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.

Nationalism Aglow

The embers of anti-Japanese sentiment are always smoldering in China. It doesn’t take much by way of political oxygen to bring them forth in full flame. Thousands of Chinese took to the streets on Sunday across several cities to protest against  Japanese nationalists landing, albeit briefly, on one of the specs of rock in disputed waters of the East China Sea known as the Senkakus in Japan and the Diaoyus in China. Japanese flags were burned in several cities and some Japanese restaurants ransacked. In Guangzhou, the Japanese embassy was picketed. In Shenzhen, demonstrators overturned Japanese cars, including a Honda in the service of Chinese police, no doubt an unintended piece of symbolism.

Both governments have tried to keep a lid on the worst excesses of nationalist expression on both sides since 2010 when Japan arrested in 2010 the captain of a fishing boat after it collided with Japanese Coast Guard ships near the islands, chilling diplomatic and economic relations. Yet at the same time, both governments are keen to assert their sovereignty. It is not a combination that will douse the flickering embers of nationalism for good. Not that politicians in either country really want to, providing it doesn’t get out of hand. The risk is that one day it will.

China Walks A Fine Line With Its Frenemy Japan

Despite the slow but inexorable intertwining of two of the world’s three largest economies, China and Japan still instinctively exercise their geo-political chops. Tokyo lodged a protest with Beijing earlier this week about what it says is unauthorized drilling of gas fields by China in disputed waters of the South China Sea. This was the latest expression of what Tokyo sees as Beijing’s backsliding over an agreement to discuss joint exploration. Last month, Beijing made a similar diplomatic protest after Tokyo announced plans to name 39 uninhabited islands near the disputed Senkaku Islands — China calls them the Diaoyu — to establish the basis for defining its exclusive economic zone in the equally undersea resources rich East China Sea.

In parallel with this diplomatic tit-for-tat, Beijing has been on something of a charm offensive, though rapprochement mission might be more accurate. It has sought to repair relations with Tokyo that hit a low point in the mid-2000s and then again in 2010 over seized trawlers and rare-earth exports. Beijing does not want to drive Tokyo even more deeply into Washington’s arms. It is wary of what it sees as a renewed attempt by the U.S. to contain it with its new Asia-Pacific pivoted foreign policy, and Tokyo’s upgrading of its self-defense forces. Nor does it want to risk awaking during its leadership transition anti-Japanese nationalist sentiments in China that are never far from the surface, but that, once aroused, can take on an unpredictable life of their own.

The tightening economic connection between the two countries also argues for Beijing keeping relations on an even keel. China is now Japan’s largest trading partner and Japan is China’s third largest source of foreign investment. The two countries are pushing ahead with discussions on creating a free trade zone that would include South Korea  Beijing sees establishing such a zone, which would account for 16% of world GDP, as a counterweight to the much larger proposed Trans-Pacific Partnership (TPP) that the U.S. is now championing but from which China, but neither Japan nor South Korea, is being excluded.

Such a free trade zone would also provide an economic grouping of a size in which the yuan could play a more prominent role. During Japanese Prime Minister Yoshihiko Noda’s visit to Beijing in late December, the two sides agreed to promote the yen and the yuan in international trade and finance, and that Japan would purchase renminbi-denominated Chinese government bonds. Both are further small steps towards gradual liberalisation of China’s exchange rate regime and the eventual full convertibility of its currency.

For all that, the two countries’ pledge to maintain a ‘mutually beneficial strategic partnership’ will only paper over the bilateral political and security cracks. These all have the potential to heighten tensions and thus quickly fray relations again as both sides oscillate between cooperation and confrontation.

Tokyo’s cooperation with other governments that are worried by Chinese regional assertiveness provides the potential for several flash points. Japan’s navy is discussion greater cooperation with its counterparts in the Philippines and India. Tokyo is also pushing for the Association of Southeast Asian Nations (ASEAN) to set maritime rules for the South China Sea, waters that Beijing believes are either its own or in which it should have free reign. To Beijing, that all looks like a Japanese proxy for Washington ‘encirclement’.

To help reverse the Washington-wards drift, floods of Japanese visitors are being invited to China later this year for the 40th anniversary of the two governments’ establishment of diplomatic relations. These range from Crown Prince Naruhito to politicians, journalists and representatives of Japanese religious and non-governmental organizations. Whether that hospitality and a measured placatory stance towards Tokyo will always mean the avoidance of confrontational responses to Japan’s actions is another matter.

When Tokyo announced its plan to consolidate control over the Senkaku/Diaoyu Islands, the People’s Daily thundered that this was a “flagrant act damaging China’s core interests”.  That was the first time ‘core interests’ had been applied to the islands in state media, we believe, though the foreign ministry refrained from using the term and patriotic Chinese were prevented from setting sail to the islands in protest. On maintaining such a fine balance of discipline, Sino-Japanese relations now turn. Beijing is walking a fine line, indeed.

Japan Gives Its Coast Guard New Powers In Waters Claimed By Beijing

When in 2010 Japan’s Coast Guard seized a Chinese trawler, the Minjinyu 5179, in disputed waters of the East China Sea close to the islands Japanese call the Senkaku and Chinese the Diaoyu it caused a diplomatic row that bought relations between Tokyo and Beijing to a testy and very public low. Repeat incidents since have been dealt with more discretely. But now Japan’s Coast Guard is being given greater powers by the country’s parliament to seize or expel ‘suspicious’ vessels in its waters, including in disputed waters claimed by Japan, more discretion over the use of weapons in such incidents and fresh powers to interrogate suspects on land.

The legislation appears aimed directly at China and comes in the wake of other moves to bolster Japan’s Self-Defence Forces in response to Beijing’s perceived military build-up in the region. We shall be watching to see how Beijing chooses to react to the Coast Guard’s new powers as a bellwether of the current state of bilateral relations. A few days ago, a visit to the Senkaku/Diaoyu islands by Okinawa officials brought a swift complaint from Beijing while a group of Chinese activists attempted to sail there to protest against the Japanese visit.

China, the U.S., Japan: Spot The Honest Broker

U.S. Secretary of State Hillary Clinton has been playing the peacemaker in the dispute that won’t go away between Beijing and Tokyo. She proposed hosting a trilateral meeting with her Chinese and Japanese counterparts to discuss the two testy neighbors’ territorial dispute in the East China Sea and to try to ratchet down the tension, which has remained grouchy, to say the least, at the East Asia Summit in Hanoi which has brought them all to the same table, or at least corridors. Clinton’s proposal has got a gruff brush-off from Beijing behind the usual diplomatic language pledging to “make concerted efforts to contribute to a positive, cooperative and comprehensive China-U.S. relationship in the 21st Century.” Perhaps that is because Clinton said during the Japanese leg of her Asian swing that the U.S. considers the disputed islands in question, the Diaoyus to Beijing, the Senkakus to Tokyo, which now administers them, within the scope of the U.S.-Japan defense alliance. That scarcely leaves the U.S. as an honest broker.

Japan Defuses Trawler Row, Moves On To Next China Test

It looks, as this Bystander suggested yesterday, that arms have been discreetly twisted. Japanese prosecutors say that the continuing detention of Zhan Qixiong, a Chinese fishing trawler captain at the center of a row between the two countries, would be “inappropriate considering the impact on relations with China”. Beijing, which has sent a plane to bring Zhan home, had been increasingly strident in its demand that the captain should be released unconditionally, its hard line returning Sino-Japanese relations to the icy state of recent years from which they were just starting to thaw.

The Japanese formulation sidesteps the question of whether charges would be brought or not, and thus the validity of Japan’s legal jurisdiction which is the heart of the issue as the incident took place in disputed waters near unoccupied islets in the East China Sea that Japan administers as the the Senkaku Islands and China claims as the Diaoyu Islands. Tokyo can present itself as not backing down but acting reasonably for a greater good. “Our ties are important and both sides must work to enhance our strategic and mutual beneficial relations,” Japan’s Chief Cabinet Secretary Yoshito Sengoku told Reuters news agency. Whatever. That this minor incident escalated into a major row shows how much work needs to be done.

Meanwhile, both sides have confirmed that four Japanese men have been detained in China on suspicion of illegally filming in a military area in northern Hebei. Japanese foreign ministry officials say the quartet work for a Japanese construction company that is bidding for a contract to dispose of World War II era chemical weapons. Local state security authorities say their investigations are continuing. How Beijing deals with this matter should give an indication how it wants to calibrate its relationship with Tokyo in the immediate future, but we also expect it to continue to test where the boundaries of that relationship lie as it grows as East Asia’s dominant power.

Update: With Zhan back on Chinese soil, Beijing has demanded a formal apology from Japan and compensation for the captain’s detention; Tokyo has declined on both counts.

The New World Of Security In East Asia

Word from our man in Tokyo throws some new light, for us, on the fishing trawler dispute between China and Japan. He says that there is a sense among officials that this is only the latest, if most serious, incident in a series of tests by Beijing over the past year of where Japan sees its security interests as truly lying: to what extent is the long-standing alliance with the U.S. weakening; and to what extent would a more Asia-focused security policy mean that Tokyo would see Beijing as a competitor or a rival?

While the governing DJP has been pushing improved relations with China and lessening Japan’s dependence on the U.S., the recent change of prime minister from Hatoyama to Kan has caused that pendulum to swing back a bit towards the alliance with the U.S., notably in terms of maintaining the existing agreements over the location of U.S. forces in Okinawa.

That swing is also reflected in Kan’s choice for foreign minister, Seiji Maehara, who falls squarely into the China-as-rival camp. Maehara has repeated that the islands in the East China Sea at the heart of the current dispute, the Senkakus (Diaoyus to China), are inalienable Japanese territory, though to be fair, even the most pro-Chinese Japanese politician holds the same line.

Japanese officials still believe that China will, after sufficient chest-thumping, accept that the rule of law holds in Japan and that Tokyo cannot overrule the legal process for political ends — as Beijing increasingly says publicly that it can’t with its own legal system. Fingers are crossed that the detained captain of the Chinese fishing trawler will be released by Japanese prosecutors with a warning. He faces up to three years in prison if court charges are brought and he is convicted; Beijing might not have enough invective left in that event. For all the belief in rule of law, as well as fingers being crossed, no doubt a few arms are being discreetly twisted, too.

A release would allow for face to be retained on both sides and the incident to be defused. It would not ease the underlying tensions, however. Japan is likely to continue its build up of ground and naval forces in and around the disputed waters of the East China Sea and to be sure that it keeps the U.S. over its shoulder. For its part, Beijing is likely to continue to keep probing a Japan still looking for its place in the new security environment of the western Pacific where a more assertive China is willing to test boundaries first and resolve disputes after.

Update: Xinhua is reporting that four Japanese have been detained for unauthorized entry into a military zone in Hebei.

Tokyo Drops The N-Word In Dispute With Beijing

Japan has dropped the N-word in the increasingly intractable fishing trawler dispute with China. Japan’s chief Cabinet Secretary, Yoshito Sengoku, said officials “should be careful not to arouse narrow-minded extreme nationalism.” Though he stressed that was applicable not just to officials in China, it was clearly a barb at Beijing’s hard line in the dispute.

Within hours, the Chinese foreign ministry said a meeting between Prime Minister Wen Jiabao and his Japanese counterpart Naoto Kan on the sidelines of the UN general assembly meeting in New York this week would be “inappropriate”. (Update: Wen has subsequently reinforced China’s hard line: “If Japan clings to its mistake, China will take further actions and the Japanese side shall bear all the consequences that arise,” he said in New York ahead of the U.N. meetings.)

Beijing has already suspended high-level exchanges with Japan and taken a range of other retaliatory moves following a Japanese court ruling over the weekend that the captain of the Chinese fishing vessel, Minjinyu 5179, alleged to have collided with Japanese coast guard ships on September 7 could be detained for an extra ten days while Japanese prosecutors decide whether to bring charges.

As we have noted before, Beijing has acted aggressively to avow its territorial claim to the disputed waters of the East China Sea around what Japan calls the Senkaku islands and China the Diaoyu islands, ratcheting up the pressure on Tokyo to back off bringing charges against the trawler’s captain under Japanese law. While Tokyo has sought to defuse the incident, it has shown no sign of backing down in the face of Beijing’s browbeating; if anything the Japanese Cabinet Secretary’s comments suggest Tokyo’s resolve is firming. This is becoming an increasingly high-stakes game of diplomatic chicken.

There would a high political cost for Japan’s still relatively new prime minister were he to buckle under pressure from Beijing the first time he was tested. There is some irony in the fact that Prime Minister Kan’s governing DPJ supports a foreign policy that is more Asia focused and more independent of the U.S. Relations with China have been improving since 2006, but as this latest incident shows, it doesn’t take much to scratch open the underlying nerves of distrust.  Other countries in the region who have disputed maritime borders with China will be looking on with some concern, and considering if tighter security relations with the U.S. might not offer them some insurance against similar treatment.

Sino-Japanese Trawler Row Intensifies

The deadline for Japanese prosecutors to decide whether to charge the captain of a Chinese fishing trawler detained in disputed waters of the East China Sea has been extended by a Japanese court by 10 days to Sept. 29th, prompting a further round of protests from China and threats of “strong countermeasures”. Beijing has now suspended bilateral exchanges between officials down to the provincial level and called off scheduled talks on aviation and coal. It has also repeated its call for the captain of the Minjinyu 5179, Zan Qixiong, to be released immediately and unconditionally. The extended deadline gives more time for a diplomatic solution to be conjured up, but at the same time Beijing’s constant ratcheting up of the pressure on Tokyo is squeezing the space in which that can happen.

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Meanwhile, a series of small anti-Japan demonstrations have been held in cities across the country. One outside the Japanese embassy in Beijing is shown in the photograph to the left. Demonstrators were both asserting China’s territorial claims over the disputed East China Sea islands known as the Diaoyu in China and the Senkaku in Japan, and marking the 79th anniversary of the 1931 Mukden incident — the start of the siege of Mukden, now called Shenyang, that led to Japan’s occupation of Manchuria as north-east China was then called.

Detained Fishermen Flown Home

The crew of the Chinese fishing trawler, the Minjinyu 5179, seized by Japan last week in disputed waters in the East China Sea has returned home after being released by the Japanese authorities, but that is not the end of the matter. The captain of the vessel, Zhan Qixiong, remains under arrest in Japan. Prosecutors have a week to decide whether to lay formal charges against him. The incident has caused increasingly strong diplomatic protests by Beijing, which has canceled talks due later this month with Japan over developing oil and gas fields in the disputed waters.