Kobe was instead dominated particularly by Chinese, where in 1890 53% of the firms were Chinese, 21% German, 16% British, and 4% American. In terms of trading networks, Yokohama was linked with Western production and demand, while Kobe and Osaka were interlocked into the Asian trading network through the intermediary of Shanghai merchants group. The hinterland of the Kobe/Osaka area saw the rise of the cotton spinning and weaving industries around the 1870s. The cotton used there was brought from China, of which 75% was dealt with by the Shanghai trading network in this area.

     The role of Shanghai in this trading sphere needs emphasis, for between Manchester and Japan and Manchester and Korea there was Shanghai, the principal transshipment center for central and northern East Asia. Virtually all British cloth exported to East Asia passed through Hong Kong and/or Shanghai, and once it got to Shanghai, the Chinese merchants there shipped it onto other East Asian ports on boats they either owned or chartered. In Korea that meant exports to Jinsen, where a group of Shanghai merchants carried out this textile trade quite successfully. In 1882, China and Korea had agreed on conducting free trade by land and sea between themselves, and then many Shangong merchants, working in Shanghai, migrated to Korea, especially Jinsen, and helped dominate the trade at this time between Jinsen and Shanghai.

     The development of Kobe-Shanghai and Osaka-Shanghai connections was similar. In the 1880s Western, mainly British, cloth ranked as the top Japanese import, and though Japanese have often spoken of the obstacles these Western exports posed to the growth of a native textile industry, the actual shipment of these goods within Asia was handled by Chinese merchants operating out of Shanghai. Usually of Cantonese origin, they transported almost all the cotton cloth imported into Kobe out of Shanghai. As up to two-fifths of all Japanese imports of the most common form of cloth, gray shirtings, came into Kobe and as Chinese merchants were also involved, to a lesser extent in Yokohama's intra-Asian trade, the role of Shanghai's merchants in the Japan-China trade was considerable. Compared to the Edo period, they faced greater competition from Westerners and Japanese companies, but the bulk of the trade was so much greater.

     When Japan's cotton mills began in the 1890s to purchase cotton on their own directly from India, the situation changed, but not drastically. The growing demand within China for China's cotton in the late 1890s made Indian cotton cheaper, and as it also was slightly longer, stapled, and better suited for the ring frame used in Japanese mills, Japanese cloth increasingly was made out of Indian cotton shipped directly from India.