Paula S. Harrell:
While the media keeps its eye on the ongoing Diaoyu/Senkaku islands dispute, heating up yet again this week after Chinese naval ships and aircraft were spotted circling the area, a parallel, possibly game-changing development in China-Japan relations has gone largely unreported: the recent increase in collaboration between the world’s second and third largest economies in a host of science, technology, and business fields, Nationalist rhetoric aside, at the level of pragmatic action, the logic for partnership has never been stronger.
This is not to downplay the seriousness of simmering tensions, as Japan “nationalizes” the islands by purchasing them from a private owner. Although it’s true that anti-Japanese protests in China are nothing new and that carefully managed nationalism has been a staple of China’s Japan policy for decades, 2013 presents a more dangerous picture. The stakes are higher. As a newly strong China projects its power outward into the East China and South China seas, the rocks at the end of the Okinawa archipelago—called Diaoyu in Chinese and Senkaku in Japanese—have assumed outsized importance due to their strategic location and proximity to potential reserves of undersea oil and gas. Disputing Japan’s sovereignty over the islands as China has done recently raises to a new order of magnitude longstanding friction between the two sides over issues of history and war responsibility. With air and sea provocations now increasingly part of the equation, observers quite rightly warn that a local incident could spiral out of control even as cooler heads examine the justice of conflicting territorial claims through the lens of international law. Taking the long view, Cui Tiankai, China’s new ambassador to the U.S., says that “the fundamental problem is whether Japan can accept China’s expanding new strength.” The U.S. answer to the same question lies in the “yes, with reservations” tone of its “Pivot to Asia” policy. Meeting in Hawaii in late March, U.S. and Japanese officials outlined a joint defense plan aimed to push back against China’s new assertiveness in the East China Sea.
Analysis of the economic impact of the ongoing territorial crisis has drawn a lot of attention and produced a mixed balance sheet. When Diaoyu/Senkaku-related anti-Japanese protests broke out in China in August and September of 2012, commentators were quick to tag Japanese business the clear loser. True, Japanese car sales in China plummeted some forty percent by year-end with significant declines also in sales of Sony, Panasonic, Toshiba, and Sanyo home appliance products. Although recovery has started in these sectors—auto sales show modest gains and air purifiers, not surprisingly, are selling exceptionally well—other areas appear stagnant. Japan’s tourism industry has yet to reverse the downward trend in Chinese visitors to Japan triggered by the dispute.
But there have been negative consequences for China as well. Anti-Japanese protests and boycotts have convinced many Japanese companies to accelerate plans to shift production operations from China to Southeast Asia, a shift already under way in response to increasing wage demands from Chinese workers. Potential loss of jobs is significant. Toyota alone employs around 30,000 Chinese workers in its factories in China. Analysts appeared generally unconcerned about the impact on China of the dip in Japanese Foreign Direct Investment (FDI) that occurred in 2012. Indeed, July 2013 reporting shows a rebound in FDI figures, including from Japan. Still, it’s worth bearing in mind that any pullback of Japanese investment over the long term, whether for political or economic reasons, could work to China’s detriment, denying Chinese businesses the technological and managerial expertise of Japanese companies with global reach and experience—and this just at a critical time in China’s own push to develop innovative technologies that are globally scalable.