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 Japan at first turned to industrialism to foster the growth of an urban population which would both provide a home market for agricultural products and turn labour to the production of goods for domestic and foreign use. Several changes have occurred since that time. Where, formerly, Japan was more than self-sufficing from the point of view of food supply, of recent years from 8 to 15 per cent of its total imports have been foodstuffs, the fluctuation being due to the varying conditions of the home crops, principally rice. The importation of foodstuffs, and the probable increasing need of these imports, necessitate an attempt to offset the country's already unfavourable trade balance by an increase in exports of industrial products.

If Japan is to find employment for her increasing population through the process of further industrialisation, the development of her export trade and of foreign markets capable of absorbing an increasing amount of her manufactured and semi-manufactured goods becomes more and more essential. Such markets would, at the same time, serve as a source of supply of raw materials and of foodstuffs.

Japanese export trade, as hitherto developed, has two main directions: her luxury product, raw silk, goes to the United States of America and her staple manufactures, chiefly cotton textiles, go to the countries of Asia, the United States taking 42.5 per cent of her exports and the Asia market as a whole taking 42.6 per cent. Of this latter trade, China, the Kwantung Leased Territory and Hong-Kong take 24.7 per cent, and a large share of the remainder is handled by Chinese merchants in other parts of Asia.

During 1930, the last year for which complete figures are available, the total exports of Japan amounted to 1,469,852,000 Yen, and her imports to 1,546,071,000 Yen. Of the exports, 260,826,000 Yen, or 17.7 per cent, went to China (excluding the Kwantung Leased Territory and Hong-Kong), while, of the imports, 161,667,000 Yen, or 10.4 per cent, came from China (excluding the Kwantung Leased Territory and Hong-Kong).

Analysing the principal commodities exported by Japan to China, it will be found that China takes 32.8 per cent of all aquatic products exported by Japan; 84.6 per cent of refined sugar; 75.1 per cent of coal and 31.9 per cent of cotton tissues, or an average of 51.6 per cent.

The same analysis applied to the commodities imported from China shows that 24.5 per cent of the total amount of beans and peas imported by Japan comes from China; 53 per cent of the oil-cake; and 25 per cent of vegetable fibres; or an average of 34.5 per cent.

As these figures are for China only, excluding Hong-Kong and the Kwantung Leased Territory, they do not indicate the extent of Japanese trade with Manchuria, which passes mainly through the port of Dairen.

The facts and figures just given clearly show the importance to Japan of her trade with China. Nor is Japan's interest in China limited to trade alone; she has a considerable amount of capital invested in industrial enterprises, as well as in railways, shipping and banking, and, in all of these branches of financial and economic activity, the general trend of development has been increasing considerably during the last three decades.

In 1898, the only Japanese investment of any consequence was a small cotton gin in Shanghai owned jointly with Chinese, representing a value of about 100,000 taels. By 1913, the estimated total of Japanese investments in China and Manchuria amounted to 435,000,000 Yen out of a total of 535,000,000 Yen estimated investments abroad. By the end of the World War, Japan had more than doubled her investments in China and Manchuria over those of 1913, a considerable part of this increase being due to the famous "Nishihara loans", which had been partially granted for political considerations. Notwithstanding this setback, Japan's investments in China and Manchuria in 1929 were estimated at almost 2,000,000,000