Category Archives: China-Japan

China And Russia Fly Too Close For The Quad’s Comfort

A Russian TU-95 bomber and Chinese H-6 bombers fly over East China Sea in this handout picture taken by Japan Air Self-Defence Force and released by the Joint Staff Office of the Defense Ministry of Japan March 24, 2020.

CHINESE AND RUSSIAN nuclear bombers conducting a joint exercise over the Sea of Japan while in Tokyo the leaders of Japan, the United States, India and Australia are discussing regional security sends a particular message of togetherness on the part of Beijing and Moscow.

The aircraft (seen above in a Defence Ministry of Japan photograph) did not breach territorial airspace. However, Japan’s defence minister, Nobuo Kishi said it was the fourth time since November that long-distance joint Russian and Chinese air force flights have passed near Japan. Such flights date back to at least 2019

Beijing has been ambivalent about Russia’s invasion of Ukraine, despite the effusiveness of Presidents Xi Jinping and Vladimir Putin when they met during the Beijing Winter Olympics in February over their relationship ‘without limits’. It adds another headwind to those buffeting China that Xi could do without.

Nonetheless, the invasion has connected the security situations at Asia’s eastern and western extremes. The meeting of the four leaders in Tokyo under the auspice of the Quadrilateral Security Dialogue (‘the Quad’) was plain on that point. However, they were as explicit in saying the Quad is not an embryonic ‘Asian NATO’ as Beijing has been about claiming its relationship with Moscow is not an alliance.

Neither assertion cuts much ice with the other. Nor is there much getting around that an alternative international governance model for the region just sounds like another way of describing challenging China’s regional expansion.

The Quad has no formal institutions (unlike NATO). It has conducted joint naval exercises, but it is also looking to advance its soft power by promoting intra-regional cooperation in areas like ‘green’ transport, climate change and cybersecurity.

This modular approach to regional security aligns closely with the Biden administration’s preference for building coalitions of countries and institutions around specific mutual needs — and defining security extremely broadly — rather than traditional security alliances and trade agreements. The newly announced Indo-Pacific Economic Framework fits that mould, too.

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History Lays Landmines For Marketers

TO PARAPHRASE EDMUND BURKE, the Anglo-Irish political philosopher, those who don’t know history are doomed to be fined for it.

Chinese authorities have fined Sony’s Chinese subsidiary 1 million yuan ($155,000) for announcing a product launch event for a new camera, the A7, that was to have been held on the opening day of a trade fair in Shanghai on July 7, Japan’s Nikkei reports.

The date marks the anniversary of the Marco Polo Bridge Incident in 1937, generally considered to be the start of the Second Sino-Japanese War.

There was an immediate backlash in China when the date was first announced. The new camera’s reported marketing tagline ‘Capture More of Your World’ probably did not help. Sony apologised suitably profusely and cancelled its event.

Nonetheless, authorities have gone ahead with imposing the fine, the maximum allowed, citing violations of China’s advertising laws that forbid online advertisements from hurting the dignity or interests of the state. Authorities found that Sony had hurt the dignity of the nation.

Authorities also said they fined the Chinese unit of South Korea’s Samsung Electronics 400,000 yuan because its advertisements for two smartphone models violated laws forbidding the disrupting of social order and spurring disobedience.

Last year, the Japanese gaming giant Capcom found itself caught up in a PR whirlwind in China after using ‘918’ as the passcode for the launch of Resident Evil 3. Patriotic social media users took this as a reference to the Mukden Incident on September 18, 1931, which Imperial Japan staged and then used as a pretext for its invasion of China.

Just the previous month, Tencent had removed a popular Japanese anime and manga, My Hero Academia, from its streaming services following Chinese claims that a newly introduced character was a reference to Unit 731, the Japanese military’s biowarfare research unit during the Second World War, responsible for hundred’s of thousands of deaths.

The only safe dates for Japanese product launches in China might be August 15, the anniversary of Emperor Hirohito announcing Japan’s surrender to end the Second World War or September 2, the date of the surrender ceremony and the formal end of the Second Sino-Japanese War.

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RCEP Provides Beijing With A Win-Win

Schematic representation of membership of the East Asia Summit, RCEP, ASEAN, the Quad and the CPTPP or TPP-11. Graphic: China Bystander.

CHINA IS ON the north-northwestern rim of the Regional Comprehensive Economic Partnership (RCEP). Yet it will be at the heart of the economic bloc that the trade agreement will cement.

RCEP is due to be signed on November 15 during the virtual twin ASEAN and East Asia Summits. The latter involves the ASEAN Plus Six — the six being China, Japan, South Korea, India, Australia and New Zealand — and the United States and Russia. As RCEP does not include India, the United States or Russia, it will have a summit of its own, too.

The 15 RCEP members (China, the ten ASEAN nations, and the four other countries with which ASEAN has free trade agreements, Australia, Japan, New Zealand and South Korea) account for approaching 30% of the world’s gross domestic product and one-third of its population. More significantly, they will likely account for most of the world’s economic growth in the coming decades.

Whether that will make this the Asian century rather than the Chinese century in succession to the long American century, is a matter for the future. For the present, it is the world’s engine of growth that will drive the recovery of the global economy from its Covid-19-induced recession.

India withdrew from the RCEP negotiations late on, concerned about both the impact of the dismantling of regional tariffs on its farmers and Chinese imports on its manufacturers. It may return at a later date. Most ASEAN countries would welcome that. Beijing will be indifferent, especially if border tensions with India remain.

The United States was never in, pursuing the TransPacific Partnership (TPP) instead as a geopolitical counterweight to the China-led RCEP as part of President Barak Obama’s ‘pivot to Asia’. President Donald Trump’s withdrawal from the TPP as soon as he took office in 2017 left its successor, the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP, also known as TPP-11), a pale shadow of a competitor to RCEP, especially as Beijing moved purposefully to fill the resultant vacuum.

The Trump administration’s putative Indo-Pacific economic grouping based on private sector investment and the Quadrilateral Security Grouping (the Quad: India, Japan, Australia and the United States) never amounted to anything. Many ASEAN nations are uneasy about the Quad, uncomfortable with its security and military focus that pushes them towards choosing between Washington and their neighbour who is often their main trade and investment partner.

There is talk that the prospective incoming US president, Joe Biden, might join the CPTPP, but this Bystander feels it is too late; that horse has bolted. An alternative would be for the United States to seek to join RCEP, on the better-to-be–inside-the-tent theory. That would require a US-ASEAN free trade deal first.

There is more than symbolic significance in the fact that the RCEP is being signed before the next US administration takes office, even if it will not be implemented until the second half of 2021, following ratification by the signatories.

For Beijing, RCEP is an opportunity to write regional trade rules to its advantage, and also diversify its trade at a time of both unsettled relations with the United States and an eastward shift of the global economy’s centre of gravity. A win-win.

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China And Japan Warm Commercial Ties As A Matter Of Convenience

CHINA-JAPAN RELATIONS have blown hot and cold since the two resumed diplomatic ties in 1972, and there is self-evidently history as to why that is the case.

Japanese Prime Minister Shinzo Abe’s current three-day visit to Beijing is the first by a Japanese prime minister for seven years, an indication in itself that the bilateral relationship is coming out of a chilly phase. The ‘historic turning point’ lauded by the official statements is over-egging the pudding at this point.

There is a geographical logic to the trade deals agreed during the trip ($18 billion worth). This has been given additional fillip by the US administration’s imposition of tariffs on both Chinese and Japanese exports. Both neighbours need to diversify their sources of supplies and their markets as a result. They are both already among the biggest trading partners of the other and the $30 billion currency swap agreed during Abe’s visit will underpin that.

However, Japanese carmakers have not yet got the all of the better access to the Chinese market they want, and Tokyo has not provided as ringing an endorsement of the Belt and Road Initiative as China would wish.

Abe also needs to secure a better seat at the table in the discussions over North Korea, which are becoming increasingly a quadrilateral affair between Pyongyang, Seoul, Beijing and Washington, sidelining Tokyo, which has a particular issue over Japanese citizens kidnapped by North Korea that is not shared by the other four.

The key point of conflict between Beijing and Tokyo remains their territorial dispute over islands in the East China Sea known as the Diaoyu to China and the Senkaku to Japan. Anti-Japanese riots broke out in China just six years ago following moves by Japan to extend its sovereignty over the islands. Cars made by Japanese manufacturers and other Japanese products were vandalised in China. Tourism, trade and investment between the two countries fell off a cliff. Beijing froze high-level contacts.

Anti-Japanese nationalist sentiment remains a switch that Beijing can flip on or off at its convenience.

Asia’s two largest economies making common commercial cause in the face of the challenges posed by the Trump administration is one thing; resolving long-standing political differences will be another. The challenge will be greater for Japan than China, as it now has two ‘frenemies’ to deal with not one.

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How Much Candidate Trump Will President Trump Contain?

Donald Trump seen in Washington, November 2011. Photo credit: Gage Skidmore. Licenced under Creative Commons

THE U.S.PRESIDENT-ELECT, Donald Trump (above), had few kind words for China during the presidential election campaign. He accused it of stealing millions of American manufacturing jobs and threatened protectionist tariffs against Chinese exports.

Yet to China he was the preferable candidate. His Democratic rival, Hillary Clinton, was seen, on the basis of having been seen at close quarters as U.S. secretary of state, to be no bosom buddy of Beijing.

The maverick nature of Trump’s campaign and his questioning of the basis of the United States’ traditional security alliances had, however, caused some optimism in Beijing that his election would weaken America’s international standing in the region and that his reservations about free-trade agreements would kill the Trans-Pacific Partnership (TPP), the economic prop of Washington’s ‘Asian pivot’.

However, set against that the uncertainty and volatility in regional affairs that a prospective Trump presidency will bring, in particular on the Korean peninsula. Beijing does not like uncertainty, and there less than anywhere.

Worse, long-cultivated contacts with the Washington China-policy and financial elite have been rendered for nought by the imminent arrival of a US president who at 70 has never held elected office and so has no track record, no known team and no known thought-through China strategy. Beijing also has reason to fear that Trump’s victory will put at risk the forces of globalisation that have propelled China’s economic and thus global ascendency.

It is unrealistic to expect that a Trump administration can repatriate low-wage manufacturing jobs. Those that automation and technology have not rendered redundant are already going to Vietnam and elsewhere in Southeast Asia if they are going anywhere as China ‘rebalances’. Moreover, China is only one aspect of the economic trends that are transforming the US economy in a way that leaves so many Americans, especially older, white ones, feeling left behind, a sentiment Trump so expertly tapped during his election campaign.

That is not to say that Beijing will not try to score points against electoral democracy, though it will not want to examine too closely the insurgence of rank-and-file voters against a ruling political class. Beijing is also unlikely to pass the opportunity to take an early measure of the next US president, probably by being more assertive in the South China Sea.

That, though, is a double-edged sword. It risks prodding Trump in the direction of politicising the issue rather than contesting it on legalistic grounds — such as through asserting freedom of navigation rights and using the UN Convention on the Law of the Sea. That approach, adopted by the Obama administration, has given Beijing scope to build its presence in the South China Sea with a lessened risk of direct US military confrontation.

Beijing’s scope for action now will also be tempered by the reactions of other regional nations to Trump’s election victory. Japan, for one, may see an opportunity to fill a potential vacuum both by building up its military capabilities and by being more active with its development aid and investment in the region. The Asian Development Bank, which falls under its sway, easily outguns the Beijing-created Asian Infrastructure Investment Bank.

South Korea, too, may end up with nuclear weapons from a Trump administration, a development that would be unwelcome in Beijing, not least because it ups the nuclear stakes on the peninsula, elevating the risk of instability that Beijing so abhors.

Further south, the Philippines, Malaysia, Thailand and Indonesia are all calculating where their strategic interests lie between China and the United States.

There has been a quiet (pace the Philippines new president Rodrigo Duterte) shift of emphasis towards developing stronger economic links with China while retaining Washington’s security umbrella. That shift will be being recalibrated in the light of candidate Trump’s criticism that US security partners are ‘free-loading’.

He is not the first US president to have made that complaint, but few have suggested that the US will take its umbrella away if its regional allies do not contribute their fair share to the costs.

Whether President Trump will take the same view as candidate Trump on this and all the other issues that touch on China is probably as much of a guess in Beijing as it is in the rest of the region, and even possibly, at this point, in Washington.

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Xi, Park And Abe: Neighbours Who Have To Get Along

PRESIDENT XI JINPING and his South Korean counterpart, Park Geun-hye, chose an opportune moment to announce their two nations would hold a summit with Japanese Prime Minister Shinzo Abe. Date and location are to be determined but Seoul in October or November this year is likely. Prime Minister Li Keqiang would probably attend for China.

The backdrop to the announcement was the parade in Beijing to mark the 70th anniversary of the end of the Chinese People’s War of Resistance Against Japanese Aggression and the World Anti-Fascist War, or the Second World War in Asia as it is known in the rest of the world. That let both Xi and Park point up their anti-Japanese credentials with domestic audiences, while still setting out to resume the trilateral summits that had occurred until 2012 when Chinese-Japanese relations took a decided turn for the worse over territorial claims in the disputed waters of the South China Sea.

Such a resumption serves to reassure both Beijing, that it is not being ganged up upon by two U.S. allies and Washington that one of its allies isn’t moving closer to the Chinese camp. This Bystander does not expect the meeting to yield any concrete results beyond a commitment from all parties to hold the summits annually. A mooted trilateral free-trade agreement remains a distant prospect.

Two other aspects of Park’s visit to Beijing caught this Bystander’s eye. One was her choice of a striking yellow jacket for her appearance at the Beijing parade, where she flanked Xi with Russian President Vladimir Putin on the other side. Yellow was the emperor’s colour in imperial times and retains a superior status to other colors to this day.

Second was her expression of gratitude to Beijing for its “constructive role in defusing recent tensions on the Korean peninsula.” This, we understand, was sending a PLA mechanized brigade close to the border, a strong signal to Pyongyang to quieten down.

One thing that did not catch this Bystander’s eye at the parade was Kim Jong Un. He has still to visit China since becoming North Korea’s leader.

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Xi Blows Hot And Cold Over Apec

The Asia-Pacific Economic Co-operation Summit (Apec) in Beijing brought together the leaders of the world’s three biggest national economies, President Xi Jinxing, Japan’s Prime Minister Shintaro Abe and U.S. President Barack Obama. It was not a particularly happy confluence.

While Xi and Abe shook hands  — the first meeting of the leaders of China and Japan for more than two years — the rest of the body language was scarcely cordial. Icy, in fact. The tension over the two nations’ maritime territorial dispute in the East China Sea won’t easily be shaken off.

Obama arrived bearing gifts, extensions to the terms of multiple entry visas, from one year to 10 for business people and tourists, and to five years for students. But while China and South Korea agreed to sign their proposed bilateral free-trade agreement (FTA), the U.S-led Trans-Pacific Partnership (TTP) continued to tread water. Nor did the U.S. make any apparent progress in its negotiations to update the 18-year old agreement it has with China on trade in high-tech goods and services.

If anything, in rounding out its FTAs with Japan and the U.S. by signing one with China, South Korea has less need to pursue membership of the TTP with any urgency. While that could be read as score one for Xi, similarly Seoul also has less need to pursue the Beijing-proposed rival to the TTP, the Free Trade Area of the Asia-Pacific (FTAAP). Washington has been, behind the scenes, resisting that determinedly, though it couldn’t prevent Apec leaders agreeing to a two-year study of the scope of an FTAAP. That wasn’t as much movement towards a drawing up a roadmap as Beijing wanted, but it was still more ground than Washington had wanted to yield.

The summit was Xi’s show, his first big international meeting since he assumed power, and an opportunity to show how China is increasingly dictating the region’s pecking order. In the group photograph at the end of the summit, Russia’s Vladimir Putin is standing next to Xi on his right. The two countries signed a big oil-and-gas deal ahead of the summit and promised further cooperation. Obama is down the line to Xi’s left, halfway to the end of the front row. Abe is relegated to the second row.

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Japanese Companies Rethink Their China FDI

September’s Japanese trade figures underlined the economic impact of the maritime territorial dispute in the East China Sea that Tokyo is embroiled in with Beijing. Exports of Japanese cars to China and imports of Chinese tourists in particular were sharply reduced, compounding the difficulties Japan’s exporters, like their Chinese counterparts, are suffering in the sluggish global markets for their goods.

The trade effects of the dispute may be transitory, but a new Reuters survey points to a more permanent breaking of some of the many ties between the two economies. One in four Japanese companies, the survey finds, are rethinking their investment plans in China, either delaying or scaling back new investment; one in six said they were considering switching investment to other countries. The more than 250 Japanese companies surveyed were from both manufacturing and non-manufacturing industries, from electronics to apparel and retailing.

Japan is the leading source of foreign direct investment in China (excluding that from Hong Kong and Taiwan). The Japanese government reckons that some 20,000 of its country’s firms have invested a combined $1 trillion in China over the past two decades.

Some of what these Japanese companies are now thinking may be a political convenience for economic necessity. China’s cost advantages in low-end manufacturing are eroding. Supply chain and worker efficiency advantages decreasingly offset that. That would suggest that low-margin businesses like apparel and low-end consumer electronics, already being produced mainly for export, will move off- off-shore first, to places like Vietnam, Myanmar and Malaysia. Japanese companies that are counting on domestic Chinese sales, like the carmakers and retailers, have little choice but to ride it out, hoping that the diplomatic tensions will ease, and along with them this latest bout of anti-Japanese consumer sentiment in China.

This Bystander recalls that in 2005, when Sino-Japanese relations were going through one of their periodic low-points, Japanese executives started to consider the need to put some of their regional manufacturing capacity elsewhere than in China. By last year, they were putting three yen of new investment in Southeast  Asia for every two they put in China. Now they have double cause to step up that trend.

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China, Japan, South Korea Free Trade Talks Suspended

The maritime sovereignty dispute between China and Japan has derailed discussions about creating a free-trade zone involving the world’s second and third largest economies plus South Korea. Chen Yulu, a People’s Bank of China advisor, broke the news at a meeting of central bankers from the three countries. He said he hoped the suspension of the free trade discussions was temporary. “It will be a big loss for Asia if the process is terminated,” he told the Reuters news agency.  Leaders of the three countries have been discussing creating a free-trade zone for some years, certainly through several cycles of ebbing and flowing relations between Tokyo and Beijing. This Bystander expects the free trade talks to survive this latest nadir.

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When The Economic Elephants Of East Asia Fight

If war is to be waged between China and Japan on the economic front, it is China that starts from the stronger position. Japan is far more dependent on China for its growth than China is on Japan. China is Japanese companies’ largest export market. Japan is Chinese companies’ fourth largest. China’s exports to Japan last year, by its own count, were worth $148.3 billion whereas Japan’s exports to China were worth $194.6 billion. That tots up to some $340 billion-worth of trade at risk as a result of the territorial dispute in the East China Sea.

Foreign direct investment by Japanese companies has been growing apace, up 19% to $4.7 billion in the first seven months of this year, compared to the same period of 2011. That is one reason that there are so many Japanese factories, stores and other businesses for protesting Chinese to ransack. With violent anti-Japanese protests taking place in 50 cities, Japanese businesses from Qingdao to Chengdu have been vandalized–with plenty of marquee brand names’ local operations to go after, including those of Honda, Nissan, Toyota, Yamaha, Panasonic, Canon and Ito-Yokado.

They, and hundreds more of those that have not been attacked, or not yet, have shuttered up shop, waiting for this gale of nationalist fury to blow itself out, as previous such storms of anti-Japanese sentiment have done. Sept. 18th is the anniversary of the infamous Mukden Incident in 1931 which triggered the Japanese occupation of Manchuria. It may prove the most volatile day yet for this particular outburst. Beijing won’t want matters to get too far out of hand on the streets beyond that, but domestic Chinese politics in the run up to the leadership transition may constrain the voices of reason.

While the initial economic cost may be limited, the unintended long-term casualty of all this could be growth throughout the region, especially if Tokyo or Beijing take formal action such as imposing sanctions. The two countries economies have become so entwined, and their supply lines reach so far into East and Southeast Asia, that, as the east African proverb has it, when elephants fight, it is the grass that suffers.

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