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China is now widely seen as the coming superpower. But few even among the west’s China-watchers understand quite how fast this geopolitical freight train is approaching. Moreover, most western observers assume that China’s ambitions are being opposed by its east Asian rival, Japan. In the words of the Economist, Japan is “standing in the way” of China’s superpower ambitions. As the Japanese economy is still more than three times larger than China’s, Japan’s supposed hostility has tended to tranquilise western concerns about the dragon’s rise.

All conventional wisdom to the contrary, however, Japan and China are not enemies. The two east Asian great powers quietly buried the hatchet 25 years ago and, at least as far as top policymakers are concerned, their relations have long been remarkably close and even warm. It was in December 1979 that the Japanese prime minister, Masayoshi Ohira, paid a historic visit to Beijing to set the seal on wide-ranging plans for Sino-Japanese co-operation. What started out as a simple economic partnership has now blossomed into a full-scale alliance, with an increasingly obvious anti-western-and particularly anti-US-agenda.

Japanese policymakers entered this alliance because they recognised earlier than their western counterparts how radically the map of world power was likely to be redrawn in the 21st century. They realised that, thanks to reforms initiated in the 1970s, the Chinese economy was launched on a path of sustainable growth. It required little prescience to see that a rise in China’s military power would follow. As China’s growth has continued to meet and even surpass Japanese expectations, the Japanese have become convinced that the US will come off second best in the rivalry with China for global leadership.

Faced with this realisation, Japanese leaders had a choice. They could obstruct China, sabotaging any hope of reconciliation with their neighbour, or they could mend fences. All the evidence is that they chose the latter, and that since 1979 they have been accommodating, and indeed encouraging, China’s superpower ambitions.

Of course, all this must remain strictly sub rosa. Japanese leaders understand that any acknowledgment of how close Sino-Japanese relations have become would risk a backlash from America. After all, Japan has long presented itself as one of America’s most loyal and devoted allies-and has enjoyed uniquely generous economic privileges as a result.

Yet the fact that Tokyo and Beijing enjoy a special understanding is becoming ever harder to conceal. A marked pro-China bias has long been apparent in key areas of Japanese policy, including trade, technology transfer, foreign aid and diplomatic co-operation.

On the Chinese side too, there is plenty of evidence that relations have undergone a sea change. Reciprocating Japan’s preferential trade policy, China now buys more than twice as much from Japan as from the US. The number of Chinese students studying in Japan in 2002 was nearly 60,000, a fourfold increase on the late 1980s. And manifestations of Japanese popular culture-from Manga comics to karaoke-are now all the rage among young Chinese.

The origins of the Sino-Japanese rapprochement date to the early 1970s. In the wake of President Richard Nixon’s historic visit to Beijing in 1972, Japanese officials rushed to build closer trade ties with China. Then in 1978, in a move almost unnoticed in the west, Japan and China signed a treaty of friendship. This opened the door to extensive economic negotiations that culminated in Ohira’s Beijing visit in 1979.

The most obvious change in Japan’s China policy was in official aid. Up to 1978, Japan’s aid to China had been negligible. Then the numbers suddenly soared. China was the top destination for Japanese aid throughout the 1980s and in every year but one of the 1990s. (Japan’s worldwide aid budget has exceeded America’s in most of the period since 1989. In 2000, for instance, it totalled $ 13.1bn, nearly 36 per cent more than that of the US.)

Seen from the Chinese side, Japan has long dwarfed all other donor nations. In the 20 years to 1999, Japanese aid to China totalled YEN 2.7 trillion ($ 24bn), about two thirds of all China’s bilateral aid in the period. By contrast, for all the Clinton era talk of a US-China “strategic partnership,” the US has provided no significant aid to China in more than 50 years.

Perhaps even more important than the scale of Japanese aid is how it has been applied. In a pattern that will surprise many in the west who have perceived Japan’s China aid policy as a humanitarian gesture to atone for past wrongs, little money is intended for humanitarian purposes. Japan does virtually nothing to alleviate immediate poverty in China. Instead, it has generally worked with the Beijing government to fund “muscle-building” projects that are clearly intended to speed China’s emergence as an economic superpower.

In particular, as much as 60 per cent of Japan’s total aid has at times been devoted to improving China’s transport infrastructure. Despite talk of China as an economic threat, Japan is clearly intent on providing China’s export industries with the modern roads, railways, and ports needed to serve world markets. Not only that, in a reversal of its traditionally protectionist trade policy, Japan has been providing a major market for China’s exports; so much so that China, almost alone among manufacturing nations, enjoys large and growing surpluses on its trade with Japan. In 2002, for instance, China ran a surplus on visible trade with Japan of $ 21.9bn.

China can run surpluses on such a scale only because Tokyo has offered Chinese goods highly preferential access to the Japanese market. The truth is that Japan’s imports from China rose by 48 per cent in the five years to 2002. Yet Japan’s imports from the US, ostensibly its closest ally, declined by more than 23 per cent in that period. The end result is that, in 2002, China displaced the US as Japan’s largest source of imports. Given that the Chinese economy is merely an eighth the size of America’s, this is remarkable.


Japan has also favoured China in its tourism policy. Although the Sars epidemic has disturbed the pattern, the long-term trend shows that China is one of the fastest growing Japanese tourist destinations. This in turn reflects the Japanese bureaucracy’s manipulation of airline landing rights and airport slots (in regulator-ridden Japan, artificially tight limits on airport capacity substantially shape holiday destinations). In 2000, 1.5m Japanese tourists visited China, a 41 per cent rise in three years. While Japan’s tourist travel to China multiplied 3.5 times between 1987 and 2000, travel to Taiwan increased by less than 5 per cent.

China has also benefited from preferential Japanese technology policies. Although Japan is famous for jealously guarding its technological knowhow, a survey by the Japanese management specialist, Tomoyuki Kojima, found that Japan had provided 28 per cent of all China’s receipts of foreign technology-the largest share of any nation.

The pattern was set in the early days of the Sino-Japanese rapprochement when officials agreed a deal to build the vast Baoshan steel mill near Shanghai. The plant was designed as a replica of Nippon Steel’s Kimitsu mill, then the world’s most advanced. Other early transfers of important Japanese technology included two petrochemical complexes in Heilongjiang and Shandong provinces. By the late 1980s, these plants and others using the latest Japanese technologies provided 80 per cent of China’s ethylene needs. In 1997, NEC agreed to build a $ 1.2bn semiconductor plant in Shanghai. This plant, which enabled China to make computer chips for the first time, was so advanced that there were fears that it breached US national security guidelines. Another striking case of technology transfer was Matsushita’s decision in 2002 to establish a plant to make state of the art plasma screens, a high-technology growth area in the television industry.

Japan’s most surprising expression of favouritism towards China has been in diplomacy. Over the years it has extricated China from several diplomatic jams. In particular, in the wake of the 1989 Tiananmen Square massacre, the Japanese foreign ministry pulled out all the stops in its damage control efforts in western capitals.

In the immediate aftermath of the massacre, the ministry rushed out statements that Japan’s policy towards China remained “unchanged” and that Japan would not follow the US in imposing economic sanctions on Beijing. Officials described the massacre as “a Chinese domestic affair.” A similar attitude was apparent at the Asian Development Bank (effectively an offshoot of the Tokyo ministry of finance).

Pressured by world opinion, Japanese leaders made a few token gestures of censure-some aid payments, for instance, were delayed. But as soon as the political climate seemed opportune, Japan not only restarted its funding operations but expanded them. According to Greg Austin and Stuart Harris’s Japan and Greater China, Japan’s aid to China in the three years after 1989 totalled $ 2.37bn, an increase of nearly 38 per cent over the total in the three years to 1988.

In 1991, the Japanese prime minister, Toshiki Kaifu, paid an official visit to China-the first post-Tiananmen visit by any leader of an advanced nation. It was important not only in itself but also for its ice-breaking function in facilitating a visit a little later by John Major, then British prime minister.

Japan’s helpful attitude did not go unrewarded. The CIA recorded that China imported more Japanese goods as a reward for Japan’s post-Tiananmen diplomatic help. Figures quoted by the noted China-watcher James Mann in his book About Face showed that Japanese companies increased their share of many key Chinese markets at the expense of US and European rivals in the early 1990s.

In contrast, because of acute trade tensions at that time, Japan’s relations with the US and Europe had hit rock bottom. Why was Japan willing to expend so much of its scarce political capital “coddling tyrants”? It is hard to escape the conclusion that building up China was a higher priority for Tokyo than maintaining equable relations with the west.

This was not the first time that Japan had risked its diplomatic capital in support of the new China. In the first shaky years of the Deng Xiaoping regime in the late 1970s, Japan used its aid money to prop it up. Japanese officials justified this to Americans and Europeans by portraying Deng as a pro-western reformist. As subsequent events made clear, notably Tiananmen Square, this should have been taken with a pinch of salt. For Japanese officials, Deng’s attitude to the west was beside the point. What they saw in him was a leader who would embrace the east Asian-in other words, Japanese-economic model.

Japan’s pattern of diplomatic helpfulness was established during the earliest years of Japan’s rapprochement with China. Henry Kissinger records that Mao Zedong advised the US to maintain good relations with Japan. Tokyo reciprocated by downgrading diplomatic relations with Taiwan before Washington did, paving the way for China to take Taiwan’s permanent seat on the UN security council in 1971.

More recently, Japan’s favourable attitude to China’s bid to join the WTO helped to quell the concerns of US policymakers. After all, they reasoned, if Japan, which they took to have the most to lose from China’s rise, saw no reason to press China harder on the terms of membership, why should the US?

Robert Novick, a senior US trade negotiator, recounts that the Japanese sat back and left the Americans to play the tough cops. Novick confesses to having been surprised at Japan’s attitude, given its history of bad blood with China. “I can’t remember the Japanese being visible in the talks,” he says.

Perhaps Japan’s biggest favour was its conspicuous promptness in granting final approval to China’s WTO entry in July 1999-four months before the US and nearly a year before the EU. By setting such a “good example,” Japan seems to have been intent on pressuring the Americans and Europeans to acquiesce to a distinctly inadequate deal.

Japan’s diplomatic support for China’s economic expansionism is obliquely apparent in countless other ways. A case in point is the behaviour of pro-Japanese opinion leaders in the US establishment, loosely known as the “chrysanthemum club.” Virtually without exception, they have taken a strongly pro-China position on trade and diplomatic issues. A key figure here is the Clinton administration’s last ambassador to Tokyo, Thomas Foley, long considered one of the most committed proponents of Japan’s interests in the US. As leader of the House of Representatives, he also played an important role in persuading Clinton to grant China “most favoured nation” status, and to renounce the former policy of making its access to the US market conditional on meeting minimum human rights standards.

Given the wealth of evidence that Japan is supporting China’s superpower ambitions, a question remains: if the two nations are so friendly, why is this not reflected in their rhetoric? Part of the answer is that rhetoric has much less meaning in east Asia than it does in the west. East Asians say what they think is expected of them-and in the case of east Asian leaders that means paying lip service to positions established by their predecessors decades ago. Such rhetoric placates important domestic interest groups. Moreover, perpetuating the impression of sullen hostility between the two nations also has the crucial advantage of disguising from the US the depth of their co-operation.

But there is more than a hint of humbug in the extravagant denunciations of Japanese military aggression that sometimes emanate from Beijing. When it counts, Chinese leaders stand on Japan’s side-even against the interests of their own people. Specifically, they continue to debar Chinese citizens from pursuing claims against Japan for compensation in respect of wartime atrocities that are believed to have claimed at least 10m victims in China. Japan’s compensation to victims of all nationalities represents less than 5 per cent of the sum Germany has paid to Jews and other victims of the Nazis.

One of the more contrived manifestations of Sino-Japanese hostility concerns Japan’s remembrance of its war dead. The principal form this remembrance takes is visits by Japanese politicians to the Yasukuni shrine in Tokyo. The shrine is notorious for the fact that among the 2.5m people it commemorates are war criminals who visited terrible atrocities on millions of Chinese citizens in the 1930s and 1940s.

The Chinese press is regularly outraged by the Yasukuni visits. But it is also possible to see the visits as part of an elaborate smokescreen to deflect attention from the true closeness of Tokyo’s relations with Beijing. The visits first became a flashpoint at a crucial time in Sino-Japanese relations in April 1979. Just a few weeks previously, Deng Xiaoping had paid a historic visit to Tokyo. He had evidently been warmly received-so much so that it was felt on both sides that some contrivance was needed to hide the true closeness of Sino-Japanese relations. The Japanese authorities found the solution in a leak to the press: the previously unexceptionable Yasukuni shrine was now officially said to commemorate 14 top Japanese war criminals. Prime Minister Ohira then announced that he planned to visit the shrine regardless. In contrast to Deng’s epochal visit to Tokyo, which received little attention in the western press, Ohira’s Yasukuni outing made the front pages worldwide. The story served the interests of Deng and other Chinese leaders by allowing them to sound suitably ferocious in condemning Tokyo-while at the same time blocking American lawyers from helping Chinese citizens pursue war claims against Japan.

Empty posturing is also apparent in other much publicised Sino-Japanese spats, such as the cluster of bilateral Japan-China agricultural disputes that broke out in 2001. The goods concerned-long-stem onions, shiitake mushrooms, and tatami rushes-accounted for less than 0.2 per cent of bilateral trade. And while Chinese officials were talking up the prospects of a trade war, trade between the two nations was growing by more than 20 per cent a year.

Another recent scandal that allegedly damaged Sino-Japanese relations centred on a three-day orgy by Japanese executives in a southern Chinese hotel in September 2003. A party of employees of a Japanese construction company bought the services of 500 Chinese prostitutes who, at various times, would congregate in the public spaces of the hotel in full view of other guests.

A spokesman for the Chinese foreign ministry described the episode as “an extremely odious criminal case.” Reflecting the official stance, government-controlled newspapers aired extravagant charges that the Japanese had planned the orgy to humiliate the Chinese people, since it coincided with the anniversary of Japan’s 1931 attack on Chinese Manchuria.

But were Chinese officials really outraged? Foreigners’ hotels in China are notorious for the brazenness with which prostitutes are permitted to proposition guests. This is not only officially tolerated; it is considered a useful contribution to foreign exchange receipts. The episode was reported in the media of both nations in a highly artificial way. In Chinese press reports-and even in denunciations in China’s internet chatrooms-the company’s identity was carefully withheld. Indeed, as far as Chinese reports were concerned, the men were simply “Japanese tourists.” The fact that they were on a company jaunt came out in subsequent Japanese reports-but the Japanese press too withheld the company’s name.

Had the Chinese been so minded they could have gravely punished the company by releasing its name. If, as seems certain, the company is a major one with global operations, it would stand to suffer significant losses of business in the west, particularly in the US.

None of this is to suggest that the Chinese do not remember the past. They do. But history is full of cases where former enemies find it within themselves to reconcile. A long pre-1945 history of military conflict has not prevented France and Germany from co-operating closely. Then there is America’s own experience with Japan. In the space of a couple of years in the 1940s, Americans switched from demonising the Japanese to treating them as close allies.


The Japanese and the Chinese are pragmatic people who rarely let history get in the way of good business. And there is no question that, for both sides, the alliance is good business. The two economies are highly complementary: Japan’s ultra capital-intensive manufacturers supply the sophisticated components and complex equipment needed by China’s labour-intensive factories. As the resulting consumer goods are exported mainly to the west, the relationship is a win-win in trade terms for both nations. For Japan in particular, the benefits are far larger than is generally understood: it has an enormous interest in China’s exporting success. Thus although China’s exports to the US now exceed even Japan’s, the widely voiced conclusion that China’s success has come at Japan’s expense is misguided. The truth is that a large proportion of the high-tech components and materials used in China’s exports originates in Japan. As David Pilling of the Financial Times has reported, China accounted for nearly 80 per cent of the increase in Japan’s exports in 2003. In effect, much of what Japan exports to the US these days goes through China. This helps explain a crucial fact: Japan’s aggregate current account surpluses with the world as a whole are three to four times greater than China’s.

Short-term economic considerations are not the decisive factor in Japan’s changing diplomatic priorities. Japan’s preference for a world led by China rather than by the US is based on culture. Though many westerners imagine otherwise, Japan is deeply uncomfortable with many aspects of western culture. Although Japan presents a thoroughly westernised face to the world, this reflects no sincere acceptance of Judeo-Christian values.

Japan and China share Confucian and Buddhist traditions. Both are ruled by a traditional east Asian ethos of father knows best. Citizens are saddled with a heavy burden of duties while being denied many rights taken for granted in the west.

Because of their common cultural heritage, the Japanese and Chinese think alike in economic matters, too. Officials in both nations have huge powers to direct savings flows, build export industries, and generally shape economic outcomes. This means the two nations find themselves making common cause in opposing American efforts to reshape other nations’ economies along US lines.

Human rights is another area in which a common cultural heritage has helped align the two nations’ diplomatic interests. Japanese and Chinese leaders are at one in viewing a nation’s human rights policies as a purely internal affair. Thus Japan does not try to dictate China’s human rights policies, any more than China tries to dictate Japan’s.

All this should be understood in the context of the well known xenophobia common to Japan and China. Both nations believe that good fences make good neighbours. Since the second world war this has inclined them to a keen respect for national sovereignty. By the same token, they resent the universalist nature of America’s agenda on political, economic and social issues. This resentment explains why Japan and China are now quietly looking forward to a day when the US-led world order will no longer dominate.

• Category: Economics • Tags: China, Japan 
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