In Manchuria, the division of rights in mainland China manifested itself in the form of competition in railway construction.

After the 1922 establishment of the Republic of China, political and military activities were undertaken to reclaim Chinese rights.

The Fengtian warlords were in effect governing Manchuria at the time, and its leader, Zhang Zuolin, was cooperative with Japan.

The Kwantung Army had for some time wanted to somehow divide the Fengtian warlords, and on 4 June 1928 they assassinated Zhang Zuolin.

He was succeeded as leader of the Fengtian clique by his son, Zhang Xueliang, who in December of that year declared his allegiance to the Kuomintang, becoming fervently anti-Japanese.

The Japanese protested strongly on the basis of the Sino-Japanese Treaty concerning the Three Provinces (中日會議東三省事宜條約), in which it had been agreed that no railways running parallel to Mantetsu lines would be built.

In order to break the stalemate in the conflict between Japan and the Fengtian warlords, including the conflict over railways, the Kwantung Army took action, staging the Mukden Incident, in which a Japanese soldier detonated a small quantity of dynamite near a Mantetsu line on 18 September 1931; although no damage was inflicted, it was blamed on Chinese terrorists, and was used as a pretext for the Japanese invasion of Manchuria.

In effect, the Manchukuo Ministry of Transportation never managed "its" railway on its own, instead immediately outsourcing it to the Japanese-owned Mantetsu and removing itself entirely from the sector of business.

In addition, many of the routes the Kwantung Army sought to build were planned with military interests in mind, which, from the point of view of the railway as a business, were regarded as having very little potential profit.

As a result of conflicts such as these, the relationship between Mantetsu and the Kwantung Army, which had initially been positive and cooperative, deteriorated rapidly, and each side grew more distrustful of the other.

Of particular note is the line between Xinjing and Harbin which a team of 2,500 workers regauged in its entirety in three hours on 31 August 1935.

After the outbreak of war, in order to improve wartime efficiency, organisational reforms were conducted to streamline operations.

Through this reform, the National Railway and Mantetsu were completely merged in all but name, and remained so until the end of the war.

Additionally, the Kwantung Army withdrew entirely, leaving Mantetsu virtually the governing body of the region.

Locomotives were classified with letters of the alphabet instead of numbers (e.g. テホA), and passenger equipment classifications were composed of the standard type designation plus オ ("o"), e.g. ハオ "HaO".

Due to the fact that so much of the North Manchuria Railway's equipment was outdated, after the regauging of the NMR lines it was decided not to convert the rolling stock to standard gauge.

Although the reason for storing locomotives that could not be used on Manchuria's standard gauge lines is unknown, Yoshizumi Ishihara speculated in his 1972 book, "南満洲鉄道 鉄道の発展と機関車" (The Development of the South Manchuria Railway and its Locomotives) that they were kept for use on Soviet lines, in case Japan ever invaded the Soviet Far East.

A uniform classification system was introduced for all three railways, with locomotives of the same type receiving the same class designation.

The method of calculating and collecting fares and goods charges when moving between company and national lines changed on several a number of occasions according to the needs of the time.

This was carried over from the time before the establishment of Manchukuo, when such interchange agreements had been made with the privately owned railways that were later nationalised.

However, as the Manchukuo yuan was silver-based, and the Korean yen was gold-based, the ticket fare was converted to the currency used by the railway owning the point of sale, based on conversion rates issued regularly by Mantetsu.

A unitary system was introduced on 1 February 1936, with fare rates fixed slightly higher than those of Mantetsu.

Although Mantetsu undertook non-transport-related infrastructure projects such as electricity and urban planning, as well as management of coal mines, most were transportation-related businesses.

Therefore, when the Manchukuo government decided on its national highway plan in 1933, it determined which possible bus routes could potentially compete with the railway.

The route network was gradually expanded, and by the end of September there were bus services all over Rehe Province.

As national road construction progressed, a nationwide network of intercity bus services was planned, which was to include the Kwantung Leased Territory.

Although they were called "national highways", many of these roads were unpaved, becoming muddy and unpassable in times of heavy rain and during the spring thaw, while in dry periods they were very dusty and hard on tires.

Furthermore, for routes travelling through remote areas, security guards were needed on the busses and at stations, which incurred extra personnel expenses.

An unusual side business of the National Railway was water transport consisting of riverine ferries up and down the Songhua, Amur and Ussuri rivers.

Following the Mukden Incident riverine transport was almost completely stopped, but in 1933 the General Railway Administration started a river ferry service between Harbin and Mohe, and others were subsequently added.