Asia-Pacific: The Odd Couple
Andy Xie (Hong Kong)
China and Japan have a booming economic relationship; each is the other's second-largest trading partner, just behind the US. But their political relationship is ice-cold. Is the current state of affairs sustainable?
The political tension has not yet affected the economic partnership so far. China just awarded the contract for building the fast train from Shanghai to Beijing to a Japanese company. Japanese companies continue to invest in China.
However, I believe the political tension will eventually affect the economic relationship. All it takes is an event that may cause Chinese to stop buying Japanese goods or Japanese to stop investing in China. The tense relationship between the two countries makes such an event more likely.
The anchor to the long-term stability in East Asia is the robust bilateral relationship between China and Japan. The presence of the US prevents the tension between the two countries from boiling over for now. But it is a temporary and unstable equilibrium.
The economic partnership is booming
I thought that China and Japan were natural partners ('Natural Partners', Financial Times, May 21, 2001). Japan's labor force is stagnating due to aging. It could redeploy its manufacturing capacity to China and import cheap goods to improve the living standard for an aging population. Japan could also export advanced equipment to China for its industrialization. In return, China gains access to a rich export market and advanced industrial equipment.
The bilateral trade has indeed bloomed. Japan's trade with China plus Hong Kong is likely to reach $211 billion, accounting for 20.5% of Japan's total trade and up from $113 billion in 2001. The bilateral trade has grown at 23% per annum since 2001 compared to 9.5% in the previous 16 years. Some of Japan's exports to China are reprocessed for third markets. But, most of the bilateral trade is for mutual demand (see 'Japan's Revival Is a China Phenomenon', May 27, 2004).
China has also benefited greatly from the booming bilateral trade. The employment that Japanese factories have generated is particularly helpful to China. The availability of advanced Japanese equipment has helped China's modernization. The US, for example, still bans exports of advanced equipment to China.
Japanese companies have also helped upgrade the quality of Chinese consumption. From consumer electronics, cars, to cosmetics, Japanese products maintain the highest quality. Chinese businesses are also learning management of large production system and quality control from Japanese businesses.
Why is the economic relationship so beneficial to each other? There are two main reasons. First, China is about 30 years behind Japan in production capability and, hence, does not pose a competitive threat to most businesses in Japan. Second, Japan has an aging population and does not lose much by shipping some production to China. This powerful win-win situation is causing the economic relationship to blossom.
But the political relationship is deteriorating
The top leaders in China and Japan are not visiting each other due to rising political tension. The Chinese government has apparently ceased high-level visits as long as Prime Minister Koizumi continues to visit Yasukuni Shrine where some Class A war criminals are buried.
Both countries suffer increasingly negative media exposure in each other. The Japanese media frequently features crime stories involving Chinese living in Japan. The biggest story on China when I visited Tokyo two weeks ago was how Chinese football fans abused the Japanese football team during the Asian Cup in Asia. The overall tone in Japanese media towards China has become more and more negative.
The Chinese attitude towards Japan is shaped by the experience from the anti-Japanese war that lasted for two decades. The wound has never been closed. Whenever the Japanese government seems ambivalent in acknowledging its war guilt, the Chinese become incensed. In response to the attempts to rewrite history by some groups in Japanese society, the Chinese government has been putting up more museums and monuments to memorize the war past.
When Chinese youth view the materials about the past, they become enraged. As Chinese youth become enraged, they express their sentiment in Internet chat rooms or jeer at Japanese footballers. The Japanese media report such incidents and, without knowing the context, help make the Japanese more negative about China. What is happening is a vicious spiral.
The foundation for the China-Japan relationship is still shaky
I have discovered over many years of visiting Japan that most Japanese actually don't know what happened during the Japanese occupation in China. The official policy to tell as little as possible or whitewash the past in history textbooks is one factor. The fear of discovering something ugly is more important, in my view, to prevent Japanese from learning about the past.
The Japanese are a group-oriented society and believe in collective guilt. If the past were presented in all its gory details, it would make life very difficult for Japanese. This is, I believe, why Japan is trying so hard to forget the past. The elite probably believe that they are doing a good thing for Japan by not imposing such heavy burdens on future generations.
In China, history is lived and relived repeatedly. History is the core of Chinese culture. Chinese people never forget the past. Many peoples invaded China before. But they all became Chinese eventually. I am not suggesting that the Japanese should become Chinese. But, I believe, Chinese people need an emotional closure to what happened. If Japan continues to ignore this, Chinese frustration with Japan would only deepen over time.
Many Japanese believe that time would eventually diminish the impact of the past. This may be true but would take a long time. The negative sentiment towards Japan in China is so deep-rooted and is very hard to dissipate, in my view. I visited some ancient Buddhist caves in Shaanxi Province over the summer. My tour guide, a young girl from a local village, pointed at the missing limbs and heads of Buddhist statues and said angrily, 'Japanese took them'. I ran into a worker the other day who worked at a Japanese factory in Shenzhen. 'I wonder what my grandfather would say about what I am doing', he commented on his job to me. I keep running into ordinary people who have powerful emotions towards Japan.
Towards strengthening the bilateral relationship
The US presence is the main reason that China and Japan are developing their economic relationship rapidly while allowing the political relationship to deteriorate, because both believe that the bad vibes would not spin out of control.
How long could Asia depend on the US presence to cover up their differences? It is a risky proposition to assume that the US will always remain so engaged in Asia. As the US obligations grow elsewhere, it is possible that it could disengage in Asia. If it were to happen, it could trigger an arms race between Japan and China, which would diminish the economic prosperity in East Asia.
A robust partnership between China and Japan is vital to the peace and prosperity in East Asia. To move forward, first, China and Japan should sit down discuss the past. Some sort of catharsis about the past is a necessary condition for building a robust relationship.
Second, China and Japan should enhance the knowledge that Chinese and Japanese have about each other. Stereotypes and prejudices dominate the two peoples' perceptions about each other at present. Increasing tourism and student exchange programs would help.
Third, to anchor the economic partnership, China and Japan should pursue a free trade agreement. The complementarities between the two economies make such an agreement highly beneficial to both. Increasing economic exchanges could enhance the mutual understandings of the two peoples.
Fourth, China and Japan should establish regular military exchanges to enhance mutual trust. Joint military exercises, for example, should be pursued. Some sort of military alliance between China and Japan is the only alternative to the US military presence for East Asian stability.
China and Japan should prepare for the day that the US would disengage from East Asia.
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