Back on Track

China-ja­pan Re­la­tion­ship:

NewsChina - - CONTENTS - By Yu Xiaodong

Be­tween Oc­to­ber 25 and 27, Ja­panese Prime Min­is­ter Shinzo Abe made a high-pro­file visit to China. As the first of­fi­cial visit by a Ja­panese prime min­is­ter since re­la­tions be­tween the two coun­tries soured af­ter Ja­pan an­nounced the “na­tion­al­iza­tion” of the dis­puted Diaoyu Is­lands (Senkaku in Ja­pan) in the East China Sea in 2012, Abe's visit is widely seen as a sign of warmer ties be­tween the world's sec­ond- and third-largest economies.

‘New Era’

Dur­ing Abe's meet­ing with Chi­nese Premier Li Ke­qiang in Bei­jing, Abe trum­peted that the bi­lat­eral re­la­tion­ship was en­ter­ing a new phase. “Switch­ing from com­pe­ti­tion to col­lab­o­ra­tion, I want to lift Ja­pan-china re­la­tions to a new era,” said the Ja­panese leader. Abe's rhetoric was echoed by Li, who said that as re­la­tions be­tween the two coun­tries have re­turned to a normal track, China would like to lift the re­la­tion­ship to “a new phase.”

Among the agree­ments an­nounced dur­ing Abe's visit were a three­year cur­rency swap agree­ment of up to 3.4 tril­lion yen (US$30.4B), some 10 times that of a pre­vi­ous deal be­tween the coun­tries that ex­pired in 2013 amid the es­ca­lat­ing ten­sions. De­vel­op­ing from an agree­ment be­tween Abe and Li in May 2018 dur­ing Li's visit to Tokyo, the two coun­tries also signed an agree­ment to es­tab­lish a “China-ja­pan In­no­va­tion Co­op­er­a­tion Mech­a­nism,” which, ac­cord­ing to Ja­panese me­dia, will pro­mote co­op­er­a­tion in de­vel­op­ing ad­vanced tech­nolo­gies in ar­eas such as self-driv­ing cars and ar­ti­fi­cial in­tel­li­gence.

Abe, along with a del­e­ga­tion of some 500 Ja­panese en­trepreneurs, and Li also at­tended an eco­nomic fo­rum, dur­ing which com­pa­nies from both coun­tries signed agree­ments on 52 projects worth US$18 bil­lion. Some of these projects in­volve de­vel­op­ment co­op­er­a­tion

in third-party coun­tries, in­clud­ing a smart city in Thai­land and an off­shore wind power project in Ger­many. The Ja­pan Bank for In­ter­na­tional Co­op­er­a­tion and the China De­vel­op­ment Bank also agreed to launch a scheme to jointly fi­nance in­fras­truc­ture projects in third­party coun­tries.

Be­sides an em­pha­sis on eco­nomic co­op­er­a­tion, both Abe and the Chi­nese lead­er­ship have ex­pressed the im­por­tance of pro­mot­ing po­lit­i­cal trust be­tween the two coun­tries. Dur­ing his meet­ing with Chi­nese Pres­i­dent Xi Jin­ping on Oc­to­ber 26, Abe em­pha­sized that China and Ja­pan are “neigh­bors, we're part­ners who will co­op­er­ate with each other, rather than be a threat to each other.” While ac­knowl­edg­ing that it may be too early, Abe asked Xi to at­tend the 2020 Sum­mer Olympics open­ing cer­e­mony in Tokyo.

For his part, Xi said that China and Ja­pan have com­mon in­ter­ests in a va­ri­ety of ar­eas, and that sta­ble de­vel­op­ment of the bi­lat­eral re­la­tion­ship is im­por­tant, es­pe­cially at a time when in­sta­bil­ity and un­cer­tainty are grow­ing around the world. Xi is also re­port­edly con­sid­er­ing a trip to Ja­pan next year, which would mark the first visit by a Chi­nese pres­i­dent since Hu Jin­tao in 2008.

The Trump Fac­tor

The “in­sta­bil­ity and un­cer­tainty” cited by Xi ob­vi­ously refers to the ad­min­is­tra­tion of US Pres­i­dent Don­ald Trump, which has adopted a more ag­gres­sive ap­proach in its for­eign pol­icy. In the past months, China has been locked in a trade con­flict with the US, as Trump im­posed puni­tive tar­iffs on US$250 bil­lion of Chi­nese prod­ucts.

De­spite be­ing an ally of the US, Ja­pan has also come un­der pres­sure from the US. Not only has the Trump ad­min­is­tra­tion raised tar­iffs on im­ports of steel and alu­minum from Ja­pan, it has threat­ened to im­pose tar­iffs on Ja­panese auto ex­ports to the US.

“The US fac­tor is the big­gest ex­ter­nal force that is driv­ing the rap­proche­ment of China and Ja­pan,” said Gao Hong, a re­search fel­low from the Chi­nese Academy of So­cial Sciences. Gao said that as China and Ja­pan share a com­mon in­ter­est in safe­guard­ing and pro­mot­ing mul­ti­lat­er­al­ism, both coun­tries have in­cen­tives to im­prove the re­la­tion­ship.

Gao's view was par­tially shared by Akio Taka­hara, a pro­fes­sor of con­tem­po­rary Chi­nese pol­i­tics at the Uni­ver­sity of Tokyo. “It's a tra­di­tion of Chi­nese diplo­macy to im­prove ties with Ja­pan when there is trou­ble with the China-us re­la­tion­ship,” Taka­hara told Newschina.

But de­spite the im­por­tance of the Trump fac­tor, the thaw­ing of the China-ja­pan re­la­tion­ship at the very top level also stems from a new eco­nomic reality that is bring­ing the two economies ever closer.

Ac­cord­ing to trade data re­leased by Ja­pan's Min­istry of Fi­nance, Ja­pan's ex­ports to China reached a record US$141 bil­lion in Ja­pan's fis­cal year end­ing March 31, 2018, in­creas­ing by 16.4 per­cent com­pared to the fis­cal year of 2017.

By con­trast, Us-bound ex­ports dropped 8.5 per­cent, which not only al­lowed China to top the US as the lead­ing desti­na­tion for Ja­panese ex­ports for the first time since 2011, it may also sig­nify a fun­da­men­tal shift in the Ja­panese ex­port land­scape.

A ma­jor fac­tor be­hind the shift is, iron­i­cally, China's “Made in China 2025” Ini­tia­tive. While the US sees the ini­tia­tive as a ma­jor threat to its in­dus­trial ad­van­tages, which the Trump ad­min­is­tra­tion openly cited as a ma­jor rea­son be­hind its de­ci­sion to im­pose tar­iffs on Chi­nese prod­ucts, Ja­pan sees the ini­tia­tive more as an op­por­tu­nity.

Ac­cord­ing to a re­port in the Nikkei Asian Re­view pub­lished on April 19, thanks to China's en­deav­ors to pro­mote ad­vanced man­u­fac­tur­ing as part of the ini­tia­tive, Ja­pan's ex­ports of semi­con­duc­tor equip­ment to China in the last fis­cal year in­creased by al­most 50 per­cent over that of two years ago, with ex­ports of metal pro­cess­ing ma­chin­ery surg­ing by nearly 70 per­cent.

“The Chi­nese mar­ket has be­come in­creas­ingly im­por­tant for Ja­panese en­ter­prises, es­pe­cially those in the hi-tech sec­tor such as ar­ti­fi­cial in­tel­li­gence, elec­tric cars and dig­i­tal in­dus­tries,” Liu Jun­hong, a re­search fel­low from the Chi­nese In­sti­tute of Con­tem­po­rary In­ter­na­tional Re­la­tions told Newschina. Liu said that as the re­la­tion­ship with Ja­pan soured in the past years, China turned to other ma­jor in­dus­trial coun­tries, such as the UK, Ger­many and France for co­op­er­a­tion, which put Ja­pan in a dis­ad­van­taged po­si­tion in the com­pe­ti­tion for China's mas­sive mar­ket. “Ja­pan has a lot of ground to make up now,” Liu said.

In an ar­ti­cle pub­lished on com­men­tary site China-us Fo­cus on May 21, Liu stressed that as Ja­panese com­pa­nies de­rive more than 45 per­cent of their over­seas in­come from China and ASEAN coun­tries, over­tak­ing rev­enues from Europe and the US, the Asian mar­ket has be­come the top fo­cus for Ja­panese com­pa­nies. By trans­form­ing the China-ja­pan re­la­tion­ship from com­pe­ti­tion to co­or­di­na­tion, it will not only help Ja­panese com­pa­nies to gain fur­ther ac­cess to the Chi­nese mar­ket, but also those of other Asian coun­tries.

‘Re-nor­mal­iza­tion’

Be­sides the con­crete agree­ments reached dur­ing Abe's trip, an­other key­note de­vel­op­ment was Abe's an­nounce­ment that Ja­pan will ter­mi­nate its Of­fi­cial De­vel­op­ment Aid (ODA) scheme to China. Dur­ing his meet­ing with Xi, Abe said that the pro­gram has “com­pleted its his­tor­i­cal mis­sion,” to which Xi re­sponded by prais­ing the ODA for “play­ing a pos­i­tive role” in China's de­vel­op­ment.

Launched when China and Ja­pan signed the Treaty of Peace and Friend­ship in 1978, this ODA pro­vided China with loans, grant aid, and tech­ni­cal co­op­er­a­tion to­tal­ing 3.65 tril­lion yen (US$32B) over four decades.

While Ja­pan viewed the pro­grams as a pol­icy tool that served to sup­port China's eco­nomic re­forms and strengthen bi­lat­eral ties, the ODA is widely viewed in China as an un­of­fi­cial re­place­ment for war repa­ra­tions, a re­cip­ro­cal re­sponse to China's de­ci­sion to waive the de­mand for war repa­ra­tions when it es­tab­lished diplo­matic re­la­tions with Ja­pan in 1972.

Since reach­ing its peak in 2000, the amount of ODA has steadily de­creased in the 21st cen­tury. In 2008, Ja­pan ceased pro­vid­ing new

loans to China, and the amount of grants and tech­ni­cal co­op­er­a­tion fur­ther plunged fol­low­ing the de­te­ri­o­ra­tion of the bi­lat­eral re­la­tion­ship in re­cent years. In 2015, the to­tal amount of ODA Ja­pan pro­vided to China was merely 913 mil­lion yen (US$8M). In the mean­time, China it­self has be­come a ma­jor source of for­eign aid and fi­nan­cial sup­port to other coun­tries.

From the em­pir­i­cal point of view, the im­pact of the ODA'S clo­sure seems rather triv­ial. But sym­bol­i­cally, the pro­gram's ter­mi­na­tion may mark the end of an era and the start of a new one in the his­tory of China-ja­pan diplo­macy.

To a large ex­tent, the ODA, some­thing that typ­i­cally only ex­ists be­tween a de­vel­oped coun­try and a de­vel­op­ing coun­try, em­bod­ies two men­tal­i­ties that have shaped Ja­pan's at­ti­tudes and poli­cies to­ward China. One is a su­pe­ri­or­ity com­plex that can be traced back to the Meiji era (1868-1912) when as Ja­pan be­came an in­dus­trial power, China fell vic­tim to West­ern im­pe­ri­al­ism, later re­in­forced with Ja­pan's post-war eco­nomic mir­a­cle in con­trast to the po­lit­i­cal and eco­nomic tur­moil of China in the same pe­riod.

The other is a guilt com­plex, stem­ming from Ja­pan's sta­tus as the de­feated coun­try in World War II and its wartime atroc­i­ties against China. Found mostly among the older gen­er­a­tion of Ja­pan, it was ar­gued to be a ma­jor fac­tor that prompted Ja­pan to launch the ODA pro­gram in 1978 when China was still an im­pov­er­ished coun­try.

But as China rapidly emerged to be­come a global power in the past decades, both men­tal­i­ties have been se­ri­ously chal­lenged. While the su­pe­ri­or­ity men­tal­ity has given way to a sense of anx­i­ety, the guilt com­plex rapidly evap­o­rated among the younger gen­er­a­tion, at­trib­uted to the per­ceived rise of “his­tor­i­cal re­vi­sion­ism,” which then re­sulted in more fric­tions with China.

“Un­til China emerged as a key diplo­matic and eco­nomic power in re­cent decades, Ja­pan had be­come ac­cus­tomed to think­ing of it­self as primus in­ter pares (first among equals) among Asian pow­ers and as the clos­est ally of the US. It saw it­self as the chan­nel through which Asia com­mu­ni­cated with the world,” ar­gued Anthony Row­ley, a vet­eran jour­nal­ist spe­cial­iz­ing in Asian eco­nomic and fi­nan­cial af­fairs in a Fe­bru­ary com­men­tary pub­lished by the South China Morn­ing Post.

A more re­cent ed­i­to­rial pub­lished on Oc­to­ber 14 by dwnews.com, an over­seas Chi­nese news site, ar­gued that the trou­bles of the bi­lat­eral re­la­tion­ship in the past years were at least par­tially caused by Ja­pan's un­easi­ness over China's rapid rise.

“In 2000, Ja­pan's GDP was four times that of China's, and it took only a decade for China to sur­pass Ja­pan in 2010,” reads the ar­ti­cle. As China's GDP has fur­ther ex­panded to reach more than 2.5 times that of Ja­pan in 2017, Ja­pan is fi­nally ready to ac­cept the reality of China's rise, ar­gued the ar­ti­cle.

There­fore, for many an­a­lysts, the ODA'S ter­mi­na­tion sym­bol­izes Ja­pan's ef­fort to es­tab­lish a new norm in its ap­proach to­ward China. In an ar­ti­cle pub­lished on eas­t­asi­afo­rum.com on Novem­ber 1, Shin Kawashima, a pro­fes­sor from the Uni­ver­sity of Tokyo de­scribed Abe's visit as a trip to “re-nor­mal­ize” its re­la­tion­ship with China. A ma­jor as­pect of the re-nor­mal­iza­tion ef­forts, he ar­gued, is to “re­align Ja­panChina re­la­tions to re­flect China's eco­nomic strength and po­si­tion as a global power.”

This ex­plains why Ja­panese of­fi­cials and ex­perts have re­peat­edly stressed the “equal­ity” na­ture of co­or­di­na­tion be­tween the two coun­tries, and es­pe­cially that on the global stage.

But so far, it re­mains un­clear what the long-term im­pact of this “re-nor­mal­iza­tion” of the bi­lat­eral re­la­tion­ship will be. But in the short term, it ap­pears that both lead­ers have de­cided to put aside their ter­ri­to­rial dis­putes in the East China Sea to ad­vance their com­mon in­ter­ests in the wider re­gion.

In the run-up to his visit to China, Abe avoided us­ing the word “strat­egy” when re­fer­ring to his iconic con­cept of a “free and open Indo-pa­cific,” which Ja­pan's Ky­odo News Agency said was aimed at down­play­ing the hos­tile con­no­ta­tion per­ceived by China.

For pro­fes­sor Akio Taka­hara, Ja­pan's “free and open Indo-pa­cific” con­cept can co-ex­ist with China's Belt and Road Ini­tia­tive, with each coun­try call­ing their jointly launched projects part of their own ini­tia­tives. “Through this ap­proach, the China-ja­pan re­la­tion­ship can gen­uinely move from com­pe­ti­tion to co­or­di­na­tion,” Taka­hara said.

Chi­nese Pres­i­dent Xi Jin­ping meets with Ja­panese Prime Min­is­ter Shinzo Abe at the Diaoyu­tai State Guest­house, Bei­jing, Oc­to­ber 26, 2018

Ja­panese Prime Min­is­ter Shinzo Abe gives a speech at the first China-ja­pan Third Party Mar­ket Co­op­er­a­tion Fo­rum which he at­tended with Chi­nese Premier Li Ke­qiang, Bei­jing, Oc­to­ber 26, 2018

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