Saturday, November 08, 2014

Abe and Xi Meet and I Eat Crow

The Japanese and Chinese governments issued an extraordinary joint statement that all but ensures that Prime Minister Shinzo Abe and President Xi Jinping will hold an official meeting on the occasion of the upcoming APEC summit in Shanghai. Frankly, I did not think that it could be done. Even when Ambassador Shotaro Yachi arrived in Beijing to make last-minute arrangements, I continued to believe that it was for an unofficial chat on the sidelines—which explains why Mr. Yachi is the diplomat and I am merely a blogger.

The benefits of an agreement and a Japan-China summit for Abe are the following. First, for Abe, it provides a welcome boost in the polls in the wake of the political financing scandals that have so far taken out two cabinet ministers and casting doubt on his political competence, and adds credibility to the unspoken threat of an early snap election before a) the prime minister’s popularity drops further and b) the opposition parties can get their acts together to offer a credible threat to the LDP-Komeito coalition. I still believe that the election talk is a bluff to make the opposition more cooperative in the ongoing extraordinary Diet session, but I am less certain now.

Second, for Xi, it is an important step in reversing the consequences of its aggressive acts regarding sovereignty issues that have driven its neighbors into closer cooperation with each other as well as the United States. It may be true that it is better to be feared than loved, but not when that fear drives its neighbors into the welcoming arms of the global hegemon in the  process of a “pivot”/”rebalancing act. Try instead for respect, which is exactly what I think that the Chinese authorities are aiming at.

Third, it improves the background against which economic activities take place, which is a benefit for both men, particularly for Xi, since his authority, indeed the legitimacy of the Chinese Communist Party that he leads, turns on the outcome of his management of the domestic economy.  The first clear evidence of this should be an uptick in Japanese tourism in China next spring. Chinese tourism in Japan will also be up, but the effect of the new relationship will be hard to recognize, as it is already well on the road to recovery from the hit that it took as the bilateral relationship deteriorated, perhaps because most of the overt anger in Japan remained within the confines of the populist-conservative media and internet forums and only rarely and narrowly ever spilled over into the streets, storefronts and the like. But the effect of the improvement can easily be overstated. The rapprochement will not make Chinese consumer products feel any safer for the Japanese consumer, and there are no meaningful Chinese brands to stop boycotting. At the other end, it is hard to make out how much the summit meeting will move the needle as far as the Chinese consumer’s mindset is concerned. The somber tone of the statement clearly indicates to the Chinese that all is far from well as far as the political relationship is concerned.

And this brings me to my fourth point, which is the effect it may or may not have on Japanese investment in China. Japanese FDI into China has fallen significantly this year, which is surely one significant factor affecting Xi’s appetite for political compromise. But it is notable that Japanese investment kept rising in 2013, after the bilateral relationship had taken a dramatic turn for the worse and while US and European investment into China was falling. Given the typical last-in, last-out behavior with which Japanese corporations respond to changes in the investment climate, it is highly likely that much of the 2014 drop has been a form of delayed reaction to the economic slow-down and diminished future prospects affecting all foreign businesses. Japanese investment in China may rise next year, but it could merely be a dead cat’s bounce back from a bad delayed-reaction off year. At the same time, the positive effect of the rapprochement may be masked by a generally negative investment climate affecting all businesses, foreign corporations in particular.

Finally, let’s take a look at how the two main issues, Yasukuni and the Senkaku Islands, were treated.

First, with regard to the Yasukuni Shrine, the Chinese side demanded that the Japanese side promise that Abe would not visit Yasukuni while he was prime minister, while Abe was not going to do such a thing. However, there was no way that a post-summit visit would fail to plunge the bilateral relationship into an even deeper abyss than the one that it had fallen into after Abe’s December visit, and there was no way that Abe could have been unaware of this. So a de facto guarantee was issued in the form of the following bullet:

2. Both sides shared some recognition that, following the spirit of squarely facing history and advancing toward the future, they would overcome political difficulties that affect their bilateral relations.

Somewhat cryptic and only “some” recognition that “they would overcome political difficulties” “following the spirit of squarely facing history,” it was still enough in the wake of repeated assurances from Masahiko Komura Yasuo Fukuda that Abe would not indeed visit Yasukuni again as prime minister to go ahead with the bilateral summit. nyway...

The Senkaku Islands and more broadly the East China Sea receive their own dedicated bullet, which
is an indication of the more dangerous and imminent nature of the issue. The Chinese side reportedly demanded that the Japanese government recognize that there was a dispute, while there was no way that the Japanese government could be seen to be making a concession in the face of highly aggressive actions by the Chinese side.

3. Both sides recognized that they had different views as to the emergence of tense situations in recent years in the waters of the East China Sea, including those around the Senkaku Islands, and shared the view that, through dialogue and consultation, they would prevent the deterioration of the situation, establish a crisis management mechanism and avert the rise of unforeseen circumstances.

What made this recognition of “the emergence of tense situations” and the “different views” that they held possible was the fact that, contrary to conventional wisdom, the Japanese government had never denied the existence of a “dispute.” Instead, it had provided much narrow grounds for refusing to engage the Chinese government on the matter; namely that “[t]here exists no issue of territorial sovereignty to be resolved concerning the Senkaku Islands.”  This is a legal statement, which can be challenged in the forum of public opinion or in the International Court of Justice, and about which the Chinese obviously have “different views,” regarding the very real on-the-ground (if you will) dispute. But that dispute itself is not going anywhere. So the Chinese incursions into Senkaku territorial waters will continue, which is one reason why a “crisis management system” will be needed. Any who thinks that the Chinese side will provide any show of good will on this point should remember Xi Jinping’s September state visit to India, when the People’s Liberation Army chose that occasion to push soldiers into a region contested between China and India. The new normal is the new normal, and so it will remain. Abe has no illusions here or anywhere else for that matter. And neither does Xi. That is why the fourth bullet is couched in such cautious tones, stating that the two sides will only “gradually resume dialogue.”

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