China, Japan need more sensible approach to competition over Asian infrastructure

With China and Japan locked into increasingly fierce competition for infrastructure deals, exploratory talks between senior offi cials from both countries on connectivity of Asian infrastructure construction may not yield any results, but the eff ort should still be a reminder that there is another alternative, and there could be cooperation instead of just the current rivalry situation.

During the 18th regular vice ministerial negotiations between the Chinese Ministry of Commerce ( MOFCOM) and the Japanese Ministry of Economy, Trade and Indus- try in Tokyo on Tuesday, the Chinese side introduced the Belt and Road initiative, while the Japanese side introduced “Partnership for High- Quality Infrastructure,” and both sides held constructive discussions on connectivity of Asian infrastructure construction, according to a statement published on the MOFCOM website on the same day.

The high- level discussions on infrastructure came on the heels of news that the Philippines is close to securing an estimated $ 4.4 billion in offi cial development assistance ( ODA) from Japan for its first subway, the biggest ODA loan in the Philippines’ history.

Competition between China and Japan for infrastructure projects in Asia has heated up significantly in recent years, with tussles for rail projects seen in Indonesia, India, Laos and Malaysia. After Chinese companies won the contract to build Indonesia’s first highspeed railway linking Jakarta and Bandung in October 2015, Japan won the deal to construct India’s fi rst bullet train network linking Mumbai and Ahmedabad in December 2015.

All these projects come with low prices and extremely favorable financing terms. China did not require any debt guarantee from the Indonesian government for loans off ered to the rail project, while Japan only charged 0.5 percent interest on loans for the Indian bullet train project, with a tenure of up to 50 years.

Such competition will of course bring benefi ts for other Asian countries, but blindly pursuing infrastructure deals at any price will probably hurt the interests of China and Japan as low bidding prices and favorable fi nancing conditions may expose their construction companies and banks to extraordinarily high risks.

It is time for China and Japan to start considering reducing vicious competition, or the Asian infrastructure market will be seen as a charity demonstration platform for the two countries. Given their great potential in infrastructure, both sides should try to seek more cooperation rather than confrontation in regional development, a choice that would be more rational and sustainable.