
91177
25.68%
10578527.31%
91350
20.72%
81646
10.21%
94343
10.06%
11155910.08%
118294
9.12%

Operating income
121
0.96%
274
1.56%
371
1.61%
444
1.79%
468
1.66%
633
1.89%
901
2.12%
1779
3.98%
1518
3.47%
1480
2.82%
1930
2.78%
2545
2.64%
3446
2.25%
3991
2.28%
3954
2.69%
3995
2.35%
4524
2.44%
4363
2.25%
4531
2.25%
5241
2.43%
6098
2.64%
6230
2.59%
4690
1.95%
4586
2.44%
4489
2.40%
4824
1.96%
6185
2.49%
7274
2.69%
9407
3.11%
9473
3.17%
9063
2.55%

Local administration
Operating expenses
251
2.38%
400
2.58%
601
3.47%
941
4.47%
1083
4.42%
1401
4.90%
1952
5.54%
2864
7.71%
2492
6.98%
2747
6.49%
3539
6.49%
4952
6.69%
7662
5.95%
10150
6.89%
10386
8.98%
10832
8.03%
12821
8.50%
14127
8.85%
15938
9.56%
17808
9.81%
19104
9.83%
19425
9.82%
18288
9.35%
15305
9.20%
15366
8.81%
16511
8.94%
16855
8.22%
20950
18.34%
23625
9.36%
26107
10.49%
20085
7.14%

Net income-130-6.45%-125-5.92%-230-3.99%-497-13.40%-615-16.77%-768-15.59%-1051-14.66%-1086-14.40%-974-12.05%-1268-12.55%-1608-10.77%-2407-10.85%-4216-17.30%-6160-22.49%-6432-20.49%-6836-19.49%-8298-23.85%-9764-28.26%-11407-32.72%-12567-36.79%-13006-35.85%-13195-31.01%-13599-29.88%-10719-49.46%-10877-86.33%-11687-19.07%-10670-24.86%-13676-29.43%-14218-28.65%-16634-33.15%-11022-14.91%

38

1939
1940
1941
1942
1943

10382
11427
18629
27476
91942

2.35%
1.43%
1.99%
2.48%
7.09%

9107
10407
16127
24369
30914

2.51%
1.44%
1.86%
2.39%
2.57%

1275
1019
2502
3105
1028

1.64%
1.33%
3.47%
3.66%
1.11%

440907799328937672110626512964233630597225178655401021376
1203464

77848
76711
72131
84888
92959

Source: Mantetsu-kai 2007: 244-249.

39

Figure 1: Performance of SMR’s own network (CON), ROIC and ROS, 1907-1944 (%)
70

60

50

%40
ROIC
ROS
30

20

10

0
1907 1909 1911 1913 1915 1917 1919 1921 1923 1925 1927 1929 1931 1933 1935 1937 1939 1941 1943
Year

40

Figure 2: Operating and net income of the SMR's own network (CON), 1907-1943 (yen)1200000000

1000000000

800000000

Operating Income
Net income

600000000

400000000

200000000

19
43

19
41

19
39

19
37

19
35

19
33

19
31

19
29

19
27

19
25

19
23

19
21

19
19

19
17

19
15

19
13

19
11

19
09

19
07

0

41