China-ja­pan Re­la­tions:

On­go­ing trade fric­tion with the US has con­cen­trated the minds of lead­ers in China and Ja­pan as they make con­certed ef­forts to mend po­lit­i­cal dis­agree­ments and strengthen eco­nomic co­op­er­a­tion

NewsChina - - POLITICS - By Feng Wei

Blow­ing Hot and Cold

Ja­panese Prime Min­is­ter Shinzo Abe is re­port­edly set to visit China in late Oc­to­ber to mark the 40th an­niver­sary of the sign­ing of the peace and friend­ship treaty be­tween the two coun­tries and to im­prove bi­lat­eral ties, af­ter he met Chi­nese Pres­i­dent Xi Jin­ping at the East­ern Eco­nomic Fo­rum in Vladi­vos­tok, Rus­sia held in early Septem­ber. Some me­dia re­ports have quoted a date of Oc­to­ber 23 for the visit; a more re­cent re­port sug­gested the trip would be pushed back a day or two at the re­quest of the Chi­nese side.

Ties be­tween China and Ja­pan have been strained since Ja­pan an­nounced it would na­tion­al­ize the dis­puted Diaoyu Is­lands (known as Senkaku in Ja­pan) in 2012, which trig­gered strong protests from China. Although Abe has pre­vi­ously traveled to China to at­tend in­ter­na­tional sum­mits, the Oc­to­ber visit to China, if it hap­pens, would be the first bi­lat­eral trip by a Ja­panese leader since 2011.

Abe first pro­posed a China visit dur­ing a meet­ing with Xi on the side­lines of the Asia-pa­cific Eco­nomic Co­op­er­a­tion (APEC) fo­rum held in Viet­nam, in Novem­ber 2017. The lead­ers agreed that the meet­ing should mark a fresh start to re­la­tions be­tween the two coun­tries.

In the same month, a busi­ness del­e­ga­tion of 250 rep­re­sen­ta­tives from Ja­pan led by Ja­panese Busi­ness Fed­er­a­tion Chair­man Sa­dayuki Sakak­ibara and Ja­pan Cham­ber of Com­merce and In­dus­try Chair­man Akio Mimura vis­ited China, where they held talks with their Chi­nese coun­ter­parts to dis­cuss co­op­er­a­tion be­tween the two coun­tries' pri­vate and pub­lic sec­tors.

Then in May 2018, Chi­nese Pre­mier Li Ke­qiang vis­ited Ja­pan, the first visit in eight years by a Chi­nese pre­mier. Li wrote in the Ja­panese news­pa­per Asahi Shim­bun that China-ja­pan re­la­tions stood “at an in­ter­sec­tion for re­turn­ing to a nor­mal path of de­vel­op­ment.” It was re­ported that Li pro­posed the re­sump­tion and ex­pan­sion of a cur­rency swap ar­range­ment be­tween their cen­tral banks. The pre­vi­ous ar­range­ment had ex­pired in 2013 amid ris­ing ten­sions over ter­ri­to­rial dis­putes.

More re­cently, on Au­gust 31, Liu Kun, China's Fi­nance Min­is­ter, and Taro Aso, Ja­pan's Deputy Prime Min­is­ter and Fi­nance Min­is­ter, co-chaired the Sev­enth China-ja­pan Fi­nance Di­a­logue. China's Sta­te­owned Xin­hua News Agency said the meet­ing had in­jected “pos­i­tive en­ergy” into the bi­lat­eral re­la­tion­ship and global and re­gional eco­nom­ics.

Be­hind the chang­ing tone of the rhetoric at high-level meet­ings, the eco­nomic re­la­tion­ship ap­pears to have warmed up again. Ac­cord­ing to data re­leased by the Ja­panese au­thor­i­ties, the to­tal vol­ume of bi­lat­eral trade for the first three months of 2018 be­tween China and Ja­pan in­creased by 10.1 per­cent to reach US$76.4 bil­lion. Ja­pan's ex­ports to China in­creased by 14.2 per­cent, ac­count­ing for 18.5 per­cent of its to­tal ex­ports, while im­ports from China in­creased seven per­cent,

ac­count­ing for 22.8 per­cent of Ja­pan's to­tal im­ports.

An­a­lysts be­lieve that af­ter years of stag­na­tion in bi­lat­eral eco­nomic co­op­er­a­tion, eco­nomic ties be­tween the world's sec­ond- and third­largest economies are fi­nally get­ting back on track.

The Trump Fac­tor

It may be no co­in­ci­dence that China and Ja­pan's ef­forts to im­prove their re­la­tion­ship are hap­pen­ing against a back­drop of trade fric­tions be­tween the US and China. While the trade con­flict has sim­mered and es­ca­lated in re­cent months, Ja­pan also faces pres­sure from the US re­gard­ing their bi­lat­eral trade re­la­tion­ship.

Upon as­sum­ing the pres­i­dency in early 2017, US Pres­i­dent Don­ald Trump pulled the US out of the Trans-pa­cific Part­ner­ship (TPP), a free trade pact in­volv­ing 12 coun­tries that Ja­pan had been ac­tively pro­mot­ing. In Novem­ber 2017, US Com­merce Sec­re­tary Wil­bur Ross urged Ja­panese au­tomak­ers to re­duce ex­ports from Ja­pan and Mex­ico while boost­ing pro­duc­tion in the US in or­der to slash the huge trade deficit. The US and Ja­pan also failed to reach a deal that would ex­empt Ja­pan from the US'S steel and alu­minum tar­iffs.

Dur­ing the first round of trade talks held in Au­gust be­tween US Trade Rep­re­sen­ta­tive Robert Lighthizer and Ja­panese Econ­omy Min­is­ter Toshim­itsu Motegi, the two sides failed to reach an agree­ment on whether to open up ne­go­ti­a­tions on a bi­lat­eral free trade agree­ment. While Wash­ing­ton has been com­plain­ing about its huge trade deficit with Ja­pan, Tokyo has been try­ing to fend off US de­mands for a free trade agree­ment and avert po­ten­tially steeper tar­iffs on its ex­ports.

As the US re­sumed sanc­tions on Iran in Au­gust, it asked Ja­pan to halt oil im­ports from the coun­try. Given Iran is a ma­jor source of oil for Ja­pan, Tokyo has been seek­ing a waiver, although its ap­peals so far ap­pear un­suc­cess­ful. It is un­clear whether Ja­pan will com­pletely ter­mi­nate oil im­ports from Iran. But on Au­gust 2, Ja­pan's For­eign Min­is­ter Taro Kono held talks with Ira­nian For­eign Min­is­ter Mo­ham­mad Javad Zarif in Sin­ga­pore on the side­lines of the ASEAN For­eign Min­is­ters Meet­ing. Kono re­it­er­ated that Tokyo has up­held the 2015 nu­clear agree­ment reached by Iran and six ma­jor pow­ers, rhetoric that would surely ir­ri­tate Wash­ing­ton.

In re­cent months, Ja­pan has be­come in­creas­ingly frus­trated with the Trump ad­min­is­tra­tion's poli­cies. In a June in­ter­view with Reuters, Kat­suyuki Kawai, a rul­ing Lib­eral Demo­cratic Party (LDP) law­maker who ad­vises Abe on for­eign af­fairs, said that the al­liance be­tween Ja­pan and the US has be­come “a trans­ac­tional al­liance,” and that the Ja­panese peo­ple have be­gun to “re­al­ize that it is risky to leave Ja­pan's des­tiny to an­other coun­try.”

In late Septem­ber, Abe met Trump in New York City on the side­lines of the United Na­tions Gen­eral Assem­bly, and in early Oc­to­ber,

it was an­nounced that Tokyo and Wash­ing­ton had signed a trade deal lim­ited to agri­cul­tural prod­ucts, which experts said in­di­cates Abe still wants to take lead­er­ship of the reformed TPP.

Nev­er­the­less, ac­cord­ing to an ar­ti­cle pub­lished by the Econ­o­mist in early Septem­ber, con­cerns over Ja­pan's re­la­tion­ship with the US are “prompt­ing Ja­pan's leader to step up his ef­forts to fash­ion a more in­de­pen­dent and as­sertive for­eign pol­icy,” which in­cludes mend­ing fences with China.

Pol­i­tics Still Cold

De­spite the im­prov­ing eco­nomic re­la­tion­ship, there is no sign that China or Ja­pan will back down from their ter­ri­to­rial dis­pute over the Diaoyu Is­lands. For sev­eral years, coast guard ves­sels from both coun­tries have rou­tinely shad­owed each other in the wa­ters sur­round­ing the islets. While China con­tin­ues to send pa­trol ves­sels, Ja­pan has also been strength­en­ing the pres­ence of its coast guard to counter China's moves.

In 2017, Ja­pan added five large new pa­trols to its coast guard fleet and in­creased the num­ber of coast guard per­son­nel by more than 200. In Jan­uary 2018, the Ja­pan Times re­ported that the Ja­pan Coast Guard was planning to build bases for seven new large pa­trol ships to boost its re­sponse time.

In March, Ja­pan un­veiled a plan to launch an am­phibi­ous rapid de­ploy­ment brigade, widely re­garded as Ja­pan's ver­sion of the US Marines. With a 2,100-strong force, it will com­prise a main­stay am­phibi­ous unit and a land­ing unit equipped with am­phibi­ous as­sault ve­hi­cles and Osprey trans­port air­craft, which are cur­rently used by the US Marines.

On Au­gust 28, Ja­pan's de­fense min­istry re­leased its an­nual de­fense white pa­per for 2018. A big por­tion of the pa­per is de­voted to China's na­tional de­fense sys­tem and its mar­itime ac­tiv­i­ties in the East and South China Seas, which the pa­per said con­sti­tutes “a strong concern” for Ja­pan. The doc­u­ment im­me­di­ately drew protest from China.

Few be­lieve that the po­lit­i­cal and mil­i­tary re­la­tion­ship be­tween China and Ja­pan will see a ma­jor rap­proche­ment in the fore­see­able fu­ture. But with an im­prove­ment in eco­nomic ties, the re­cent pe­riod, dubbed “cold eco­nom­ics, cold pol­i­tics,” may be draw­ing to a close, to be re­placed by the re­sump­tion of what many de­scribe as “hot eco­nom­ics, cold pol­i­tics,” which has char­ac­ter­ized the China-ja­pan re­la­tion­ship for much of the time since the nor­mal­iza­tion of the bi­lat­eral re­la­tion­ship in 1978.

Po­ten­tial for Co­op­er­a­tion

While the ter­ri­to­rial dis­putes be­tween the two coun­tries may per­sist, there is still room to de­velop eco­nomic co­op­er­a­tion, af­ter con­certed ef­forts in the last few years to man­age their dis­putes.

By the end of 2017, China and Ja­pan had en­gaged in 15 rounds of se­cu­rity di­a­logues, 13 rounds of strate­gic di­a­logues, and eight rounds of high-level mar­itime talks. On May 9, the two coun­tries agreed to set up a “con­flict com­mu­ni­ca­tion mech­a­nism,” which in­cludes a hot­line, to pre­vent mar­itime and air in­ci­dents over the dis­puted is­lands in the East China Sea. It also pro­vides for reg­u­lar meet­ings be­tween both na­tions' de­fense of­fi­cials and a mech­a­nism for their naval ves­sels to com­mu­ni­cate at sea to avert mar­itime in­ci­dents.

Re­gard­ing trade is­sues, both China and Ja­pan sup­port mul­ti­lat­er­al­ism. This is the realm where Ja­pan's poli­cies depart from Amer­i­can poli­cies the most. Fol­low­ing the US'S with­drawal from the TPP, Ja­pan per­suaded the re­main­ing coun­tries to reach a new deal called the Com­pre­hen­sive and Pro­gres­sive Agree­ment for Trans-pa­cific Part­ner­ship (CPTPP). Ear­lier, Ja­pan had signed a sep­a­rate free-trade pact with the Euro­pean Union, cre­at­ing the world's big­gest bi­lat­eral free­trade area. Ja­pan is also ac­tively pro­mot­ing the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP), which in­volves the 10 mem­ber states of ASEAN as well as five re­gional coun­tries – China, In­dia, Aus­tralia, New Zealand and Ja­pan.

While Ja­pan has re­sisted China's Belt and Road Ini­tia­tive and re­fused to join the China-led Asian In­fra­struc­ture In­vest­ment Bank, its pol­icy has evolved from ret­i­cence to ac­knowl­edg­ing the po­ten­tial syn­er­gies in re­cent months. Dur­ing the key­note meet­ing be­tween Xi and Abe held in Novem­ber 2017 in Viet­nam, Abe said Ja­pan could of­fer help with the Belt and Road Ini­tia­tive and pro­posed that Ja­pan and China co­op­er­ate in do­ing busi­ness in third coun­tries.

In re­cent years, China and Ja­pan have been com­pet­ing for in­fra­struc­ture projects, espe­cially high-speed rail projects through­out South and South­east Asia. But since the Xi-abe meet­ing in 2017, the two sides have started to ex­plore po­ten­tial ar­eas for co­op­er­a­tion. In May 2018, the Ja­pan Bank for In­ter­na­tional Co­op­er­a­tion pro­posed that a joint Ja­pan-china con­sor­tium build a high-speed railway sys­tem in Thai­land, which, if it ma­te­ri­al­izes, would be the first time con­trac­tors from both coun­tries would be work­ing to­gether on an in­fra­struc­ture project in a third coun­try.

On Septem­ber 25, China and Ja­pan held the first meet­ing of a joint pub­lic-pri­vate com­mit­tee on eco­nomic co­op­er­a­tion in Bei­jing. An­a­lysts be­lieve that agree­ments on in­fra­struc­ture and other projects would be signed dur­ing Abe's up­com­ing visit to China in Oc­to­ber.

Af­ter years of an­i­mos­ity, the dy­namic changes in global geopol­i­tics have granted both coun­tries a rare chance to look be­yond their po­lit­i­cal dis­agree­ments to en­large their scope for eco­nomic co­op­er­a­tion. Lead­ers from both coun­tries should seize the op­por­tu­nity, which will help re­duce re­gional ten­sion and pro­mote peace and pros­per­ity to a re­gion that is in­creas­ingly chal­lenged with un­cer­tain­ties.

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