Competition and cooperation – where is Sino-Japan relations heading?

Updated On: Sep 01, 2006

It has now become a familiar story. As ties between the two regional powers, China and Japan, continue to falter over Yasukuni and history, competition with an eye on expanding their influence and securing their resources for the future is also heating up.   This time, Central Asia with its oil resources is the playing ground. 

Koizumi has just embarked on a four-day trip to Central Asia with the not-so-subtle aim of energy containment of Russia and ChinaJapan’s diplomacy is unusual in this round of diplomacy. PM Koizumi will meet up with Uzbekistan’s President Islam Karimov, a leader blacklisted in the West for human rights violations. Nevertheless, the international media suggests that this has the shadowy backing of the US which does not want Chinese or Russian influence to grow further inCentral Asia. From the Japanese perspective, this has come too late and they are eager to make up for lost time.

And what is the purpose of all these intricately-set up rivalry? Energy, and lots of it. Kazakhstan is oil-rich with expanding gas production as does Turkmenistan andUzbekistan while the region also sits on the world's second largest deposit of uranium. So what is the ultimate Japanese gameplan for the region? It is now coined as the "southern route" - a pipeline that runs from Central Asia to the Indian Ocean via Afghanistan and Pakistan, avoiding China and Russia altogether.

Koizumi has a secret weapon – Japan’s green technologies which are probably the world’s best. "(But) we must not just be digging for resources and should also think about the environment, such as employing green technologies to enhance efficiency and save energy. I think these are the fields where Kazakhstan andUzbekistan have expectations on Japan for cooperation," Koizumi said. This secret weapon may already be working as Japan and Kazakhstan have secured a joint declaration for the development of uranium mines (Kazakhstan has 30% of the world's uranium reserves).

From the Chinese perspective, Japan is now directly challenging China’s influence in the region by setting up an alternative discussion forum. In 2004, Foreign Minister Yoriko Kawaguchi instituted the "Central Asia plus Japan Dialogue", holding a round of talks on economic and security ties as an alternative to the China-initiated Shanghai Five round of talks or the Shanghai Cooperation Organization (SCO). To Chinese analysts, energy is not the only item on Japan’s Central Asian agenda. The Chinese media noted that Japan has been stockpiling rare metal and petroleum in recent years.

However, the Chinese (along with much of the international opinion) remain confident of the SCO formed in 2001 which had since taken off with remarkable speed and scope of influence. Simply put, China has a headstart on influencing the region. In 2005, Chinese state oil company CNPC purchased Canada-based PetroKazakhstan and in December of the same year, the PRC completed a 1,000km-long (620 mile) pipeline supplying Kazakh oil to western China. Beijing has also signed a gas deal with Turkmenistan. Besides energy cooperation, China has already instituted military cooperation. Recently, Kazakhstan and China jointly staged a mock anti-terrorism battle under the umbrella of the SCO.

In addition, Japan faces additional handicaps. Its close links to the West as well as relative distance from Central Asian affairs makes it a more distant player from the region. Even as it tries to score points with Central Asian nations, Iran has already warned Japan of a possible retaliatory move to jointly develop its giant Azadegan oil field with Russia and/or China if it cannot reach an agreement with Japan by Sept. 15, 2006. The Iranians are impatient with the slow pace of the Japanese government-linked Inpex Corp. which holds the concessions for the development project. They speculate that Japan is deliberately delaying the project under instructions from the United States which is at odds with Iran's nuclear program.

How the increasing rivalry will impact bilateral ties and the economics of the region is perhaps at the top of the minds of many analysts.  Some predicted that Japanese investments would shift South Asia-wards while others say Southeast Asia would actually benefit from the rivalry. Yet, Sino-Japanese economic exchanges remain as robust and strong as ever, even reaching a new record in 2006, seen as one of the most difficult year for Sino-Japanese relations after its normalization three decades ago.

Japan's trade with mainland China jumped almost 10 percent in the six months to June 2006, setting a record high for a seventh straight year. Total trade between the two Asian economies came to US$99.2 billion in the first-half period, up 9.9 percent from a year ago. It is now predicted that Japan's trade with China is likely to reach a new record for an eighth straight year in 2006, topping US$200 billion. This figure overshadows ASEAN-Japan trade in 2005 by nearly US$50 billion and is about 40 times the size of Japan-India bilateral trade for both 2004 and 2005! In other words, Sino-Japanese trade this year dwarves the combined total of Japan’s 2005 trade with both ASEAN and India. These figures will be even more impressive if Hong Kong’s trade volume is also included. China has already surpassed USA as Japan’s top trading partner since 2004. China also continues to benefit from Japanese investments, particularly in the auto sectors.

Such news quickly prompted business leaders to step out and publicly lobby for better ties between the two countries in the post-Koizumi era. Fujio Mitarai, president of the Japan Business Federation (Nippon Keidanren) called for the Japanese government to build "a positive relationship with China".


Japan premier heads to Uzbekistan (BBC, 29 August 2006)

What is Koizumi's aim in visiting Kazakhstan and Uzbekistan? (People’s Daily, 29 August 2006)

Iran eyes Russia, China if Japan stalls on oil deal (Japan Times, 29 August 2006)

Koizumi off to Kazakhstan, Uzbekistan on energy quest (Japan Times, 29 August 2006)

Energy key to Japan's Central Asia ties (BBC, 28 August 2006)

Japan, China clash over gas site (CNN, 28 August 2006)

Japan's trade with China hits new record (Channelnewsasia, 28 August 2006)

Koizumi leaves for Central Asia (BBC, 28 August 2006)

Saudi Arabia to increase crude oil supply to Japan by 300,000 bpd (People’s Daily, 28 August 2006)