The region watches as China and Japan hold a high-level economic dialogue.
The most important Chinese carrot for Japan now is its emerging economic capacity to absorb Japanese goods. Japan is China's third largest trade partner and the second largest source of foreign direct investment. China is Japan's largest trade partner and one of Japan's fastest growing export markets. Japan also has its own set of cards in interacting with China, especially in the field of environment. A $420 million Japanese loan was extended to China to fund six environmental projects.
Therefore it is no surprise that China is willing to create sound conditions for Japanese firms to invest in China, so says Chinese Vice Premier Zeng Peiyan at the first China-Japan high-level economic dialogue held in Beijing. According to Zeng, four major problems exist in Sino-Japanese economic ties: a slowdown in the growth rate of bilateral trade, unsatisfactory business environment, obstacles in technological cooperation and fluctuations of Japanese investment in China.
"China and Japan share expanding mutual interests and new opportunities for cooperation under new historical conditions," said Zeng. "We should create a new pattern of economic and trade cooperation, putting emphasis on both commodities and services," Zeng said. In addition, "as the two biggest economies in Asia, China and Japan shoulder great responsibility for global economic stability and the prosperity of east Asia," Zeng said.
The Sino-Japanese dialogue atmosphere is full of cordial praises. Welcoming the Japanese before their two-hour closed-door meeting, Yang Jiechi called Komura "an old friend of the Chinese people" and has long been devoted to promoting China-Japan relations. "With the concerted efforts of the two sides, the first China-Japan high-level economic dialogue, held on Saturday afternoon in Beijing, would make major achievements," Yang said.
Other breakthroughs were made. Both sides signed a treaty to allow the countries' police and prosecutors to work directly on criminal extradition. Politically, however, the most important breakthrough was made in the military arena. A Chinese warship dropped anchor off Tokyo last Wednesday (28 Nov) in the communist nation's first military visit to Japan since World War II. "There is no need for concern, but we must be able to protect ourselves," Rear Adm. Xiao Xinnian assured Japan. "China does not want to be a superpower or take over the world." The Chinese ship was escorted by a Japanese destroyer as its escort and a half dozen helicopters buzzing the sky. A cheering section of Chinese well-wishers waved Chinese flags and performed a lion dance. Shenzhen will also be opened to the Japanese public for tours.
Japan opened its arms to the destroyer’s crew. "We have made big strides in our military relations, and your visit symbolizes this progress," Adm. Eiji Yoshikawa, chief of staff for Japan's navy, told the Chinese delegation. Chinese Ambassador Cui Tiankai said the warship was a "messenger of peace”. Chinese crew members will go around central Tokyo for sightseeing and shopping, and will conduct a variety of exchanges, including a soccer match, with their Japanese counterparts. As part of the exchange, China awaits the arrival of Japanese naval ship.
Despite the general amicable atmosphere, it was not enough to break through the controversial issue of gas exploration in the East China Sea which remains unresolved. Nevertheless, the Chinese hosts for the China-Japan dialogue in Beijing kept up their optimism. "It's clear China and Japanese relations have taken another step forward, especially in the areas of trade and commerce," Wen told Japanese Foreign Minister Masahiko Komura and four other Cabinet officials at Zhongnanhai.
In the economic sphere, there are also some limitations to Sino-Japanese rapprochement. A joint statement issued stated that: "While Japan welcomes measures regarding the more flexible appreciation of the reminbi, it calls on China to make efforts toward allowing a faster rise". Other Japanese complaints included China blocking Japanese acquisitions of Chinese firms while the Chinese noticed that Japanese investment in China fell 30 percent last year, to $4.6 billion, from 2006.
The “euphoria” over the first visit by the Chinese warship was also dampened when Japan scrapped a plan to have Chinese navy officers tour a destroyer equipped with high-tech radar, reportedly due to US pressures. The US however was quick to deny that it was involved in the Japanese decision to scrap the tour. "Neither the U.S. Forces in Japan nor the U.S. embassy in Tokyo asked the Government of Japan to cancel a tour of a Japan Maritime Self-defense Force Aegis ship by PLA Navy officers," U.S. embassy spokesman David Marks said. Japan too tried to deny that it was the US that pressured them to cancel the tour. Defense Minister Shigeru Ishiba said he had not heard that a tour of the destroyer had been scrapped at the request of the United States, but added that the need to protect classified data was a factor in deciding what to open up. This came at a sensitive time as the United States and China are at odds over a decision by Beijing to deny the U.S. aircraft carrier Kitty Hawk entry to Hong Kongduring the Thanksgiving holiday.
The Americans are also fuming at Chinese rejection of U.S. ship visits into Hong Kong. The Pentagon said this is the third such incident. According to a defense official, a request for the USS Reuben James, a Navy frigate, to make a New Year's holiday stop in Hong Kong was formally denied by the Chinese. In addition to the Kitty Hawk and the Reuben James, the Chinese also refused to let two Navy minesweepers, the Patriot and the Guardian, enter Hong Kong harbor to escape an approaching storm and receive fuel which technically violates an international rule of the sea to provide safe harbor for vessels in trouble.
Some sources in China has hinted that Congress' honoring of the Dalai Lama and U.S. arms sales to Taiwan triggered the problems. Regardless of the reasons, the Pentagon summoned a Chinese military attache to protest the decision, which the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, called "perplexing." At the highest level, President Bush raised the same issue with Chinese Foreign Minister Yang Jiechi during their talks.
China’s relations with the EU also seemed to be entering a rough patch. “The EU exports less to China than to Switzerland, a country of seven million people," lamented European Commission President Jose Manuel Barroso. "Our ultimate goal is to create a level playing field for both sides."
EU Trade Commissioner Peter Mandelson also spoke out (with Chinese Premier Wen in his audience): "Our trading relationship with China started as we know in a balanced way". "Now it is less balanced. Indeed in my time in China these last five days, it has grown by over two billion euro," he said, referring to the trade surplus. "We... need to identify a solution to solve this question, and I hope that it is a cooperative one," Serge Abou, the EU's ambassador to China. "Protectionism is not a winning option. So let us unite our efforts to resist protectionist trends."
Countering the Europeans, Wen said "China will continue to reform the RMB exchange rate regime in a gradual, proactive and manageable manner". "The exchange rate is a cause to some extent, but not the sole decisive factor behind the trade deficit." The EU, China's largest export market, is especially hurting with a trade deficit of 128 billion euros (175 billion dollars) with China in 2006 and is likely to balloon to 170 billion euros in 2007, according to EU statistics.
Likely to add to the cold front are British accusations of China web threat. The director-general of MI5, Jonathan Evans, wrote to 300 chief executives and security heads at banks, accountancy and legal firms, warning them they were under attack from "Chinese state organisations" via the use of "custom trojans" -- software that hacks into a firm's network and feeds back confidential information. The MI5 letter includes a list of so-called "signatures" that can be used to identify such trojans, plus Internet addresses used to launch them, it added. Evans warns companies doing business in China to be on their guard against the Chinese Army, because they were using the Internet to steal sensitive commercial data.This accusation is like to cast a dark cloud over Britain's Prime Minister Gordon Brown’s visit to China in January 2008. (3 December 2007)
No Gas Accord in China-Japan Talks (AP, 2 Dec 2007)
China, Japan hold high-level economic dialogue (China Daily, 1 Dec 2007)
British spy chief warns of China web threat (AFP, 1 Dec 2007)
Japan scraps China navy tour of destroyer: media (Reuters, 30 November 2007)
China barred 3rd Navy visit to Hong Kong (AP, 30 November 2007)
US, Japan eye China after ships barred (AP, 30 November 2007)
China warship on historic visit (People’s Daily, 29 November 2007)
China says 'misunderstanding' blocked US ship (People’s Dialy, 29 November 2007)
China Warship Makes 1st Visit to Japan (AP, 28 November 2007)
EU, China confront each other on trade dispute (People’s Daily, 28 November 2007)
Chinese naval warship arrives in Tokyo for visit (People’s Daily, 28 November 2007)