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With a pledge to transform the bilateral relationship from competition to cooperation, Japanese Prime Minister Shinzo Abe’s high-profile visit to China may unveil a new equilibrium to the complex relationship between China and Japan

By NewsChina Updated Dec.1

Between October 25 and 27, Japanese Prime Minister Shinzo Abe made a high-profile visit to China. As the first official visit by a Japanese prime minister since relations between the two countries soured after Japan announced the “nationalization” of the disputed Diaoyu Islands (Senkaku in Japan) in the East China Sea in 2012, Abe’s visit is widely seen as a sign of warmer ties between the world’s second- and third-largest economies. \

‘New Era’
During Abe’s meeting with Chinese Premier Li Keqiang in Beijing, Abe trumpeted that the bilateral relationship was entering a new phase. “Switching from competition to collaboration, I want to lift Japan-China relations to a new era,” said the Japanese leader. Abe’s rhetoric was echoed by Li, who said that as relations between the two countries have returned to a normal track, China would like to lift the relationship to “a new phase.”  

Among the agreements announced during Abe’s visit were a three-year currency swap agreement of up to 3.4 trillion yen (US$30.4b), some 10 times that of a previous deal between the countries that expired in 2013 amid the escalating tensions. Developing from an agreement between Abe and Li in May 2018 during Li’s visit to Tokyo, the two countries also signed an agreement to establish a “China-Japan Innovation Cooperation Mechanism,” which,  
according to Japanese media, will promote cooperation in developing advanced technologies in areas such as self-driving cars and artificial intelligence.  

Abe, along with a delegation of some 500 Japanese entrepreneurs, and Li also attended an economic forum, during which companies from both countries signed agreements on 52 projects worth US$18 billion. Some of these projects involve development cooperation in third-party countries, including a smart city in Thailand and an offshore wind power project in Germany. The Japan Bank for International Cooperation and the China Development Bank also agreed to launch a scheme to jointly finance infrastructure projects in third-party countries. 

Besides an emphasis on economic cooperation, both Abe and the Chinese leadership have expressed the importance of promoting political trust between the two countries. During his meeting with Chinese President Xi Jinping on October 26, Abe emphasized that China and Japan are “neighbors, we’re partners who will cooperate with each other, rather than be a threat to each other.” While acknowledging that may be too early, Abe asked Xi to attend the 2020 Summer Olympics opening ceremony in Tokyo. 

For his part, Xi said that China and Japan have common interests in a variety of areas, and that stable development of the bilateral relationship is important, especially at a time when instability and uncertainty are growing around the world. Xi is also reportedly  
considering a trip to Japan next year, which would mark the first visit by a Chinese president since Hu Jintao in 2008.  

The Trump Factor
The “instability and uncertainty” cited by Xi obviously refers to the administration of US President Donald Trump, which has adopted a more aggressive approach in its foreign policy. In the past months, China has been locked in a trade conflict with the US, as Trump  
imposed punitive tariffs on US$250 billion of Chinese products.  

Despite being an ally of the US, Japan has also come under pressure from the US. Not only has the Trump administration raised tariffs on imports of steel and aluminum from Japan, it has threatened to impose tariffs on Japanese auto exports to the US.  

“The US factor is the biggest external force that is driving the rapprochement of China and Japan,” said Gao Hong, a research fellow from the Chinese Academy of Social Sciences. Gao said that as China and Japan share a common interest in safeguarding and promoting multilateralism, both countries have incentives to improve the relationship.  

Gao’s view was partially shared by Akio Takahara, a professor of contemporary Chinese politics at the University of Tokyo. “It’s a tradition of Chinese diplomacy to improve ties with Japan when there is trouble with the China-US relationship,” Takahara told NewsChina.  

But despite the importance of the Trump factor, the thawing of the China-Japan relationship at the very top level also stems from a new economic reality that is bringing the two economies ever closer.  

According to trade data released by Japan’s Ministry of Finance, Japan’s exports to China reached a record US$141 billion in Japan’s fiscal year ending March 31, 2018, increasing by 16.4 percent compared to the fiscal year of 2017.  

By contrast, US-bound exports dropped 8.5 percent, which not only allowed China to top the US as the leading destination for Japanese exports for the first time since 2011, it may also signify a fundamental shift in the Japanese export landscape. 

A major factor behind the shift is, ironically, China’s “Made in China 2025” Initiative. While the US sees the initiative as a major threat to its industrial advantages, which the Trump administration openly cited as a major reason behind its decision to impose tariffs on Chinese products, Japan sees the initiative more as an opportunity.  

According to a report in the Nikkei Asian Review published on April 19, thanks to China’s endeavors to promote advanced manufacturing as part of the initiative, Japan’s exports of semiconductor equipment to China in the last fiscal year increased by almost 50 percent over that of two years ago, with exports of metal processing machinery surging by nearly 70 percent. 

“The Chinese market has become increasingly important for Japanese enterprises, especially those in the hi-tech sector such as artificial intelligence, electric cars and digital industries,” Liu Junhong, a research fellow from the Chinese Institute of Contemporary International Relations told NewsChina. Liu said that as the relationship with Japan soured in the past years, China turned to other major industrial countries, such as the UK, Germany and France for cooperation, which put Japan in a disadvantaged position in the competition for China’s massive market. “Japan has a lot of ground to make up now,” Liu said.  

In an article published on commentary site China-US Focus on May 21, Liu stressed that as Japanese companies derive more than 45 percent of their overseas income from China and ASEAN countries, overtaking revenues from Europe and the US, the Asian market has become the top focus for Japanese companies. By transforming the China-Japan relationship from competition to coordination, it will not only help Japanese companies to gain further access to the Chinese market, but also those of other Asian countries. 

Besides the concrete agreements reached during Abe’s trip, another keynote development was Abe’s announcement that Japan will terminate its Official Development Aid (ODA) scheme to China. During his meeting with Xi, Abe said that the program has “completed its historical mission,” to which Xi responded by praising the ODA for “playing a positive role” in China’s development.  

Launched when China and Japan signed the Treaty of Peace and Friendship in 1978, this ODA provided China with loans, grant aid, and technical cooperation totaling 3.65 trillion yen (US$32b) over four decades. 

While Japan viewed the programs as a policy tool that served to support China’s economic reforms and strengthen bilateral ties, the ODA is widely viewed in China as an unofficial replacement for war reparations, a reciprocal response to China’s decision to waive the demand for war reparations when it established diplomatic relations with Japan in 1972.  

Since reaching its peak in 2000, the amount of ODA has steadily decreased in the 21st century. In 2008, Japan ceased providing new loans to China, and the amount of grants and technical cooperation further plunged following the deterioration of the bilateral relationship in recent years. In 2015, the total amount of ODA Japan provided to China was merely 913 million yen (US$8m). In the meantime, China itself has become a major source of foreign aid and financial support to other countries.  

From the empirical point of view, the impact of the ODA’s closure seems rather trivial. But symbolically, the program’s termination may mark the end of an era and the start of a new one in the history of China-Japan diplomacy.  

To a large extent, the ODA, something that typically only exists between a developed country and a developing country, embodies two mentalities that have shaped Japan’s attitudes and policies toward China. One is a superiority complex that can be traced back to the Meiji era (1868-1912) when as Japan became an industrial power, China fell victim to Western imperialism, later reinforced with Japan’s post-war economic miracle in contrast to the political and economic turmoil of China in the same period.  

The other is a guilt complex, stemming from Japan’s status as the defeated country in World War II and its wartime atrocities against China. Found mostly among the older generation of Japan, it was argued to be a major factor that prompted Japan to launch the ODA program in 1978 when China was still an impoverished country.  

But as China rapidly emerged to become a global power in the past decades, both mentalities have been seriously challenged. While the superiority mentality has given way to a sense of anxiety, the guilt complex rapidly evaporated among the younger generation, attributed to the perceived rise of “historical revisionism,” which then resulted in more frictions with China. 

“Until China emerged as a key diplomatic and economic power in recent decades, Japan had become accustomed to thinking of itself as primus inter pares (first among equals) among Asian powers and as the closest ally of the US. It saw itself as the channel through which Asia communicated with the world,” argued Anthony Rowley, a veteran journalist specializing in Asian economic and financial affairs in a February commentary published by the South China Morning Post. 

A more recent editorial published on October 14 by dwnews.com, an overseas Chinese news site, argued that the troubles of the bilateral relationship in the past years were at least partially caused by Japan’s uneasiness over China’s rapid rise.  

“In 2000, Japan’s GDP was four times that of China’s, and it took only a decade for China to surpass Japan in 2010,” reads the article. As China’s GDP has further expanded to reach more than 2.5 times that of Japan in 2017, Japan is finally ready to accept the reality of China’s rise, argued the article. 

Therefore, for many analysts, the ODA’s termination symbolizes Japan’s effort to establish a new norm in its approach toward China. In an article published on eastasiaforum.com on November 1, Shin Kawashima, a professor from the University of Tokyo described Abe’s visit as a trip to “re-normalize” its relationship with China. A major aspect of the re-normalization efforts, he argued, is to “realign Japan-China relations to reflect China’s economic strength and position as a global power.” 

This explains why Japanese officials and experts have repeatedly stressed the “equality” nature of coordination between the two countries, and especially that on the global stage. 

But so far, it remains unclear what the long-term impact of this “re-normalization” of the bilateral relationship will be. But in the short term, it appears that both leaders have decided to put aside their territorial disputes in the East China Sea to advance their common interests in the wider region.  

In the run-up to his visit to China, Abe avoided using the word “strategy” when referring to his iconic concept of a “free and open Indo-Pacific,” which Japan’s Kyodo News Agency said was aimed at downplaying the hostile connotation perceived by China.  

For professor Akio Takahara, Japan’s “free and open Indo-Pacific” concept can co-exist with China’s Belt and Road Initiative, with each country calling their jointly launched projects part of their own initiatives. “Through this approach, the China-Japan relationship can genuinely move from competition to coordination,” Takahara said.

Japanese Prime Minister Shinzo Abe gives a speech at the first China-Japan Third Party Market Cooperation Forum which he attended with Chinese Premier Li Keqiang, Beijing, October 26, 2018