In 1936, the Far East Empire's foreign trade, hampered by Japan, had in fact already fallen into a state of severe collapse. Even normal international trade in certain sensitive materials faced obstruction from Japan.
In some border areas of the northeast and north, Japan's invasion had plainly severed the main artery of trade between the Soviet Union and the Far East Empire, forcing the Northwest Region to assume a greater share of Soviet–Far East Empire trade.
Over this matter, a certain regime in the northwest had attempted to open material supply routes to the Soviet Union through a westward expedition, but it had failed.
Meanwhile, Japan continuously gnawed away at the Far East Empire's market through large-scale smuggling in the northern regions.
Japanese merchants transported huge quantities of goods—such as rayon, sugar, cigarettes, kerosene, and opium—from Japan proper, Korea, and the Far East Empire's northeast by sea to the northern demilitarized zone. They then sent them through under armed escort, forcing their way past checkpoints and into inland markets.
This dealt a blow to the Far East Empire's national industry and the Nanjing government's finances.
Because smuggled goods evaded tariffs, their low prices dealt a heavy blow to domestic enterprises operating legally.
At the same time, tariffs were one of the Nanjing government's most important sources of fiscal revenue, and smuggling inflicted enormous losses on its tax income.
To a great extent, trade between the Far East Empire and Japan had already slipped free of the Far East government's supervision and taxation system, becoming an unequal, predatory trade protected by Japanese force.
Under such circumstances, Japan would naturally also restrict the Far East Empire's access to certain crucial war materials.
Sivag said, "The Empire's former trade arrangements with the Far East Empire have completely fallen apart. The Huaihai Economic Zone