A concession is a permit to engage in business issued by a government body. In international law, a concession is a territory within a sovereign country fully governed by a different body than the national government of the country in question. From the 19th century until the Second World War colonial powers often used their power to achieve concessions for themselves or their companies rather than simply conquering the entire country. Concessions were the preferred way of dominating China.

As part of the peace treaty following the First Opium War in 1842, the victorious United Kingdoms enforced the establishment of five concessions in Chinese ports. The concessions ensured that British companies would received favorable conditions for business and be free from interferrence by the Chinese authorities. Soon the Americans claimed concessions as well and gradually they were extended to the vast majority of European nations. Additionally, the foreign nationals in the concessions possessed ”extraterritoriality.” This meant that Chinese law didn't apply to them and they were instead under their own laws or, such as in Shanghai, under separate white laws in the concessions.

Distribution of concessions in Shanghai 1937. The only difference from the situation in 1927 is the addition of an Italian concession. The concessions covered about fifty percent of Shanghai’s total area, despite the white population only numbered around 30.000 people along with a Japanese population of roughly 15.000, meanwhile the Chinese in Shanghai numbered nearly 3 millions. More than a million Chinese resided in the concessions.