This paper is one of the author's serialized studies of the Japanese involvement in drug-trafficking in China prior to and during the Sino-Japanese War of 1937-1945. It focuses on Japanese activities in central China, stressing particularly the drug situation in the metropolitan areas of Shanghai, Nanking and Wuhan (Hankow.) The article is divided chronologically into three parts covering the wartime period of 8 years. Facts show that by the time Japan consolidated its occupation of Shanghai, the Japanese military authorities had already begun to transport opium and other dangerous drugs to Shanghai from Manchuria and North China, and, at the same time, massive amounts of raw opium were also imported from Iran. The primary intention was to make money through the drug-trafficking, with a view to supplementing limited military budgets as well as reimbursing the large expenses of instituting various puppet governments in the region. The drug-trafficking scheme was drawn up and put under the control of Hajime Satomi, a Japanese assuming the Chinese name of Li Ming, who was assisted by a hierarchy of Chinese associates. In the wake of the establishment of the puppet Reformed Government in Nanking in March 1938, the scheme played some auxiliary functions of facilitating and implementing the policy set by the Japanese. The puppet Nationalist government of Wang Ching-wei was compelled after March 1940, to play the same role of facilitating drug-trafficking, although after December 1943, it began to resist this notorious business under Japanese domination with some success. Based on the information collected by the U. S. Treasury attache's in Shanghai before December 1941, the author estimates that the Japanese collected a total net profit of ¥ 2,175,000,000 during 1937-1945 (in 1939 ¥ 4.00=ca. US$1.00). It has to be noted for comparison that in 1940 the construction of a Japanese most modern 25,675-ton aircraft carrier required ¥ 80,000,000 only). From all the regions in Japanese-occupied China, it has been estimated that the Japanese and Chinese puppet authorities managed, through their massive drugtrafficking policy in 1937-1945, annually to extract from poor, helpless Chinese drug-addicts and society the large sum of ¥ 2,037,000,000 an enormous amount of money equivalent to an annual exaction of US$ 509,000,000.