China and Japan should enhance economic
cooperation in spite of political differences
Trade
between China and Japan hit a record high of $340 billion in 2010, but has been
declining ever since. In 2013, bilateral trade shrank to about $315 billion. It
was understandable as a consequence of disputes over the Diaoyu Islands; yet it
still was an unusual state between two political and economic powers with close
ties. Decreasing economic cooperation will end up damaging both sides. Leaders
of China and Japan should seriously consider how to manage the economic
relationship between the two countries, and what policy should be adopted.
Rethinking the standoff
In an
economic confrontation, the country with less economic strength always loses
more than the one with a stronger economy. China and Japan are likely of equal
economic strength. Although China's GDP has doubled that of Japan's, it still
relies on Japan in fields like investment, advanced technology and equipment.
On the flip side, Japan relies heavily on China's huge market. Any economic
confrontation between them inevitably will result in a no-win situation. Major
countries in the world are devoted to developing their economies while
promoting connections between each other so as to increase economic
cooperation. Against this backdrop, if China and Japan continue confronting
each other economically, they are sure to fall behind other countries' economic
development and the world's globalization process.
The
Diaoyu Islands issue is unlikely to be resolved anytime soon. Considering the
stubbornness of territorial conflicts, China and Japan's economic confrontation
will continue into the long term if they choose it as a method to deal with
disputes over the islands. A full conflict between China and Japan, including
economic confrontation, would be simply irrational and unproductive.
Economic
sanctions are effective only when there is a wide gap between the countries'
economic strength. If the two countries sanctioning each other are of equal
strength, they can easily find substitute products or markets. For example,
China can import more hi-tech products it needs from Europe and the United
States, while Japan can enlarge exports and investment to ASEAN countries. In
the event of failed sanctions, both sides face a lose-lose situation.
Abenomics,
the economic stimulus policy that Japanese Prime Minister Shinzo Abe is
implementing, is running into a dead end. Large-scale quantitative easing, bold
public investment and the depreciation of the Japanese yen have stimulated
Japan's economy so intensely that it may bring about a serious economic
imbalance if these policies continue. Meanwhile, China's economic slowdown is
also threatening the country's healthy development. Under these circumstances,
China and Japan must adjust or abandon their mutually contradictory economic
policies, for their own benefit and development.
In
fact, Japan's tactic of exploring the Indian market as a replacement for China
has had lackluster results, in part because Japanese investors frequently
encounter obstacles in the Indian market, which is not nearly as mature as
China's. The situation in the ASEAN market is only slightly better. However,
instability in ASEAN nations caused by corruption and internal turbulence is
not beneficial for Japanese investors, who can always gain enormous profits in
China.
Thus
far, neither Beijing nor Tokyo has found a solution to their territorial
disputes. At the same time, Abe's right-wing administration insists on
misguided acts and statements, aggressive diplomatic propaganda and military
preparation targeted at China. Consequently, China scarcely has a chance to
come to terms with Japan in politics, security and military areas. Therefore,
the political stalemate between the two East Asian neighbors will not only be
inevitable, but also long-lasting. The two governments must handle bilateral
economic relations and policies amidst a long-term political standoff.
Let's talk business
Close
economic cooperation surely can deepen ties and communication in various areas,
promote mutual exchanges and understandings, and provide economic and popular
support for ameliorating future bilateral relations. But enhancing bilateral
relations never is a corollary of increasing economic cooperation. Chinese and
Japanese governments should make more efforts to develop bilateral economic
relations, and treat it as a practical approach to gaining profits for their
own.
Japanese
leaders have no fantasy of promoting bilateral relations by intensifying
economic links. On the contrary, they often express their fear of a close
China-Japan economic relationship. But China usually magnifies the function of
boosting economic relations. Currently, both countries' attitudes are
inadequate. Japan's fear of deeper economic cooperation actually means giving
up major practical economic interests from China. Its choice to seek interests
in India and ASEAN nations is a policy that requires long-term input but leads
to small output.
China's
expectation of economic relations is impractical, and ignores the fact that a
close economic relationship alone cannot be decisive due to the complicated and
profound territorial and historical disputes between China and Japan. By
approaching bilateral economic cooperation in a more practical fashion, Japan
could cease seeking out misguided alternatives to the lucrative Chinese market,
while China would be able to maximize potential economic benefits.
To
protect their respective national interests, China and Japan should separate
their economic bonds from bilateral political, security and military relations.
In this way, while insisting on their opposing principles, stances and acts in
the political field, the two neighbors will still be able to deepen their
economic cooperation. Neither of them will feel as though they are stooping to
compromise, but will rather believe they have defended their national interests
through economic cooperation. Moreover, such a policy satisfies popular
emotions and material demands. Therefore, it is the second best choice that can
meet both immediate and long-term needs in spite of difficult political
relations.
They
also need to promote cooperation in big economic projects, particularly to
advance the building of a China-Japan-South Korea free trade area. Meanwhile,
leaders of the two sides should maintain contact in order to practically boost
economic cooperation. During their meetings, leaders of the two countries can
choose to focus on economic cooperation, without mentioning political, security
and military topics, or expressing their political, security and military
principles and stances. Such an interaction pattern will push forward bilateral
economic cooperation, while achieving consistent economic goals.
Japan's
diplomatic activity with China is usually courteous but lacking in sincerity,
which is a flexible way of interacting. The government treats diplomatic
exchanges with China as a publicity stunt, because it at least can win popular
domestic support when no diplomatic achievement is made. China, which generally
conducts diplomatic activity solemnly and holds high expectations, often feels
disappointed when diplomacy fails to create positive outcomes. Now China is changing
its attitude, and lowering political, security and military expectations when
meeting with Japanese leaders. This more realistic approach may be helpful in
easing up bilateral and regional tensions.
Zhou
Yongsheng
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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