Intensive Economic Ties and Sino—Japanese Relations

Introduction

Intensive economic ties play an important role in improving the Sino-Japanese relations. However， when taken into account other factors which influence the bilateral ties， the intensive economic tie itself also brings some uncertainty for the domestic development of Japan. So to some extent， it is a double-edge sword for Sino-Japanese relations. As the domestic economic foundation is the decisive factor which influences the diplomatic policy of a country， then the first aspect which explains the Sino-Japan relation should be their domestic economical condition. Secondly， because of the special historical problems and geographical location， nationalism in both countries should not be ignored when considering the bilateral ties. Thirdly， the economic tie between China and Japan is an important part of the whole Asia’s national system. And the interests of ASEAN， South Korea， Japan and China are closely connected with each other. So in order to explain the changes of the Sino-Japan economical and diplomatic relation， it is necessary to talk about the economic development of Asian economy after the Second World War and what roles Japan and China played in this system during different periods of history. Then the economical relation of Japan and China can be explained from these three main aspects： the domestic development condition of Japan and China； nationalism in both countries； and the economic development of Asian economy and the change of national system after the Second World War.

The economic development of Japan and China

After the Second World War， the domestic development of Japan and China can be separated into two main periods， from 1950s to 1990s and after 1990s. During the first period of history， Japan developed rapidly with America’s economic assistance and China experienced social instability and economic stagnation. However， in 1990s， the collapse of the “bubble economy” caused great damage to Japan’s economy， in contract， the implication of Reform and Opening Policy changed the development condition of China and increased its national power. This change influenced the bilateral relation between China and Japan.

From 1950s to 1990s： Sino-Japan relation within a Japanese-led regional order

The rapid economic development of Japan after the Second World War was stable and full of vitality. As the most modernized country in Asia at that time， its economy transferred from a labor-intensive pattern to a technology intensive and capital intensive pattern. And accordingly， in order to make use of the cheap labor in some less-developed regions， such as South Korea and Taiwan， the labor-intensive industry was relocated. And this industrial and capital relocation was an important motive force for the development of these less-developed regions. This model was called “flying geese paradigm”by a Japanese scholar named Kaname Akamatsu. And during this period of time， the investment of Japan and the regional trade was quite influential towards the economic development of Asia. And China was also included in this ‘Japanese-led regional production order’（Hughes， 2009： 840）

As a geographic neighbor， China can provide large numbers of cheap labors and broad market for Japan. And under the new established ‘1955 political system’， Japan concentrated on their economical and technical development. （Hughes， 2009： 839）. In this case， the ideological differences and historical problems were less important compared with the economic value of China. Close partnership was built following the normalization of Sino-US relations in 1972. Formal Sino-Japan diplomatic relation was built in the same year and the Treaty of Peace and Friendship was signed in 1978， which provided security for the bilateral relations. As China’s major investor and trade partnership， Japan remained to be China’s largest trade partner for ten years from 1993 to 2003. Japan was China’s largest donor of official development assistance （ODA） by the early 1980s， and it was cancelled in 2008 （Drifte， in Hughes， 2009： 839， 841）.

During this period of time， the Japanese-led regional system was stable. Japan and China kept a close and positive bilateral economic relation in general， and the development of both countries benefitted from the system.

After 1990s： the economic stagnation of Japan and the changes of international structure

The economy of Japan fell into stagnation because of the collapse of its “bubble economy”in the early 1990s. And the recession of Japan’s economy lasts for around ten years and it was also influenced by the global crisis from 2007 to 2009. Then in general， the problems of Japan’s economy began to show up and the economic growth was less rapid and stable than before. And at the same time， because of the important role Japan played in regional economic system of Asia. The domestic economic problems also caused great economic recession in other Asian countries. Large amount of capital was removed back into Japan in order to solve the problem of capital shortage in domestic market.

The economic crisis in the 1990s reflects the shortcoming of the “flying geese model”， less developed countries are overdependence towards the investment and industrial relocation of Japan， then the economy is largely controlled and the stability of it can not be ensured. And the second reason why original Japan-led production system can not be sustained is that the recession of Japan’s domestic economy， which determines it is much more difficult for it to keep its most important and decisive role in Asia. And at the same time， China began to develop rapidly after the implementation of the reform and opening policy. A new “parallel development model”was established after the 1990s. ‘A parallel development model is created where production processes are subdivided and completed across various countries， thereby creating trade in parts， components and other intermediate products， as well as the formation of regional production and service network’（Cheng， 2011： 272）. The equal cooperation and competition increases the independency and creativity of different countries’ economy.

During this period of time， international structure and the economic situation of China and Japan changed to a large extent， and these factors influenced their diplomatic relations. After China opened to the outside world， United States and European Union became its important trade partners， and accordingly， the amount of the bilateral trade between Japan and China accounted less and less for the total trade of China in the 1990s. Because of the economic potential of China and the economic stagnation of Japan， Japan began to regard China as its challenger.

The intense bilateral economic cooperation and competition between China and Japan

China is Japan’s largest trade partner in 2012 and Japan is China's forth-largest trade partner after European Union， United States and ASEAN （Xinhua 2012）. China’s import from Japan increased from 10.51 billion dollars in 1981 to 176.7 billion dollars in 2010， however， the percentage of the bilateral trade accounts as for China’s total trade decreased from more than 40% to around 10% in 2010. The trade was influenced by the global financial crisis in 2009 and recovered rapidly after that. （China Statistical Yearbook， 1982-2010 issues， in Cheng， 2011： 269） And Japan’s cumulative investment towards China was 83.97 billion dollars until June 2012， and this constitutes the largest percentage among all countries’ investing towards China （Xinhua 2012）. Even though the investment of China in Japan has not been as significant as the former， it also increases rapidly and reached 84.1 million dollars in 2009， which constitutes 0.7 percent of Japan’s total inwards （China Statistical Yearbook， 1996-2010 issues， in Cheng， 2011： 271）. Moreover， by the end of 2011， China has become Japan’s biggest national debt holder. And the total amount is around 230.5 billion dollars （Xinhua 2012）.

After 1990s， the rapid development of China posed great pressure towards Japan when considering their bilateral diplomatic relations. On the one hand， Japan has realized China’s power and capability. A more powerful country is able to control and influence other countries in order to get more interests. And as a neighbor and trade partner of China， Japan is becoming more passive because of its dependency towards China’s market. And on the other hand， China is becoming more competitive. They are competing for market in the worldwide. Then that is the reason why the economic relation of Japan and China is contradictory. And this relation is also an important factor which influences the Sino-Japan diplomacy relation.

Neo-nationalism in China and Japan

Because of the historical problems and territorial dispute， the conflicts about political problems go against the stability of intense economic relations between China and Japan. New-nationalism in both countries is an important factor which influences the recent Sino-Japan relation. It is promoted by the governments with some particular intentions. However， once it was aroused by some events， the emotion and action of people is not completely in control by the governments. The uncontrollability of nationalism constitutes unstable factor which influences bilateral relations. Nationalism is based on people’s confidence towards their own traditional culture （Nakano， in Rose， 2000： 171）. And as the symbolic form of meaning and information， culture can provide people a sense of belonging and identity. When people are expressing their favor towards a form of culture， the real meaning is their tendency towards the information transmitted by these symbols. And the rise of nationalism in China and Japan after the Second World War is based on the great success of two countries’ special economic development models， which proved the value of the meaning contained in their traditional culture （Rose， 2000： 171）.

Neo-nationalism in China after 1990s

The nationalism after the 1990s in China is based on the success of the implication of Reform and Opening Policy. And on the other hand， this confidence was promoted by the government in order to strengthen the internal cohesion and ensure the legitimacy of CCP. However， after the establishment of PRC， traditional cultural legacy was once regarded as the block of the widespread of socialism and establishing the prestige of the Communist Party. Cultural Revolution was aroused by CCP with an aim to eradicate the influence of traditional culture and establish a new system of ideas in people’s mind. After the end of Cultural Revolution and the implication of the Reform and Opening Policy， western culture was introduced and accepted. Both CCP and Chinese traditional culture lost their prestige. And that was an important reason of the rise of ‘national cultural nigilism’ and ‘Tiananmen Square Movement’ in 1989. After ‘Tiananmen Square Movement’， government realized that when the market of China had been opened up to the outside world， the influence of western ideas and values would threaten the political position of CCP. The western ideas， which include individualism， liberalism and democratism， should not be supported in China. Market-oriented economy created wealth for people and ‘Chinese characteristic’ was highly spoken of in official discourse. And accordingly， intellectuals began to discover the value of Chinese traditional culture. And it was no longer criticized by the government， because they found ‘there was a …… need to articulate a more vivid sense of collective identity of the Chinese people’（Zhao， in Rose， 2000： 176）.

In order to emphasize the value and uniqueness of Chinese traditional culture， western ideas were regarded as a different form of culture which was ‘not suit for Chinese situation’. ‘Cultural difference between the East and the West’ was becoming a popular topic in academic research. And the thought of people was influenced by these discourses. Accordingly， western world was also described as the enemy of China. The roots of ‘anti-western’ thought can be found in the history of China’s modern history and the confrontation of the two camps during the Cold War era. The trade fraction and western countries’ criticism towards China’s human rights are regarded as the evidence to prove the hostility of the west. And because of the historical problems and territorial dispute， Japan is also regarded as the ally of ‘the west’ and being criticized. The hostility of ‘the west’ aroused patriotic emotion among the public. In this sense， China’s domestic problems are neglected. Nationalism provided people confidence and power to express their discontent in their daily life and the most emotional ones are often the members of disadvantage groups in a society. The disadvantage groups transfer their discontent towards the society to the ‘hostility to the west’. And accordingly， the CCP transfer the domestic problems to the international conflicts.

Neo-nationalism in Japan

Because of the rapid development after the Second World War， Japan’s economic power and world influence had increased a lot. The elites attempted to increase Japan’s international position and build a new national identity. Neo-nationalism appeared in Japan during the 1980s， the research of history issues was more open to the public， regular symposiums were held to attract many young audiences who were interested in these problems. Such topics were also shown in large amount of new established magazines and newspapers which aimed to gain popularity among the new generation. ‘New-nationalists’ claimed themselves to be liberals and their main proposal was to build a new ‘Liberalist View of History’ through education， such as reforming the history textbook. Many historical events were discussed again and re-explained. And the most representative example was about researching the ‘truth of Nanjing Massacre’. However， many common people also expressed their dissatisfaction towards these discourses and actions， and the new-nationalism was regarded as the same with traditional nationalism which was thought to be responsible for the world war and great damage brought to the last generation. New-nationalism in Japan also aroused strong patriotic emotion of the public in China， their patriotic demonstration and irrational action shown the hostility of Chinese towards Japan. This is the main reason why most Japanese felt disappointed towards China and less supportive of the Sino-Japan relations.

That is to say， the nationalism of Chinese is used by the Chinese government and neo-nationalists in Japan. Firstly， the hostility and threaten of China gives Japan excuses to strengthen their military buildup， which helps to increase their power and promote international position. And secondly， because of economic stagnation and the appearance of the social problems， the threat from China also helps to transfer people’s attention to the outside and ease the domestic contradictions. And thirdly， because of Japan’s economic dependency towards China has threatened its economic security， then the hostility can also provide Japan an opportunity to decrease the economic relations with China. Overall， as an important factor which influences the Sino-Japan relations， nationalism is actually ‘a useful device used by elites to maintain legitimacy and internal unity’ （Rose， 2000： 170）.

South China Sea territorial disputes

The development of China changed the international system of Asia. Japan， ASEAN and even United States are trying to establish new diplomatic relations with different powers in order to protect their own interests.

Even though the international influence and status has increased a lot， China still sticks to its ‘good neighbor policy’ in Asia and continues to intensify the economical， social and political relations with peripheral countries as well as US. ’Beijing has worked to sustain regional stability and has sought greater economic advantage and political influence， without compromising core Chinese territorial， security， or other interests （Sutter， 2004： 719）.’And there are several reasons to explain China’s diplomatic strategy. After 1990s， the end of Cold War era provided PPC the possibility of developing in a relatively peaceful environment for the first time. China was able to build direct official diplomatic relations with many capitalist countries without the influence of super powers. And secondly， because the modernization and stability of China has direct relation with the legitimacy of the CCP， then the party must concentrate to solve the domestic problems， such as the corruption of government， great income gap between different regions and serious problems of environmental pollutions. Thirdly， market economy also calls for the stable and close international relations. China’s dependency towards foreign investment and capital determines China’s adherence towards peaceful foreign policy. Sino-US relation is regarded as a key factor which influences the diplomatic strategy of China. Besides the intense bilateral economical relation， America’s Asian policy and its power in this region is also influential towards China’s decision in dealing with some sensitive problems， such as the territorial dispute in the South China Sea. China’s ‘good neighbor policy’ is part of the ‘peaceful rise’ strategy which was generated according to Deng Xiaoping’s statement ‘China should on the one hand ‘bide its time and hide its capabilities” while at the same time “accomplish some things’’ （Qian， in Glaser and Medeiros， 2007： 305）.

However， this statement seems not that convincing for some peripheral countries. The increasing power represents China’s capability of protecting its national interests through influencing other countries’ policy. And China’s military development， economic friction and territorial dispute make them more doubted about China’s ‘peaceful strategy’. As for Japan， a more powerful China brings more uncertainty towards its security. And that explains why Japan stress and strengthen US–Japan alliance cooperation from the 1990s. However， the intense diplomatic relation between China and US can not be ignored for Japan when it is considering its relation with US and China. And it is also possible for US to abandon Japan when US is forced to choose between China and Japan in the conflicts （Hughes， 2009： 846）. So Japan must avoid the serious clash with China. None of these three countries want to make a chose between the other two ‘partners’ and the most ideal situation is to maintain the balance and peace in this region. As another part which is also involved into this regional system in Asia， ASEAN countries are also influenced by the change of international system and Sino-Japan relations. Soon after the end of Cold War， China started to communicate and built official diplomatic relations with ASEAN countries. ASEAN Plus Three forum was proposed in the first leaders’ meeting in 1997 and implemented in 1999. However， Japan was more interested in the west during that period of time， so China was able to create a more close relation with ASEAN. China–ASEAN Free Trade Area？was established in 2001. However， ASEAN countries also felt the pressure coming from the increasing power of China and territorial dispute in south sea. And this provided Japan and ASEAN more possibility and necessity to strengthen their bilateral relations. Japan and ASEAN countries signed the Japan- ASEAN Comprehensive Economic Partnership Agreement （CEPA） in 2008 in order to promote trade and increase investment. Japan introduced India， Australia and New Zealand into the East Asian Summit framework and ASEAN–Australia–New Zealand Free Trade Area？（AANZFTA） was established in 2010， which weakened the influence of China in this system and kept a balance between different powers.

Diaoyu/Senkaku Island conflicts between China and Japan reflects the complicated relations of different powers in Asia. Diaoyu/Senkaku Island was colonized and occupied by Japan during the Second World War. It was once controlled by US after the end of the war. When US planned to return the island to Japan in 1972， the sovereignty of it was also claimed by mainland China and Taiwan at the same year. And this can be regarded as the beginning of the territorial conflicts of Japan and China after the Second World War. Potential rich oil and gas resources around the islands were discovered in 1969， which becomes another key reason of sovereignty conflicts. Thirdly， because of its special geography location， its military value also became a reason of conflicts. However， this problem was set aside because of the successful establishment of official Sino-Japan diplomatic relation in 1970s. Recently， Japanese government planed to buy the island from a family which nominally owned the islands. And this action aroused large-scale anti-Japan movement in China. The Diaoyu/Senkaku Island event hurt the bilateral economic relation between Japan and China. Many Chinese refused to buy Japanese goods and Japanese stores have closed to avoid more damages caused by the movements. China has to maintain its stick to the ‘good neighbor policy’ and try to control the situation， and this determines China’s passive position in this conflict. And at the same time， China did not claim to solve the problem peacefully. And according to the discussion above， considering the necessity of keeping the stability of the triangle relation between China， Japan and the US， it is not wise for Japan or China to make the dispute more serious. And at the same time， China’s military force in south sea increased the pressure of ASEAN countries. So Japan is more possible to increase the economical and political relation with ASEAN， which to some extent replaced the market lost in China. Consequently， the dependency of Japan’s economy towards China decreased， and this can be an important intention for Japan to raise the Diaoyu/Senkaku Island conflicts in South China Sea.

Conclusion

Intensive economic relation is one of the most important factors which influence the bilateral relation of two countries， but it is not the only factor. The change of the international structure in Asia affected by the development of China and the economic stagnation of Japan also influences the diplomatic policies of the two countries. And as for the two adjacent powers， the national security is also quite crucial when considering the diplomatic policies. The special geographical relations are conducive to a close economical relation， and at the same time， it might also cause some conflicts about territory， resources and overseas markets. And the historical problem is also a factor which can not be ignored. Considering the geographical relations and historical problems， China and Japan tend to regard each other as its potential enemy. Taken into account all these factors， the benefits brought by the intensive economic relation between these two countries might be reduced. Even though the economic development of Japan benefits a lot from this relation， its dependency towards China also threatens the stability and decrease the initiative when dealing with the international problems. And this dependency tends to increase if there is not any interference. In this sense， the intensive economic tie is part of the reasons which cause the conflicts of Sino-Japanese relations. However， at the same time， it also determines the conflicts can also be controlled by Japanese government， because the damages caused by the conflicts are also harmful to its development. What Japanese government intends to do is to decrease the dependency towards the China without harming the bilateral economic relation too seriously. And territorial dispute and nationalism can be helpful tool to achieve this balance.

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