China:On the face of it, the idea of hostility between the two East Asian neighbors is sharply at odds with excellent trade numbers and Japan’s unrelenting efforts to keep open the bilateral flows of commerce and finance.
Here is the latest: The Japanese sold to China 35.2 percent of all the goods they dumped on the rest of Asia in the first seven months of this year. And that was a 10.6 percent increase from the year earlier.
For all of 2017, the Japanese export business to China literally flourished, soaring 20.5 percent after a 6.5 percent decline in 2016.
The China business remains the key lifeline to the Japanese economy, where net exports contributed exactly one-third of Japan’s economic growth since the beginning of 2017.
Japan’s Prime Minister Shinzo Abe was profoundly convinced of that simple truth all along. Here is what he said in his first press conference following his party’s landslide victory in December 2012: “China is an indispensable country for the Japanese economy to keep growing. We need to use some wisdom so that political problems will not develop and affect economic issues.”
Love thy neighbor
That amounted to the squaring of the circle for a man who forged a veto-proof parliamentary majority on a platform “Take Back Japan” (“Nippon o Torimodosu”), featuring the economic revival through aggressive monetary easing and an export-boosting cheaper yen, a tough line on territorial disputes with China and South Korea and an unacceptably idiosyncratic reading of Japan’s history to his Chinese and Korean neighbors.
Abe quickly ran into huge problems with Beijing and Seoul, but, following an apparent trade inertia driven by long-term contracts, and Japan’s strong sales efforts, exports to China held up well in 2013 and 2014. The worsening political relations caught up, though, and Japan’s China business went on a sharp decline in 2015 and 2016.
Japan, however, did not give up its quest of strong export sales to China against a background of flammable disputes. An unending flow of business and parliamentary delegations kept filing into Beijing seeking “cooperation and understanding,” while Abe tirelessly worked for elusive summits with his Chinese counterpart.
Eventually, China began to relent as hostile winds of trade and security were starting to blow across the Pacific after the U.S. presidential elections in late 2016.
So, Abe got some time with China’s President Xi Jinping in November 2017 on the sidelines of the Asia Pacific Economic Cooperation (APEC) meeting in the Vietnamese resort city of Da Nang.
“A fresh start,” both leaders agreed, with Xi insisting that “constructive steps” must be made to “appropriately manage and control disputes that exist between the two countries.”
Indeed. The disputes kept simmering despite a slew of high-level exchanges and empty shells of ritual incantations about mutual benefits from friendly and cooperative relations, while Beijing and Tokyo knew that they were making no progress at all on their irreconcilable differences.
