Establishment of Credit Arrangement Between the Central Bank of

Manchou and the Otto Wolff Group of Germany

The Credit Agreement between the Central Bank of Manchou and the Otto Wolff Group of Germany, for the conclusion of which negotiations had been in progress since July of this year at the instance of the Otto Wolff Group, was signed at Hsinking by both parties on September 4th. On the other hand, the Governments of Manchoukuo and Germany, which had been, since the signing of the Agreement, deliberating upon the framing of the official notes to be exchanged between them for giving effect to the Agreement, also reached an accord on the matter. The notes, therefore, were formally exchanged on November 15th between Mr. Chuichi Ohashi, Chief of the Manchoukuo Foreign office, and Dr. Karl Knoll, German Trade Commissioner in Hsinking; thereby giving effect to the Agreement on the same day.

The essential features of the Agreement are as follows:

1. The present Agreement is for establishing the first credit, and, as occasion arises in the future, may be extended to cover a

2.

3.

4.

5.

6.

7.

second and a third credit through consultation between the two
parties;

The limit of the first credit amount is placed at two million
pounds sterling (some thirty-five million yuan in Manchoukuo
currency);

The term of the present Agreement is six years, ending June 30th,
1944;

The credit bears interest at the rate of 5.5 percent per annum;
Ninety percent of the settlement to be effected under the present
Agreement is to be paid out of the special Reichsmark account
which Manchoukuo holds in Germany in accordance with the German-
Manchoukuo Trade Agreement, and the remaining ten percent with
pound sterling drafts;

The settlement provided for in the present Agreement is to be
effected twice a year, namely, at the end of June and December;
There is an understanding between the Governments as well as the
competent authorities of Germany and Manchoukuo that articles to
be purchased by the Manchoukuo side from Germany under the present
Agreement shall be limited to machinery for heavy industry and
shall not include such articles as will affect other trade articles
in general. Simultaneously with the going into effect of the
Agreement, the Manchoukuo Foreign Office authorities gave a press-
interview, the gist of which is as follows:

The authorities of the Government of Manchoukuo and Germany gave their assent to the first Credit Agreement signed in Hsinking on September 4th by the Central Bank of Manchou and the Otto Wolff Group of Germany; and with the intention of securing smooth fulfilment of the Agreement by rendering every possible assistance to those concerned, had the official notes to that effect formally exchanged between Mr. Ohashi, Chief of the Foreign Office, and Dr. Karl Knoll, German Trade Commissioner in Hsinking, on November 15th, thereby giving effect to the Agreement on the same day.

Although the present Agreement provides at present for the establishment of a credit for approximately 35,000,000 yuan as the first arrangement, it is the intention of the parties to the Agreement to extend it to cover a second and a third credit as the prospect of its utilization increases, and the Government of Manchoukuo on their part are fully prepared to give all possible assistance for the utilization and fulfillment of the Agreement.

It may be recalled that a trade arrangement was concluded between Manchoukuo and Germany in April last year, as the result of which trade relations between the two countries have steadily become closer, and furthermore, the amicable relations between the two nations have been greatly promoted by the exchange of trade commissioners. It is now confidently expected that, by the conclusion of the present Agreement,. the relations between the two countries will become still more amicable and closer.

It may be noted that Manchoukuo, having already formulated an industrial five-year plan covering a period in which she will be most urgently called upon to exert her utmost in the exploitation of the inexhaustible natural resources that she is endowed with, will naturally have to import on a large scale machinery and other articles. Now that the Agreement has been concluded, Manchoukuo will not only be able to utilize a six-year long term credit, but will also be enabled to derive no small benefit from the Agreement in spering much of her foreign exchange payment, inasmuch as the Agreement stipulates that 90 percent of her dues to Germany shall be settled by her receipts for the staple products exported by her to that country.

As for Germany, she may, by thus contributing to the industrial development of Manchoukuo, confidently count upon future cooperation with the latter's industry, which is expected to witness considerable development and expansion.

Source: Bulletin No. 195. November 24, 1937, "Manchoukuo" Government,
Department of Foreign Affairs, Hsinking.

C

The Japanese in "Manchoukuo" have been particularly interested in developing the mining industry in order to increase the supply of critical raw materials in the empire. The Mining Law (infra) lays down the regulations governing the exploitation of mineral resources and vests in the State the ownership of all minerals not yet mined. For practical purposes operations in the mining industry have been restricted to a few official or semiofficial companies such as the Manchuria Gold Mining Company, the Manchuria Coal Mining Company, the three semi-official organizations engaged in mining iron, and the Manchuria Mining Development Company to which has been allotted most of the lesser minerals. This policy of restricting development to a few official or semi-official companies has been followed since the inception of the State.

Because of the basic importance of the iron and steel industry, a special control law was passed in 1938, restricting trade in a wide variety of iron and steel products to an official company, the Japan-Manchuria Trading Company. Subsequent regulations (infra) added to the list of iron and steel products coming within the scope of the law.

Also included are the law and regulations creating the oil monopoly and the law creating the alcohol monopoly. The Manchuria Potroleum Company, established as an official company some months carlier, became the instrument of the State in effectuating the monopoly in the production, refining and distribution of oil. The creation of an oil monopoly was one of the earliest and most significant violations of the "Open Door" policy in "Manchoukuo".

The other laws in this section consist mainly of enactments establishing special companies for specific purposes. More than a hundred official and semi-official companies of this kind have been set up in "Manchoukuo".

Article 1. The term mining as used in the present Law shall include exploitation of minerals and all enterprises related to such exploitation of minerals.

Article 2. The term minerals as used in the present Law shall include gold ore, silver ore, platinum ore, copper ore, lead ore, zinc ore, tin ore, iron ore, antimony ore, aluminium ore, nickel ore, cobalt ore, iron sulphate ore, chromite ore, manganese ore, bismuth ore, scheelite ore, molybdenum ore, mercury ore, arsenic ore, phosphorus ore, sulphur, graphite, coal, petroleum (including combustible natural gas closely related to oil-bearing stratas), asphalt, oil shale, limestone, dolomite, magnesite, fluorspar, felspar, fire clay, barite, seltpetre, gypsum, silica, talc, asbestos and mica.

Article 3. All minerals (including dross and duffers) not yet mined shall belong to the State.

Article 4. No person other than a subject of Manchaukuo or a juridical person created in accordance with the laws and regulations of Manchoukuo shall become a holder of a mining right. The foregoing provision, however, shall not apply to those who have secured special permission from the Minister of Industry.

Article 5. No one shall carry on exploitation of minerals on the surface of land or underground within sixty metres from a municipal boundary, railways, tracks, roads, water works, canals, rivers and lakes, swamps, embankments, grounds of mausolea, shrines or temples, cemeteries, parks or buildings and other establishments, without permission of the proper authorities concerned and also of the owners of the land concerned and those holding interests therein.

The owners of the land concerned or those holding interests therein shall not refuse to grant the above mentioned permission without good reasons.

Article 6. In case mine-lots are duplicated, holders or lessees of the mining rights concerned shall have their respective rights to the mine-lots limited.

Article 7. All rights and obligations of the holder or lessee of a mining right as provided for in the present Law shall be transferred together with the mining right or leased mining right.

All rights and obligations of the holder or lessee of a mining right, as provided for in the present Law, shall be deemed as having been automatically transferred to the lessee or holder of a mining right upon creation or termination of a leased mining right. The preceding provision, however, shall not apply in case of termination of the leased mining right due to termination of the mining right itself.

Article 8. The prescribed acts of procedure or any other acts, performed in accordance with the provisions of the present Law shall be binding upon a successor of a person who desires to apply for a mining permit, applicant, holder or lessee of a mining right, owner or holder of interests in the land concerned and other interested persons.

Article 9. In case it is deemed necessary for national defence or preservation of national resources, applications for mining may be restricted by designating the districts or minerals concerned by Imperial Ordinance,

Article 10. The Minister of Industry may, in accordance with proper orders, entrust a part of his power specified in the present Law to the Director of Mining Inspectorate.

Article 11. In the case of Heingan Provinces, the Minister of Mongolia Administration and the governors of the several Hsingan Provinces shall stand, respectively, in place of the Minister of Industry, and the Director of Mining Inspectorate in the present Law.

Chapter II. Mining Rights

Article 12. Any holder of a mining right shall have the right to exploit and gain minerals within such mine-lots as are specified and allotted to him.

Article 13. A mining right shall be a real right and, unless regulated by provisions in the present Law, it shall be governed by the regulations concerning immovables.

Article 14. A mining right shall not be made the object of a right other than inheritance, transfer, attachment for non-payment of taxes, compulsory execution, mortgage and leased mining right.

Article 15. Joint mining applicants or joint holders of mining right shall respectively appoint representatives among themselves and notify the Director of Mining Inspectorate of such appointment. In case the parties concerned fail to give the above-mentioned notice, the Director of Mining Inspectorate shall designate the representatives.

The representatives shall represent joint mining applicants or joint holders of mining right to the State.

Joint mining applicants or joint holders of mining right shall be regarded as having entered a partnership agreement.

Article 16. Any person who desires to carry on mining shall submit to the Minister of Industry a written application with a map of the desired mine-lot attached thereto,

Article 17. In case the Minister of Industry considers that the mining applied for is harmful to public interests or is without practical value, the said Minister shall not grant the application concerned.