If we take a closer look at the commercial and financial routes between Japan and China, we could easily tell that there are no signs of a strained relationship between these two neighboring countries. Trade numbers are great and Japan appears to be doing everything in its power to sustain these routes and keep them open.
Let’s take one of the latest statistical pieces of data on trade as an example: 35% of all the goods that Japan sold during the first seven months this year to entire Asia found its way into China. When we compare this number to the one of last year, we can see that the increase is significant, as it stands at 10.6%.
We all know that Japanese export numbers are insanely high, and 20.5% of all exported goods and services are bought by China. This is really important considering that 2016 was the year when Japanese export to China was in a 6.5% decline.
China is Japan’s most important partner and the economy of Japan keeps on growing thanks to the Chinese market. Since the beginning of 2017, the Japanese export business to China contributed 33% to Japan’s entire economic growth.
Shinzo Abe, the Prime Minister of Japan, closely oversees the situation. After his party won the elections in December 2016, he said that China remains one of the most important partners of Japan, enabling the growth of Japan’s economy. He also expressed goodwill towards finding solutions for political problems, worried that the political issues may lead to economic issues, something Japan’s economy could not withstand.
The Roadblocks to Japan-China Business
To understand why the Prime Minister’s statement after winning the elections in 2016 caught so much attention, we have to go back in time. Shinzo Abe was the man behind the famous “Take Back Japan” campaign. The parliamentary majority supported the candidate and his vision.
Abe’s efforts in the Japanese Diet were noticed by Japan’s largest neighbor as well. On the surface, the campaign appeared to be very beneficial for the revival of Japan’s economy. However, under the hood, the chosen methods quickly caught the attention of both Seoul and Beijing. What was it that alarmed Japan’s partners?
First of all, it was Japan’s intention to revive its economy through aggressive monetary easing by bringing down the value of the Yen. Then there was a part where this campaign drew a tough line on Japan’s territorial disputes with South Korea and China. And lastly, the campaign pushed controversial interpretations of Japan’s history with China and Korea.
China and South Korea reacted quickly. But the long-term trading contracts and Japan’s increasing sales efforts sustained the exports to China. The numbers didn’t show any influence of the political issues on the economic trends. At least not in 2013 and 2014.
In the following two years, political relations became worse. The business relationship between Japan and China has suffered. It explains the 6.5% decline in Japan’s exports to China.
While Beijing took action and reduced the import, it didn’t stop Japan’s officials from going to China and trying to mend things. In fact, Japanese parliamentary delegations visited China on many occasions asking Beijing for understanding and offering new ways of cooperating in terms of trading. Unfortunately for Japan, the change in the U.S. politics gave China other options.
In November 2017, Japan’s Prime Minister met with Chinese President Xi Jinping in the city of Da Nang. During the Asia Pacific Economic Cooperation (APEC) meeting, the leaders agreed that they needed a fresh start. Xi Jinping was very firm about making the necessary steps towards efficient management of the past and current disputes between the two countries.
Sadly, all of this was just a bit of goodwill and an inspiring tale of the APEC 2017. In reality, nothing has changed, even though both countries were well aware of the importance of maintaining and improving commerce and financial routes. Their differences appeared to be a major obstacle standing in the way of a better future for both countries.
Since the beginning of 2017, the Japanese export business to China contributed 33% to Japan’s entire economic growth.
Beijing Tries to Leverage Japan with Historical Issues
Two weeks ago, more precisely on August 28th, Tokyo published its defense paper. Xinhua, a media house controlled by Beijing, had a thing or two to say about the newly published documents.
According to Xinhua, the paper has a 35-page long text containing highly sensitive remarks on China’s national defense system. This includes the Chinese activities in the East and South China Seas and the Diaoyu Islands (in Japan known as Senkaku Islands). Xinhua also used the opportunity to stress that these islands are China’s inherent territory in all terms, including legal, geographical, and historical.
Beijing also had few things to add to all of this. They said that Japan is exaggerating its China threat. In fact, Beijing went so far as to invite Tokyo to “regain trust from its Asian neighbors” and “reflect on its invasion history”.
Could the Trace Be a Stepping Stone for Further Improvements?
The numbers show that Japanese export to China has recovered during the last year. It seems that the officials on both sides have worked on contested territorial claims and strategic differences. On the other hand, all the disputes between these countries remain unsolved.
This brings us back to the reason behind the economic trade growth between these two countries. It remains unclear whether it’s the result of progress in resolving political issues or it was the consequence of US changing the security and trade policies toward East Asia.
The current state of things does not stem from the effective political change nor from a solution acceptable to both Japan and China. But it will definitely influence the following agreements and the general direction of Japan-China relations and mutual investment. Could the recovery in trade stimulate a better cooperation in other spheres, too? We would love to hear your opinion in the comment section below.