Describing by Japanese Prime Minister Shinzo Abe as a “historic turning point”, his recent trip to
Beijing starts a new era in Sino-
Japanese relations. Embarking on a new ‘China strategy’, this visit also marks
the 40-year anniversary of the China-Japan Treaty of Peace and Friendship and this
visit was the first by a Japanese leader to Beijing in seven years. Setting aside any previous rivalry, China and
Japan have agreed to boost their economic ties, forget their political
differences and boost free trade.
Adopting a practical and more realistic approach,
Sino-Japanese ties are much more stable now as their converging interests bring
them closer and increase their co-dependence. Recognizing this fact, even President
Xi said that, “As the international situation changes,
China and Japan are becoming increasingly dependent on one another. The rapid
changes in the world are providing China and Japan with opportunities for more
in-depth cooperation.” If their bilateral terms continue on a positive
trajectory without getting upset by the ongoing great game, this equation would
result in the following scenario.
Firstly, this would
consolidate Asia’s two biggest economies which are also the world’s second and
third economy and make the ongoing trade war lose its velocity. Quite obviously,
both Tokyo and Beijing are looking out to prepare for any international trends
that could harm their interests. Even though the major target of tariffs has been
Chinese exports up till now, a broader fallout of such moves hits Japan as well
and it does seem quite likely that the U.S. will extend the tariffs to Japanese
auto exports in the coming days. These days, Japan has been supplying a lot of
essential components required in Chinese finished goods and some of the U.S.
sanctions against China already hit this extremely profitable arrangement which
utilizes China’s capabilities in manufacturing and Japan’s expertise in science
and technology.
Secondly, China has become a top economic priority for
Japan but it remains to be seen whether it is as indispensable for China. Ever
since the bilateral economic dialogue was revived between Japan and China,
things started improving for Japanese trade which underwent sharp fluctuations
in the past. Since 2017, China became Japan’s biggest trade partner and
bilateral trade now stands at around $300 billion. Considering that exports
from Japan have had a 14 percent increase in exports to China from January to
August this year, maintaining good relations with its past rival is now a compulsion
for Japan. Even though it has foreign exchange reserves worth around $2.9 trillion,
Japan had been faced with economic stagnation since two decades and trade with
China in the first half of this year has raised its economic growth by 1
percent already.
Thirdly, it is significant that both countries have
now started joint business investment and 50 deals in joint
infrastructure projects were announced. Investment co-operation on such a
massive scale could be on BRI projects as well but the details are not known
yet. As both nations have similar development ventures enshrined in their
long-term foreign policy strategy, working together on the BRI is to be
expected and this is a major development.
In all, the Japanese business delegation has finalized 52 deals
worth around $18 billion in third-party markets and one joint major smart- city
project in Chonburi, Thailand. Not only that, a bilateral currency swap arrangement was decided which was
activated with immediate effect lasting until nearly the end of the year 2021.
Under this mechanism, the exchange of local currencies is allowed between the
two central banks with a ceiling of $30 billion and a yuan clearing bank would
also be set up in Japan.
Boosting co-operation in securities markets including
the listing of exchange traded funds, both sides agreed to facilitate smoother
Customs clearance. Alongside, various
other broad-spectrum agreements ranging from finance and trade to security
listings were inked to help and enhance bilateral co-operation between the two
nations. Upgrading strategic ties, both sides have also agreed to hold a
meeting between defense officials at the end of this year. Since a while, both
states have also been mulling over setting up a hotline to prevent unintended
collisions in the area also known as the “Maritime and Aerial Mechanism.”
Notwithstanding their historical differences, Japan
and China have undoubtedly covered a lot of area and remarkably sorted out
their divergences in a very short time. Basically, the trade war is becoming a
menace for many of the export economies that fear that they might be affected
in the long run and it is understandable that Japan wishes to protect its
interests. Recently, major multi-lateral agreements such as the Paris climate
accord and the JCPOA nuclear deal with Iran have been done away with and the
IMF has warned about financial turmoil in the future. As the current global
environment is erratic and unstable, it is prompting countries to regroup and
protect their interests.
Interestingly,
Prime Minister Shinzo Abe has met the Indian PM immediately after his return to
Tokyo and Japan’s participation in the Belt and Road Initiative must have been
part of the discussion. It is a known fact that India disapproves of the BRI,
and Japan’s recent overtures towards China are bound to have some effect on
India’s stance towards the mega-project. Perceived also as a die-hard U.S.
ally, it might become hard for Japan to keep up with China as well in the
future even though maintaining ties has become vital for its business interests.
Though it is largely unclear how Japan intends to balance all three of these
countries in the days ahead, it must have worked out new ways.
Summing it up, if China and Japan can maintain this
bonhomie and avoid friction in the months ahead it will be no small achievement
and promises to have lasting impact on the Asia-Pacific region as well as
global affairs.
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