Japan has refused to join Donald Trump’s trade war with China and joined the RCEP

In modern times, rational, pragmatic states envision a broad canvas of relations with all their formidable counterparts. They do not allow their divergent interests in any area of interaction to deter the convergent ones in others. They are rather always inclined to preserving and creating space for cooperation with other states in whichever sector it is possible. Japan’s approach towards China is a case in point.

Japan’s colonial past, Japanese war crimes, in particular, continue to leave indelible scars on the Chinese national memory. According to a 2017 BBC World Service poll, only 3% of Japanese people and 5% of the Chinese view each other’s nation positively. According to eminent American expert on East Asia, Ezra Vogel, who passed away the other day, the feeling of this positivism towards each other has improved to over 10% in recent years.

Besides, Tokyo has had political friction with Beijing over the sovereignty of the Senkaku islands that China calls Diaoyu islands. Japan today is concerned at China’s military build-up and assertive behaviour in the East and South China Seas. In order to checkmate any possible Chinese designs on this front, Tokyo is said to be considering even to develop strike weapons such as cruise missiles that could reach ground targets in China. Tokyo has also formed the Quadrilateral Security Dialogue with Washington (New Delhi and Canberra) to address its mounting concern about Chinese behaviour in the region.

However, Japan has never allowed such irritants to affect adversely its economic relations with China. Authentic studies say Japan-China relations have been “cold” in politics but “hot” in economics. Tokyo was ahead of Washington in its effort to create economic relationship with China. Before then American President Richard Nixon visited China in the early 1970s, several Japanese trade missions visited Beijing to negotiate trade agreements with China. Then Japanese Premier Eisaku Sato would say “Japan has no diplomacy unless we come to grips with the China policy”.

China was the largest beneficiary of Japan’s Official Development Assistance (ODA) programme between 1979 and mid-2000s. From 1979 to 2018, Japan provided ODA worth 3.65 trillion yen ($32.4 billion) in loans, grants and technical cooperation to China. China used Japan’s ODA to modernise its infrastructure such as roads, schools, airports and power stations, as well as infrastructure projects in medical and environmental areas. Japan scrapped any new ODA to China only in 2018. Its FDI has surged in China post-2010.

Today Japan is China’s third-largest source of foreign investment. Japan is China’s third-largest trading partner. Trade has increased from $1 billion to some $317 billion over the past 45 years. China is Japan’s largest export market and trading partner. It represents more than 20% of Japan’s total trade.

The total stock of Japanese foreign direct investment in China stood at over $124 billion at the end of 2018. According to an estimate, in 2019, 1,000 new Japanese companies were set up in China. As of the end of 2019, Japan invested $115.70 billion in China, ranking first of all countries.

Chinese tourists have been the biggest group visiting Japan in recent years. In 2018, some 8.4 million Chinese tourists visited Japan and spent a whopping $13 billion, accounting for nearly 34% of all spending by foreign visitors. In 2018, over 115,000 Chinese students went over to Japan. Today over 2.7 million foreign residents are estimated to be in Japan. Of this, Chinese nationals account for the largest group, with close to 800 thousand.

Signs are Sino-Japanese economic relationship will continue to flourish in future. Despite the adverse economic impact of the Covid-19 pandemic the world over, there is an uptick in Japan’s trade with China. Bilateral trade between China and Japan in the first half of 2020 was estimated close to $150 billion. Japan’s investment in China was about $2 billion.

In their telephonic conversation in September this year, Chinese President Xi Jinping and Japanese Prime Minister Yoshihide Suga agreed to deepen their economic cooperation and deal with challenges posed by the pandemic.

In a recent interview to a Japanese newspaper, Chinese Ambassador to Japan, Kong Xuanyou hoped Chinese President Xi’s upcoming visit to Japan should be helpful in building China-Japan relations.

The atmosphere for better economic ties looks conducive. Despite its strong military and security linkage with Washington, Tokyo has not bought American President Donald Trump’s phrase “the Chinese virus” to refer to the Covid-19 pandemic. Japan has refused to join Trump’s trade war with China and joined the Regional Comprehensive Economic Partnership (RCEP), which is believed to be dominated by China. Japan has also not followed America’s lead against China’s Belt and Road Initiative. It is said to be seeking to cooperate with the project.