Spat costs Sino-Japanese business dear

By Ding Gang Source:Global Times Published: 2012-12-5 20:10:05

Last week, a friend living in Japan arrived at Bangkok to attend a meeting. We talked of the economic and trade relationship between China and Japan. He told me that a few days ago he saw an advertisement in Tokyo street where a bank promised an APR of 2 percent for yuan saving accounts. 

Japan has been in economic stagnation for a long time, and most banks provide almost no interest for savings, so this offer was pretty good. It made me reflect on how China and Japan complement each other in their economic and trade ties.

The two countries have been used to hot economic exchanges but a cold political relationship. However due to the dispute over the Diaoyu Islands, the economic exchange has also cooled down. Many important economic and trade agreements which were already achieved, including a currency swap plan, cannot be carried out at the moment. The speedy decline of the bilateral relationship has led to a lose-lose situation.

According to statistics from China's Ministry of Commerce, since this October the volume of direct investment from Japanese enterprises has totaled $460 million, down by nearly a third from a year ago.

The predicted annual increase for 2012 of Japan's overall direct investment in China has dropped to 11 percent, whereas the number for the first nine months of this year was 17 percent.

Some Japanese multinationals have begun to consider shifting their investments to other countries. Southeast Asian countries have attracted considerable Japanese investment in the past couple of months.

But it is the US that reaps the biggest profits. The US has collected huge strategic benefits.

"China and Japan signed a currency swap agreement in June, and the Diaoyu Islands dispute escalated soon after in August. Can it be that the Americans set the trap and we were both fooled?" my friend joked.

The US dollar is the foundation of its national prosperity. Despite the colossal trade volume between China and Japan, 80 percent of the transactions were denominated in dollars, which is extremely unreasonable. The currency swap between China and Japan will shake the position of the US dollar, which is the last thing that the Americans want to see.

Chinese and Japanese economies complement each other not only in currency, but also in many other fields.

The scale of this is self-evident, if we look at how many Japanese components there are in Chinese products exported to Europe and the US, how many Chinese use electronic products made by Japanese brands, and how many Chinese employees work at Japanese companies.

Some netizens call for boycotts against Japanese products. However, can these netizens tell what percentage of a Nissan is made in China, and what proportion is made in Japan?

Some comment that we should stop Chinese and Japanese economies from further complementing each other. But this situation is a natural result of the fact that the two economies are at different development stages and occupy different positions in the global production chain. Amid the current economic globalization, mutual support is an irreversible trend, and one that benefits China's development.

Statistics from the Japanese embassy in China show that nearly 1 million Chinese workers are employed in Japanese enterprises. These people are no different from other Chinese, and no one has the right to force them to lose their job.

They can't be sacrificed for some people's "patriotism." These employees also have kids and parents that they need to take care of. What's more, if Japanese companies have to shut down and leave China, these workers still need to rely on government pensions, which are ultimately paid by taxpayers.

China and Japan are the second- and third-largest economies in the world. It's rare for such economies to complement, rather than fiercely compete with, each other. Such a relationship, if well fostered, will not only benefit China's economic growth, but also bring a longer period of strategic opportunities.

Boosting economic exchange with Japan as soon as possible means neither abandoning sovereignty nor forgetting history. As to sovereignty issue, we should continue our original agenda, launch negotiations, and show toughness if necessary. History certainly shouldn't be forgotten.

Nevertheless, sovereignty and historic issues should be separated as much as possible from economic ones. A mature public needs to understand this.

The author is a senior editor with People's Daily. He's now stationed in Bangkok.

Posted in: Ding Gang, Viewpoint

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