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Money Matters News
September 03,2018

Donald Trump’s tariffs prompt thaw in China-Japan ties

Web Desk

Donald Trump’s protectionist trade policies are leading to a reordering of economic relationships around the globe. The biggest is that between the world’s second- and third-largest economies — China and Japan. Talks in Beijing on Friday between the two countries’ finance ministers are the latest sign of thawing relations after years of tension. The rapprochement is to be welcomed — but is bound to have limits.

Bilateral trade exceeded $300bn in 2017, with more than 1,000 flights a week between the two countries. But Japan, the biggest source of foreign investment in China in 2011, dropped to fifth by 2016.

China reaped what it sowed after letting relations with Tokyo deteriorate from 2012, when the Japanese government purchased three of the uninhabited but disputed Senkaku Islands, known in China as the Diaoyu, from their private owner. The incident prompted one of the most serious postwar rifts between Beijing and Tokyo.

As Sino-US relations improved throughout Barack Obama’s second term as president — and remained stable during President Trump’s first year in office — China had few qualms about effectively freezing high-level government interactions with Japan. But after Mr Trump’s dramatic escalation on the trade front this year, Beijing is scrambling to repair in months what it neglected for years.

Chinese prime minister Li Keqiang’s visit to Japan in May was his first since becoming premier in 2013, and the first by a Chinese premier since 2010. It came a month after the two countries had their first “high-level economic dialogue” in 10 years. Japan’s ambassador in Beijing was last month invited to write an opinion column in the People’s Daily — the first such instance in a decade — on the 40th anniversary of the Sino-Japanese “Peace and Friendship” treaty.

The subject of Friday’s talks, reviving a currency swap arrangement that lapsed in 2013, is less important than their symbolic value. They should help prepare the way for a still unconfirmed visit to China by Shinzo Abe this year.

Beijing’s overtures have prompted divisions in Tokyo between one camp that continues to view China as a security threat, and another around Mr Abe that regards them as an important opportunity to reduce tensions. They also present Japan with a diplomatic balancing act, as it seeks to preserve relations with its most important partner, the US. While it shares China’s annoyance over Mr Trump’s steel tariffs — and regrets snubs including the current US administration’s withdrawal from the Trans-Pacific Partnership — Tokyo’s rapprochement with Beijing in no way signals a fraying of its alliance with Washington.

Historical grievances and territorial disputes weigh too heavily on China and Japan to imagine they will ever be great friends. Tokyo’s politicians can make things difficult for their neighbours with a sometimes ambivalent attitude towards Japan’s aggression and atrocities during the second world war. The Chinese Communist party has been happy to stoke nationalist resentment against Japan for its own domestic political purposes.

But Tokyo is well advised to make the most of any warming with Beijing, which could help promote security across Asia. It is to be hoped, too, that this is not a cynical shift by China that it will simply undo when it finds it convenient. For Beijing, and for Asia more broadly, the best approach is not politically expedient zigzags, but consistent engagement with Japan. Had Chinese officials taken the latter approach over the past five years, they would not be having to scramble so hard now to rebuild the relationship.

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