South Manchuria Railway South Manchuria Railway was built as a part of the Chinese Eastern Railway in 1898 - 1903 by Imperial Russia according to the Russian - Chinese convention and the Convention of Peking 1860 . The ( ） was a company founded in the Empire of Japan in 1906 , taken over after the Russo - Japanese War ( 1904 – 1905 ) , and operated within China in the Japanese - controlled South Manchuria Railway Zone . The railway itself ran from Lüshun Port at the southern tip of the Liaodong Peninsula to Harbin , where it connected to the Chinese Eastern Railway . History . Following the Japanese victory over Imperial Russia and the signing of the Treaty of Portsmouth , the southernmost section of the southern branch ( Harbin - Port Arthur ) of the China Far East Railway was transferred to Japanese control . The last station remaining in Russian hands was Kuancheng ( Kuanchengtze , in contemporary spelling ) ; the first Japanese station was Changchun . A new , semi - privately - held company was established with a capitalization of 200 million yen to operate the railroad and to develop settlements and industries along its route . The organizing committee was headed by General Kodama Gentarō , and after his death , by General Terauchi Masatake . Count Gotō Shimpei , formerly Japanese governor of Taiwan , was appointed the first president , and the headquarters of the company was established in Dairen . One of the first tasks of the new company was to change the railway gauge . The rail line was originally built according to Russian gauge ( ) , during the war it had been converted by the advancing Japanese troops to the Japanese gauge , in order to facilitate the use of rolling stock brought from Japan . But once the new Japanese South Manchuria Railway company took possession of the line , it had the tracks re - gauged again , now to the international standard gauge ( ) , presumably with an eye to connecting the system to other railways of China . In 1907 , an agreement was reached between the Japanese and Russian authorities about connecting the Japanese South Manchuria Railway with the line to the north , which remained in the hands of Russian China Far East Railway . According to the agreement , Russian gauge tracks would continue from the " Russian " Kuancheng Station to the " Japanese " Changchun Station , and vice versa , tracks on the " gauge adapted by the South Manchuria Railway " ( i . e . , the standard gauge ) would continue from the Changchun Station to the Kuancheng Station . By the end of 1907 , the company employed 9 , 000 Japanese and 4 , 000 Chinese . By 1910 , those numbers had increased to 35 , 000 and 25 , 000 respectively . The railway used a significant amount of U . S . - made rails and signaling equipment , as well as some steam locomotives built by the American Locomotive Company at Dunkirk , NY . A visiting executive from the Erie Railroad was quite impressed with the arrangement , and described South Manchurian Railway ca . 1913 as " the only railroad in the whole world that is like our American railroads ( and they are , fairly speaking , the best ) " . " Mantetsu " quickly expanded the system inherited from Russia to staggering proportions , building coal mines at Fushun and Yantai , and harbor facilities at Andong , Yingkou , and Dalian . At each station , " Mantetsu " built hotels for travelers and warehouses for goods . Japanese settlers were encouraged through the construction of schools , libraries , hospitals and public utilities . The " Mantetsu " Research Wing was the centerpiece of Japan ' s colonial program , and instigated agricultural research into development of soybean farming . Land under cultivation expanded 70 % in 20 years . From 1916 , " Mantestu " began to spin off a number of subsidiary companies , including Showa Steel Works , Dalian Ceramics , Dalian Oil & Fat , South Manchurian Glass , as well as flour mill s , sugar mill s , electrical power plants , shale oil plants and chemical plants . Until 1925 , the company also operated the Korean railway system . Company assets rose from 163 million yen in 1908 to over a billion yen in 1930 . " Mantetsu " was by far the largest corporation in Japan , and also its most profitable , averaging rates of return from 25 - 45 percent per year . During the 1920s , Mantetsu provided for over a quarter of the Japanese government ' s tax revenue s . Over 75 % of " Mantetsu ' s " income was generated by its freight business , with the key to profitability coming from soybean exports , both to Japan proper and to Europe . Soybean production increased exponentially with increasing demand for soy oil , and for soy meal for use in fertilizer and animal feed . By 1927 , half of the world ' s supply of soybean was from Manchuria and the efforts by " Mantetsu " to expand production and to ship to export ports was a classic example of an extractive colonial economy dependent on a single product . The South Manchuria Railway was also charged with a government - like role in managing the rail transportation system after the formation of Manchukuo in 1932 . By 1938 , Mantetsu had 72 subsidiary companies , development projects in 25 urban areas and carried 17 , 515 , 000 passengers per year . Between 1930 - 1940 , the Japanese population of Manchukuo rose by 800 , 000 making ethnic Japanese the majority in many of the towns and cities served by " Mantetsu " . " Mantetsu " prided itself on state - of - the - art urban planning , with modern sewer system s , public park s , and creative modern architecture far in advance of what could be found in Japan itself . These things were possible due to " Mantetsu ' s " tremendous profitability , and its political power to seize property and silence opposition and dissent at will through its political connections to the military and totalitarian national leadership . In 1934 , " Mantetsu " inaugurated the " Asia Express " , a high speed train from Dalian to the Manchukuo capital of Hsinking ( Changchun ) . Reaching a top speed of , the " Asia Express " was the fastest scheduled train in Asia at the time . Changchun remained the break of gauge point between the Russian and standard gauges into the 1930s , until the Chinese Eastern Railway itself was bought by Manchukuo and converted to the standard gauge in the mid - 1930s . In 1945 , the Soviet Union invaded and overran Manchukuo . Rolling stock and moveable equipment was looted , and taken back to the Soviet Union , some of which was returned when the Chinese Communist government came into power . " Mantetsu " itself was dissolved by order of the American occupation authorities in occupied Japan .