CRI Interview on “some latest development of the China-Japan relations”

Just recorded an interview for China Radio International. Went mostly according to my CliffsNotes below. Did very little improvising (which I am not good at). Let’s see if they use it all, or edit it.

1.      Up to date Xi Jinping and Shinzo Abe have not held any face-to-face talk since they took office. However, the Japanese media Nikkei Business Daily reported earlier this month that Japan and China are trying to arrange two-way talks between their leaders at this year’s APEC Summit in November in Beijing. It might be difficult to verify this, but do you sense any positive changes in bilateral ties?

Yes, I am seeing improvements. Two events. First, in May, Masahiko Komura visited Beijin. He met Zhang Dajiang, and said that he did not think that Prime Minister Abe would visit the Yasukuni Shrine. The fact that the meeting took place at all was important. Mr. Zhang is the Chairman of the National People’s Congress, which makes him the third most important official in China. As for Mr. Komura, he is one of the most important elders of the ruling Liberal Democratic Party, outranked only by Mr. Abe himself. He served as foreign minister on two occasions and acquitted himself well. He is clearly a moderate but enjoys Mr. Abe’s full trust, who called on him to reel in a reluctant Komeito, the junior coalition partner, as well as reluctant doves of his own party, to support the reinterpretation of the Japanese constitution to allow collective self-defense. Mr. Abe will not say that he will not go to the Yasukuni Shrine; personal conviction and domestic politics prevents him from saying so outright. But Mr. Komura’s comment carries great weight and was certainly closely coordinated with Mr. Abe and his senior advisors. I am reasonably cofident that the Chinese authorities got the message.

Second, a couple of weeks ago, Kishida Fumio and Wong Yi had a bilateral meeting at the ASEAN Regional Forum. The importance of this meeting is obvious; this is the first time that the foreign ministers of the two countries met bilaterally in a long while. Nothing substantial came of it, but that was not the point. It is another gingerly step toward normalization of the bilateral relationship, giving us some hope of a summit that will enable the two governments to tell their people, move along, there’s nothing to see here. That is particularly important for the Xi Jinping administration, which needs to focus on domestic reforms. The islands can wait, I’m sure.

2.      Former Japanese Prime Minister Yasuo Fukuda paid a low-profile visit to China late last Month and he successfully met with President Xi Jinping. In the eyes of Chinese, Yasuo Fukuda was a friendly Japanese leader when he was in power. How is his trip perceived from the Japan point of view?

People in Japan who welcome any sign of improving bilateral relations must have welcomed that visit, but I do not think that it moved the needle, as far as the Abe administration was concerned. I could be wrong; I am not an insider, and if I were, I probably would not be talking openly about this. And Mr. Fukuda is not quite Mr. Hatoyama, who has also visited Beijing with much less success. But Mr. Fukuda is clearly a dove; Mr. Abe obviously is not. Mr. Fukuda is also retired as a politician, which further diminishes the impact. I think that it was good in the sense that it sent the message to the Chinese public that the Chinese leadership had nothing against Japan itself, or even the Liberal Democratic Party. Such gestures help contain the negative fallout if and when there are incidents down the road.

3.      In public Shinzo Abe is calling for “frank and open discussions” with China. On the other hand, however, the Abe government seems to make no concessions on island disputes in East China Sea. How is Abe’s China policy interpreted from the Japanese perspective? Do people in Japan hold a more critical view or supportive view towards his China policy?

The overwhelming majority of the Japanese public support Mr. Abe on his position regarding the Yasukuni Islands. From the Japanese perspective, it is the Chinese authorities that are trying to change the status quo, which is not a good precondition for concessions unless Japan is at a serious disadvantage security-wise. I think here, the Japanese perspective is that the mutual security treaty with the United States is very useful. And this is not just Mr. Abe. Remember, the two incidents that made the bilateral relationship take a serious turn for the worse occurred under administrations led by the Democratic Party of Japan, not the Liberal Democrats. “Frank and open,” sure, but that does not necessarily entail the possibility of “concessions.” The Japanese position is that China should take the matter to the International Court of Justice. I don’t see that changing any time soon.

4.      Data from Japan’s foreign ministry show the number of Japanese living in China fell more than 10 per cent in 2013. Do you think that political distrust has a growing spill-over effect on other aspects of China-Japan ties?

We are certainly seeing the results of investment or disinvestment decisions made in late 2012, early 2013, after the December riots in China that targeted Japanese assets and products there. But the downturn in Japanese investment reflects more general problems with regard to China. Remember, investment this year from the United States and European Union has also fallen by double digits year-on-year, just not as dramatically as in Japan’s case. Labor costs keep going up, and there is a sense that non-Chinese businesses are being targeted to their economic disadvantage. The recent crackdown on foreign auto manufacturers and suppliers is the most obvious case from the foreign perspective. Even the McDonalds chicken meat fiasco is seen as picking on a foreign firm. And political risk advisors think that the trend towards favoring state-owned enterprises and national champions will continue for the foreseeable future.

Some of the drop in the number of Japanese living in China may be attributable to a less amenable social context that reflects the downturn in the political relationship, but I suspect that it is more a reflection of a combination of maturing investments—businesses will replace expensive ex-pats with local personnel whenever they can—and quality-of-life issues, such as pollution and food safety. The ex-pat employees that remain are sending their families back to Japan.

5.      Amidst the deteriorating Sino-Japan relations, economic cooperation between the world’s second and third largest economies has been suffering. Recent data from The Japan External Trade Organization, however, show Japan’s export to China during the first half of this year actually had an increase for the first time over the past 3 years. At the same time, China’s export to Japan has gone back to the level prior to the ongoing crisis between the two countries. Why do you think the bilateral trade is showing signs of recovery? Will the positive signs in trade pave way for the warming-up of the bilateral relations?

It’s simple. The Chinese economy continues to grow, the Japanese economy continues to recover, and there is strong interdependence between the two economies. The figures were bound to come to this sooner or later.

But the trade figures do not pave the way for a political warming-up. In fact, if anything, I think that it’s more the other way around; as the Chinese authorities have taken ownership of the bilateral political and security conflict, sidelining the Chinese public as far as participatory politics—demonstrations, riots, boycotts and the like—this has enabled the economic side of the relationship to take on a business-as-usual coloring.

Now, I do not think that the Japanese public really connects the politics to the economics. If the Japanese consumer hesitates to consume products made in China, it is out of safety concerns, not because one finds China’s actions around the Senkaku Islands disagreeable. It does not quite work that way the other way around, because of how the dispute as well as the so-called history issues play out in China’s education and media. But the Chinese authorities have done a good job of containing the economic fallout. The real problem in China is more general, and is not a Japan issue.