Japan PM heading to China to look for trade opportunities
Markets fear geopolitical conflicts
JAPAN’s Prime Minister Shinzo Abe makes a rare trip to China this week hoping improved relations will lead to new economic partnerships, as the two countries come under US pressure on trade.
The visit is the first by a Japanese premier since 2011 and is part of a years-long process of repairing ties in the wake of a disastrous falling-out in 2012, when Tokyo “nationalised” disputed islands claimed by Beijing.
The incident prompted anti-Japanese riots in China, and kicked off a frosty spell that has only gradually and recently begun to thaw.
Since an awkward 2014 encounter between Abe and Chinese President Xi Jinping on the sidelines of a summit, there have been ministerial visits by both sides and a softening of rhetoric.
But Abe’s trip will be a test of how far the two countries have come, and the need for progress is all the more urgent as US President Donald Trump levies tariffs and rattles sabres on trade with both China and Japan.
“The trade war with the US seems like it’s helping bring them together a bit,” said Kristin Vekasi, assistant professor of political science at the University of Maine, and an expert on Japan-China ties.
“In that sense, they’re actually on the same side... and if Japan leans away from the US because of decreased economic opportunities, there’s a potential for closer ties with China,” she said.
Belt and Road Initiative
The two leaders are likely to focus on a range of potential deals, including joint investments in infrastructure in regional nations including Indonesia and the Philippines.
Abe has signalled some interest in China’s massive “Belt and Road Initiative”, which funds major infrastructure work, but experts said a concrete deal on Japanese participation was unlikely for now.
Both sides are keen to improve economic cooperation, with Japanese business eager for increased access to China’s massive market, and Beijing interested in Japanese technology and corporate knowhow.
“Japan and China have really nicely complementary economies, and they can benefit hugely from having closer trade and investment ties,” Vekasi said.
“They’ll try and bring home some economic tangibles. That’s generally where they’ve been able to successfully cooperate in the past.”
The two leaders may find less common ground outside of the economic realm, with tensions lingering over ter- ritorial issues.
Just days before Abe’s trip, Tokyo lodged an official complaint after Chinese ships cruised around the disputed islands that Tokyo calls the Senkaku and Beijing labels the Diaoyu islands.
And in September, Japan carried out its first submarine drills in the disputed South China Sea.
Japan does not border the South China Sea but has expressed concern about Chinese military activity there.
Cooperation and confrontation
Abe and Xi are likely to simply avoid those thornier issues, said Kazuyuki Suwa, a professor of political science at the University of Shizuoka.
“Neither side will make any compromises... They will say what they need to say, and won’t likely agree to go beyond that,” he told.
“The relationship is a mixture of cooperation and confrontation, and that will stay the same.”
Much of the meeting will be about optics, with both men looking for the symbolic boost that the summit will provide.
Abe will also be hoping to extract a pledge that China will make good on plans for Xi to pay a reciprocal visit to Japan next year.
If he succeeds, “that itself should be called one of the major achievements of this trip,” Suwa said. STOCK markets slumped Tuesday on geopolitical r isks stretching from US tensions with Russia and Saudi Arabia to trade issues and Italy’s budget stand-off with the EU.
European stocks picked up where Asia left off, with Frankfurt losing more than two per cent in morning deals after Hong Kong closed down more than three per cent.
The dollar was down versus the euro, yen and pound.
Frankfurt was dragged down additionally by a near eight per cent plunge in the share price of chemicals and pharmaceuticals giant Bayer to € 70.50.
There is meanwhile growing unease about Italy’s row with the EU over its purse-busting budget, which Brussels said breaks the bloc’s financial rules.
The populist government in Rome has refused to back down and cut its spending promises despite warnings about the country’s economic outlook.
Italian economy minister Giovanni Tria wrote the European Commission a letter, saying the new spending that Rome proposed was needed to restart growth in the third-largest economy of the Euro zone, after a decade of economic stagnation.
The standoff comes as officials struggle to hammer out a Brexit agreement with a deadline for Britain to leave the EU looming in the background.
Pressure is also growing on Saudi Arabia after it admitted that a journalist critical of Riyadh had been killed at its Istanbul consulate.
Oil prices slid Tuesday as the market discounted concerns about potential supply disruptions in the Middle East.
Saudi Arabia said Monday it had no plans to repeat its harsh 1973 oil embargo, even as relations with the West sour f o l l owi n g t h e d e a t h o f Khashoggi.
In stocks, Wall Street closed mixed Monday as investors wait on company earnings.
The sharp losses Tuesday in Asia brought an end to a rally in previous sessions fuelled by China’s top brass issuing coordinated statements of support for the country’s markets and officials unveiling tax cut plans.
Nerves have been tested by US President Donald Trump’s warning that he will pull out of a nuclear treaty with Russia and bolster America’s arsenal.
Traders are also turning their attention to next month’s US midterm elections, which could turn control of Congress over to the Democrats.