August 5th 2006

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Articles from this issue:

COVER STORY: Top manufacturer slams free trade 'fantasy'

EDITORIAL: Whom the gods wish to destroy

CANBERRA OBSERVED: Nelson turns blind eye to neglected defences

PRIMARY PRODUCTION: Australian Government cutting farmers adrift

QUARANTINE: Can we ensure zero risk on trade?

QUEENSLAND: Afraid of uttering the dreaded 'D' word

OPINION: Pregnancy counselling services under threat

STRAWS IN THE WIND: Israel and Hezbollah / Still call Australia home? / Night thoughts / Victoria and the pokies

OPINION: Robert Manne, the intellectual hero

HISTORY: Knowing history and knowing who we are

INTERNATIONAL AFFAIRS: China and Japan - partners or rivals?

TAIWAN: Taiwan President rocked by scandals

Government the problem, not the solution (letter)

Britain's home-grown terrorists (letter)

Parties under siege from radical feminists (letter)

THE MARKETING OF EVIL: How Radicals, Elitists, and Pseudo-Experts Sell Us Corruption Disguised as Freedom, by David Kupelian

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China and Japan - partners or rivals?

by Sharif Shuja

News Weekly, August 5, 2006
Will China's increasing economic power bring it into conflict with Japan and exacerbate the two countries' rivalry for regional leadership? Sharif Shuja examines the likely outcome.

China's hazardous combination of rapid economic growth, continuing "military modernisation minus transparency", and increased emphasis on naval build-up is of growing concern to the Japanese.

Although these factors have caused tension between China and Japan, in reality the two countries have too much to gain from mutual cooperation to let their ideological and other differences interfere with the establishment of improved relations.

There are real chances that China and Japan will cooperate and consolidate their relationship into one of trust and mutual accommodation. The interests of China and Japan appear complementary in many areas, and this common interest could foster Sino-Japanese cooperation on multilateral issues.

Korean Peninsula

Japanese leaders are increasingly stressing Sino-Japanese policy consultation and coordination in order to preserve regional peace and stability, such as in the Korean Peninsula.

It is stressed that maintaining and developing a good, stable relationship between Japan and China is important not only for Japan, but for the peace and stability of the entire Asia-Pacific region. Japan's aim is for China to become an integral part of the regional framework of peace and prosperity.

Issues, such as the problem of energy supply and demand, environmental degradation, the development and transfer of missile technology, and the military, political and economic situations in the Korean Peninsula, will significantly impact the relationship between China and Japan.

Besides, Tokyo does not want to risk losing cooperative opportunities with Beijing on issues of common interest, including expanding trade relations, solving environmental problems, enhancing regional cooperation, and denuclearising the Korean Peninsula. Thus, the Sino-Japanese relationship could become an important partnership.

The rapid growth of the Chinese economy over recent years has also reinforced the importance of Sino-Japanese economic relations as the spectre of trading blocs loom.

Increasingly, the economy of southern China has become more integrated with those of Hong Kong and Taiwan as overseas Chinese capital has returned to China.

China's newfound economic strength has not escaped Tokyo's attention. Recognising the importance of the economic integration of southern China with Hong Kong and Taiwan, Tokyo was enthusiastic in its support for the admission of China, Hong Kong, and Taiwan into the Asia-Pacific Economic Cooperation (APEC) forum in 1991.

Japan and China are rapidly becoming economically interdependent. Japan has been an important source of capital in China's economic modernisation, and China (including Hong Kong) is now Japan's largest trading partner. China has also served as a preferred production base for Japanese firms. Most Japanese business leaders and economic bureaucrats continue to view China's economy as complementary to their own.

As Japan's economic interests in China have evolved, its political dialogue with Beijing has also deepened. In 1998, for example, Japan and China agreed to annual meetings between their heads of state and an expansion of their dialogue to include security issues. In 2001, Japan, China, and South Korea agreed on an additional annual summit meeting among their respective economic ministers.

These episodes indicate that Japan has actually moved closer to Beijing, despite more than a century of enmity between the two countries, despite their competition to establish regional leadership, and despite an active lobby of "China hawks" in Tokyo.

As economic strength has become the major index of power, and with Japan having become an economic powerhouse, it might be reasonable to conclude that Japan's assumption of a major role in Asia is inevitable. Close political partnership with China would not only facilitate Japan's thrust for political influence in Asia, but also enhance its bargaining leverage over the United States and Europe.

For China, Sino-Japanese economic cooperation will help diversify China's foreign trade. Recent controversies over the renewal of China's Most Favoured Nation (MFN) trade status in the United States reminded Beijing of the disadvantage of being over-dependent on the United States for exports. Japanese support is also important for China's incorporation into regional economic frameworks, as evidenced in the admission of China, Hong Kong and Taiwan into APEC.

The Chinese leadership seems satisfied with the current state of economic relations with Japan. Beijing is looking to Japan for continued economic assistance to develop its economic and social infrastructure, as well as private investment and modern production technology. Thus, it is reasonable to conclude that economic gain, rather than political influence, has become the main motive behind China's recent attitude towards Japan.

Fortunately, the interests of China and Japan appear complementary in many areas. While China is a permanent United Nations Security Council member, it is a developing country economically. Although Japan is not a permanent member of the United Nations Security Council, it is a major player in the World Trade Organization (WTO)'s multilateral trade negotiations, and a member of the Group of Eight (known as G8).

Many Chinese, like their Japanese counterparts, have recognised that bilateral cooperation is not only in the mutual interests of the two countries, but also in the interest of peace and stability in Asia. Therefore, they are becoming more receptive to a politically assertive Japan in Asia. Although Japan aspires to be a regional power, its limited economic power, domestic stagnation, and the recent increase in its economic instability could limit its political aspirations.

United Nations

There are also indications that Japan and China are seeking bilateral cooperation in the United Nations. The simultaneous admission of the two Koreas into the UN in 1991 was the result of Sino-Japanese cooperation. Pyongyang, supported by Beijing, had long opposed the idea of two Korean seats in the UN, fearing that it would perpetuate the division of the Korean Peninsula. China eventually backed off from its long-time opposition, thus clearing up a major obstacle to admitting the two Koreas into the UN.

Regarding regional affairs, the interests of the two countries also appear to be complementary. While China appears to accept a growing Japanese political role commensurate with its economic might, Tokyo seems to believe that China's leverage over the North Korean regime is indispensable in Japan's bid for political influence in Asia. Sino-Japanese cooperation will undoubtedly continue to aid the maintenance of stability in the Korean Peninsula.

It should be noted that Japan has undertaken a number of international actions in recent months which have aroused Beijing's hostility. Among these are: (1) Japan's warning to China after it enacted its "anti-secession" law which legalised war with Taiwan; (2) Japan's attempt to secure a permanent position on the UN Security Council; (3) Tokyo's exploration permits for oil and gas in disputed waters of the East China Sea; (4) Tokyo's territorial claims over the Dokdo islets; and (5) the development of closer relations between Japan, the United States and Taiwan.

Prime Minister Koizumi Junichiro's visits to the Yasukuni Shrine also arouse China's hostility. The shrine commemorates the deaths of convicted war criminals as well as thousands of ordinary Japanese soldiers whose lives were lost in combat.

The controversial history textbook issue is yet another source of Sino-Japanese friction. In April 2005, a new history textbook, which both China and South Korea said had twisted historical facts and whitewashed Japan's war crimes, triggered anti-Japanese demonstrations in both countries.

There was also criticism of Chinese textbooks in Japan's media, suggesting that China should halt its nationalistic and anti-Japanese education. In any case, China's own sordid history of repression against its own people - including the Tiananmen Square massacre in 1989, genocide in Tibet, and fomenting of insurgencies in Asia from the 1940s to the 1970s - hardly qualifies it to criticise Japan.

The legacy of World War II continues to have repercussions on the bilateral relationship. The resentment against Japan among ordinary Chinese citizens is still very strong, even when relations between the two governments are amicable. Many Japanese tourists to China realise that Japan and the Japanese are not very well liked in China, despite the extensive, technical and financial assistance they provide to the country. In addition, some Japanese find business with China and the Chinese to be difficult.

While often outside the realm of government control, these misgivings could still be a source of diplomatic tension and put a damper on the Sino-Japanese partnership. However, China and Japan's rapidly growing economic interdependence could be the solution to this historical antagonism. It may also strengthen mutual trust and create more incentives for bilateral cooperation.

One final apprehension is that China's rapid economic growth may propel China into an economic rivalry with Japan in East Asia. This appears unlikely at present as China's economic interests seem to complement those of Japan.

The rapid growth of Chinese exports in recent years has been mostly in low-value-added products such as textiles and footwear, which are tangential to Japanese export interests. While China is paying more attention to export markets in Southeast Asia, it does not seem likely that the economic interests of the two countries will clash in this region in the foreseeable future.

As China is a major capital importer, China will not compete with Japan for direct investment in Southeast Asia. Large-scale yen loans are indispensable for Beijing to consolidate its investments in economic and social infrastructure. Japan will continue to be the largest foreign aid donor in the world, a contributor to aid programs, and to UN funding.

Legacy of World War II

While the legacy of World War II has kept alive mistrust between China and Japan, the two countries are making efforts to build mutual trust through bilateral dialogue. Growing interdependence and common interests that arise in the uncertain post-9/11 era will very likely ease the mistrust and overcome obstacles to a political partnership between the two countries.

Many factors favour close relations between Tokyo and Beijing. China has huge economic potential, and enjoys broad-based support from the developing world. Japan is a strong economic and technological power, and plays an important role among the industrialised countries.

Therefore, Sino-Japanese bilateral cooperation and interdependence are not only beneficial for the two countries and the Asia-Pacific region; they are also significant for promoting global cooperation and economic development.

  • Dr Sharif Shuja is an academic staff member of the International Studies Program at Victoria University.

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