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  • China vs Japan

    The Potential Deterioration of Sino-Japanese Relations

    In the past few months, Japan's and China's relationship has been tested by a wandering submarine, visits to a ceremonial shrine, oil drilling rights on disputed territory, proposed cuts in state aid, currency revaluations and trade disputes. Underlying all of this has been China's economic expansion, Japan's attempts to reverse its economic stagnation and increased competition between the two largest economies in East Asia for raw materials and energy resources. Beijing appears to have the upper hand in most of these disputes, but Tokyo has been uncharacteristically forceful in challenging China's influence.

    China and Japan have been historic competitors, but economic integration had the potential of moving the countries toward a conciliatory relationship. However, recent events have threatened to push the two largest economies in East Asia further apart as they compete over diplomatic influence and raw materials to fuel their economic growth. Nationalism is increasingly becoming important in Japanese politics, and the assumption that China will assume the role of the regional hegemon has only heightened the political pressure for Tokyo to assert itself on the world stage.

    Competition Over Natural Resources

    China has experienced meteoric economic growth over the past several years, which has increased the demand for natural resources in East Asia and amplified the argument between Beijing and Tokyo over natural gas drilling rights in the East China Sea. The Chunxiao gas field lies in the middle of the two countries' disputed exclusive economic zones (E.E.Z.). Under the United Nations Convention on the Law of the Sea, countries have an exclusive right to regulate seabed resources up to 230 miles (370 km) from their coastline; however, Japan and China have differing interpretations of the U.N. convention.

    Japan claims the demarcation line falls at an equal distance from each countries' shoreline, but China claims the continental shelf is the demarcation line. The U.N. is due to make a decision on the demarcation line by May 2009; nevertheless, China has begun building drilling rigs just three miles short (4 km) of the demarcation line (as defined by Japanese interpretation). Tokyo has protested the move because it believes that the rigs could extract gas belonging to Japan.

    This competition for resources has emerged as a serious sticking point in Sino-Japanese relations as the two countries move toward greater economic integration -- it has even taken on a military aspect. Japan has previously dispatched P-3C surveillance aircraft and survey ships to monitor the Chinese construction near its E.E.Z. Japan suspects that China may be using the drilling project in part as a cover to survey the area for potential submarine warfare because the construction site lies strategically near Taiwan and the disputed Senkaku/Diaoyu Islands, which are claimed by both countries. [See: "Senkaku/Diaoyu Island Dispute Threatens Amiability of Sino-Japanese Relations"]

    On October 25, delegates from the Japanese Ministry of Foreign Affairs met with their Chinese counterparts for an emergency talking session to resolve a dispute over the gas fields. Both parties agreed to settle the dispute within the framework of the U.N. Convention on the Law of the Sea, but Japan's strident tone surprised many observers and was further evidence that Tokyo is moving toward a more aggressive foreign policy.

    Tensions in the East China Sea were raised again on November 10 when Japanese microphone-carrying buoys detected a Chinese submarine in Japan's territorial waters. Tokyo scrambled military planes and warships to track the submarine, but the Chinese submarine had left Japan's territory before it could be intercepted. Japan claimed that China apologized for what it said was a technical problem that caused the submarine to veer off course, but the incident showed the progress that Japan has made in rebuilding its military defense capabilities since the end of World War II. Similar conflicts may arise in the future as China expands its submarine force, which at 50 to 80 nuclear and non-nuclear submarines will rival the U.S.' all nuclear fleet by the end of the decade and far outweighs Japan's 18 non-nuclear submarines.

    Another Sino-Japanese energy dispute is focused on a pipeline to be built from Russia's untapped East Siberia oil fields. After Beijing signed a deal with the Russian oil company Yukos in May -- giving China partial control of the pipeline and securing it as the sole buyer of the oil -- Japanese Prime Minister Junichiro Koizumi lobbied Russian President Vladimir Putin about the benefits of directing the pipeline to Japan.

    Shortly thereafter, the Russian government, in a move widely considered politically motivated, presented Yukos with a bill for unpaid taxes that had the indirect effect of scuttling the pipeline deal with China and pushed the company toward bankruptcy. In this new environment, Japan sweetened its offer and it seems likely that it will now win the pipeline deal -- though, under the new terms, Japan would have no control over the pipeline's management and other countries would be able to purchase the oil.

    Japan's diplomatic efforts are emblematic of the new course that Prime Minister Koizumi has set for his country -- a shift toward a more nationalistic, self-reliant foreign policy. Tokyo has sent troops to Iraq, lobbied for a permanent seat on the U.N. Security Council and infuriated Beijing by changing policies adopted in the wake of WWII.

    Diplomatic Disputes

    Prime Minister Koizumi has visited the Yasukuni Shrine every year since taking office in 2001. The shrine honors Japan's war dead since 1853 but also contains the remains of 14 WWII Class-A war criminals. Beijing views the shrine as a symbol of Japan's brutal campaign against China during WWII, and has cited Koizumi's visits to the shrine as a major obstacle in Sino-Japanese relations. Koizumi's visits are the first reason cited every time Beijing declines Tokyo's invitation for a high-level, official meeting.

    On the sidelines of the recent Association for Southeast Asian Nations (A.S.E.A.N.) summit, Chinese Premier Wen Jiabao reiterated Beijing's disapproval of Koizumi's shrine visits. This came ten days after Chinese President Hu Jintao made similar comments after a brief meeting with Koizumi at the Asia-Pacific summit in Chile. According to a Chinese spokesman, Hu told Koizumi "in very explicit terms that the crux of the problem is that Japanese government leaders pay homage to the Yasukuni Shrine."

    There is popular support for the harsh stance that Beijing has taken with Japan over the Yasukuni Shrine, as evidenced by the treatment of the Japanese soccer team -- and subsequent popular riots after China's loss to Japan -- at the Chinese hosted Asian Cup tournament, but Beijing's focus on the shrine visits is strategically motivated; China hopes to undermine Koizumi's political support by dividing the country over an issue tied to the nationalistic policies that allowed him to assume power within his Liberal Democratic Party (L.D.P.). The more liberal, economic reformers of the L.D.P. have urged Koizumi to stop visiting the shrine in order to foster a better economic relationship with China. Conservatives within the L.D.P. have noted that if Koizumi stops the visits now, at the height of Beijing's complaints before the 60th anniversary of Japan's defeat in WWII, it will be seen as caving in to Chinese pressure and will weaken Tokyo's negotiating position in future talks.

    Support amongst the electorate about this issue is nearly evenly divided, with most polls showing support for and against each around 30 percent (the remaining are undecided). Following the A.S.E.A.N. summit, Koizumi seems to have moderated his stance on the shrine visits, saying he takes Beijing's protests seriously and "will make an appropriate judgment in the future" on continuing his visits.

    Another diplomatic sticking point is also tied to WWII. Japan has provided China with Official Development Assistance (O.D.A.) since 1979, but it is largely considered to be retribution for the atrocities committed by Japan in WWII that motivated the initial O.D.A. payments. The political climate has changed greatly since the O.D.A. program began, and Japan is moving to end the aid to China.

    The O.D.A. program began when China was first opening its economy to the outside world, and the country was a net oil exporter. The O.D.A. program was useful in establishing a toehold for Japanese companies in China, as well as to help reduce Japan's dependency on the Middle East for energy needs. Currently, China's economy is more open to foreign investment (and has trended toward openness and transparency in recent years) and China has become a net oil importer. Under these conditions, the O.D.A. program no longer serves its initial purpose, and O.D.A. to China has fallen for the past three years.

    On November 26, Japanese Foreign Minister Nobutaka Machimura told the Japanese Parliament, "We will reduce the amount of O.D.A. to China. I think it is only appropriate for China to graduate from O.D.A. in the near future." The Chinese foreign minister reacted by saying, "The Chinese people need only rely on their own strength, wisdom, determination and confidence to build their own country."

    Under these conditions, it is likely that Koizumi will be able to use the discontinuing of O.D.A. in the near future to bolster his support with the conservative members of his government, while also discontinuing his visits to the Yasukuni Shrine (or at least making his visits clearly in an unofficial manner). The net effect of these positions would not affect Koizumi politically if he managed to link them in the public's mind, but they would help to stabilize his government's relationship with Beijing. Beijing's public statements indicate that it would accept these policies, and, if the shrine visits are halted, President Hu may visit Tokyo regardless of the cut in O.D.A.

    Conclusion

    The degradation of Sino-Japanese relations has come at an unfortunate time -- both countries are facing major economic upheavals, and their conditions are tightly linked by the growth in trade across the East China Sea. Outside conditions are putting further pressure on the relationship as well. The United States' current account deficit has caused a decline in the value of the U.S. dollar, which has strengthened the Japanese yen -- a major stumbling block for an export-based economy emerging from several years of decline. The Chinese yuan is pegged to the dollar and its value has been kept at an artificially low value -- a major boon to an economy based on providing cheap exports. Japan may act to prevent any further strengthening of the yen to the dollar and yuan, which would put further pressure on the Sino-Japanese relationship.

    Tokyo will move to assert itself more boldly on the world stage in the near term by pushing for a permanent seat on the U.N. Security Council; reevaluating Article Nine of its constitution, which prohibits Japan from having a standing army; and by negotiating trade agreements with A.S.E.A.N. countries that will make it more competitive with China in the region. If China follows its "peaceful rise" policy, Beijing will not react too harshly to these actions -- while at the same time ensuring that nothing Tokyo does will prevent China from assuming the role of regional hegemon. Should the conflict between East Asia's two largest economies approach the breaking point, it may send the region's economy into a tailspin; indeed, how future disputes are settled between Japan and China will determine the course of the Asian economy.

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