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China and Japan: The separation of economics and politics
Willy Lam
9/10/2004

The soon-to-be-announced appointment of former Vice-Foreign Minister Wang Yi as Chinese Ambassador to Japan is emblematic of efforts by the Hu Jintao-Wen Jiabao leadership to improve Sino-Japanese relationship. In the past year, bilateral ties have deteriorated due to a host of issues ranging from "the question of history" – and compensation for World War II-related damages – to altercations over rights to oil and gas under the East China Sea. Protests by nationalistic Chinese groupings outside the Japanese Embassy in Beijing, banned until about two years ago, have become almost routine. Ugly scenes at a recent soccer match between the two national teams in the Chinese capital demonstrated the hostility with which many Chinese regard their next-door neighbor. And in Japan, the "China threat" theory is fast gaining ground owing to the perception that an economically and militarily strong China is throwing its weight around and threatening Japanese interests everywhere.

A Chinese source close to the foreign-policy establishment in Beijing said the Chinese Communist Party's (CCP) Leading Group on Foreign Affairs, headed by President Hu, recently decided that Beijing needed to take some initiative in mending fences with Japan. Wang, a fluent Japanese speaker who had served in the Chinese Embassy in Tokyo, is tasked with making recommendations to the CCP leadership on how to ameliorate bilateral ties. While Beijing had in the past sent diplomats with vice-ministerial rank to be top envoys to the U.S. or the United Nations, it is rare that such a senior official be posted overseas as ambassador.

The Chinese source said advisers to Hu and Premier Wen had suggested a course of action toward Japan that emphasized the "separation of politics and economics." This means that both countries should look for ways to – at least for the time being – shelve or play down differences over political and diplomatic issues such as the "question of history." At the same time, more focus should be put on benefits derivable from economic and energy cooperation. For example, according to one proposal by a semi-official Chinese think tank, both Beijing and Tokyo should reiterate that sovereignty disputes over the Diaoyu – or Senkaku – islands be set aside until the next generation. Groups asserting Chinese sovereignty over the Diaoyu archipelago have repeatedly sailed to the islands and clashed with Japanese coast-guard vessels.

It is understood that Chinese leaders and their advisers have studied in detail how the two adversarial neighbors have suffered damages through bitter battles to secure Siberian oil from Russia. While final decisions still have to be made, Moscow seems to favor the Japanese plan of building an oil pipeline to the pacific port of Nakhodka just opposite Japan, while cutting out China. However, because Moscow has been playing China off against Japan, Tokyo will end up paying much more to Russian state oil companies. The conclusion of Chinese strategists is that if China and Japan had cooperated in negotiations with the Russians, both countries would have reaped substantial gains.

According to the "separation of politics from economics" game plan, China and Japan should pursue more cooperative projects in manufacturing and services, particularly in the technology sector. This would entail more Chinese investment in Japan, and vice versa. While Japan seems to have lagged behind the U.S. and Europe in getting into the China market through direct investments or joint ventures, sectors of Chinese industry ranging from automobiles to electronics are eager to secure Japanese know-how. And although diplomatic ties have worsened, bilateral trade reached $133.6 billion last year, up 31 per cent from 2002.

The past month or so has witnessed efforts by Chinese authorities to at least generate some good vibes for bilateral relationship. The PLA leadership has agreed to send a delegation of young and middle-aged officers to Japan to tour facilities under the Self-Defense Forces. Authorities in Zhejiang Province last month forbade Zhejiang University students to wear a "Reject Japs" T-shirt to mark the August 15 World War II Victory Day – and to call for a boycott of Japanese goods. The official media also expressed disapproval of calls by anti-Japanese groups to prevent China's new national identity cards from being printed in a factory that has Japanese investment. Despite massive opposition, particularly from angry Netizens, quite a few experts in the Ministry of Railway still favor using Japanese bullet-train technology for the important rail link between Beijing and Shanghai.


Practical difficulties, however, have bedeviled quite a number of potential big-ticket joint-ventures. For instance, moderate politicians and intellectuals in China and Japan have proposed the joint development of oil resources under the East China Sea, one of the most nettlesome issues in bilateral ties. However, two major Chinese state oil companies, China Petroleum and Chemical Corporation (Sinopec) and China National Offshore Oil Corporation (CNOOC), have already started drilling in the Chunxiao Oilfield, which is situated very close to what Tokyo considers to be the "mid-point boundary" between the two nations. Beijing enjoys one clear advantage: the bulk of the continental shelf on the Chinese side is flatter and more shallow than on the Japanese side, meaning that exploitation will be much less costly for the Chinese. In light of this, there is little incentive for either the Chinese government or the oil firms to give Japan a piece of the action. Tokyo, however, is complaining that Chinese drilling activities in Chunxiao would suck up oil and gas that lie under seas within Japan's exclusive economic zone.

The biggest obstacle to restoring Sino-Japanese good will, however, is that as nationalism is rising in both countries, it is often difficult to separate politics from economics. The CCP leadership's perception of Japan-US and Japan-Taiwan relations will continue to wreak havoc on bilateral ties, including economic cooperation. Beijing is very nervous about what it sees as Tokyo's enhanced cooperation with Washington in the latter's long-standing "containment and encirclement policy" against China. Internal CCP papers have referred to Japan as "the Asian headquarters of the American military machine." This follows recent reports about US-Japanese agreements on more extensive use of Japanese bases by American forces. Chinese officials have also asserted that Washington is encouraging Tokyo to revise Japan's constitution and laws to give Japanese defense units more leeway in operations in neighboring waters and air space.

Beijing's worst nightmare is that, should the CCP leadership take the military option against Taiwan, both U.S. and Japanese forces would help the island defend itself. A late August article in the official International Herald Leader noted that the U.S. and Japan had already established a "broad-band information chain" to share intelligence and military technology and that there was a possibility of this hi-tech lifeline being extended to Taiwan. "Because of factors including history, culture, economics and strategy, Japan has a special ‘complex' regarding Taiwan," wrote IHL journalist Zhang Hua. Privately, Chinese officials have warned Tokyo not to get entangled in a Taiwan Strait battle. Beijing has made it clear that should Tokyo provide bases to American jet fighters or naval vessels involved in a China-Taiwan conflict, Chinese authorities would consider Japan to be a belligerent party – and that the PLA would seek reprisals against the country.

Diplomatic analysts in Beijing said the Chinese would be happiest if Tokyo were to take the stance recently evinced by Australian Foreign Minister Alexander Downer. While in Beijing last month, Downer said Canberra had no obligation to side with the U.S. in the event of a cross-Strait war. He indicated that the Australia-New Zealand-United States (ANZUS) treaty was only binding when any of the signatories was attacked. "Some other military activity elsewhere in the world, be it in Iraq or anywhere else for that matter, does not automatically invoke the ANZUS treaty," he said. While Downer and other members of the Australian government subsequently toned down those remarks, Beijing hopes that some kind of "Australian model" will be followed by America's Asian allies such as Japan, South Korea and Philippines.

Diplomatic analysts say if Tokyo were willing to seriously consider a stance of "neutrality" in a possible China-Taiwan military conflict, Beijing would be inclined toward rewarding its neighbor with favors, including supporting Japan's bid to gain a permanent seat on the U.N. Security Council. At this stage, however, most Japanese officials and citizens seem disturbed by the apparently non-peaceful rise of Chinese economic and military prowess, as demonstrated by the PLA's saber rattling over Taiwan. And Tokyo's decision to form an even closer alliance with the U.S. has enjoyed popular support. While the economic relationship between the two Asian giants is tipped to flourish throughout this decade, business benefits alone are hardly sufficient to paper over their deep-seated – and worsening – suspicions about each other.

Willy Wo-Lap Lam, one of Asia's best known journalists and authors, is a senior China analyst at CNN's Asia-Pacific Office in Hong Kong.

This article appears on AFAR with permission from Jamestown Foundation, China Brief.

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