China and Japan: Economic Partners, Strategic Rivals

This text is translated and adapted from a French article published in Le Monde on Sept. 22, 2012. Reproduced with kind permission of Le Monde.

On 17 September, China Daily published a particularly virulent editorial threatening Tokyo with harsh trade sanctions if the Japanese government did not go back on its decision of 10 September to ‘nationalize’ the Senkaku Islands (Diaoyu in Chinese), previously owned by a Japanese family.

Kitakojima and Minamikojima of the Senkaku Islands
Two of the disputed islets – Kita-Kojima (left) and Minami-Kojima (right).

However, this ‘nationalization’ was actually intended to pull the rug from under the feet of the Governor of Tokyo, Shintaro Ishihara, a nationalist, who wanted to purchase the islands on behalf of the municipality, and whose Noda Cabinet feared anti-China provocations. This was a move designed to reduce tensions with China surrounding the disputed sovereignty of the Senkaku Islands, but it has come back to haunt Japan.

China is frustrated that its warnings have been unheeded, and emphasises that this archipelago ‘is an inalienable part of Chinese territory.’ Several patrol boats from China’s maritime surveillance agency have been sent to the area.

Question: why such an escalating diplomatic dispute about a string of five uninhabited islets whose total area does not exceed 7 km2? The dispute had already come to a head in October 2010 during a minor naval incident in this tiny archipelago. On that occasion Beijing had used an economic weapon by drastically reducing its exports of rare earths to Japan. Such incidents are in fact the symptom of the recurring tensions between China and Japan, economic partners by necessity but strategic rivals. The sudden resurgence of this dispute has a triple dimension: intrinsic interest in these islands, the weight of history and strategic ambitions in Asia.

The economic and strategic importance of this archipelago is far from negligible. Located 200 miles northeast of Taiwan, it occupies a key position in the event of regional conflict and it controls a crucial maritime artery supplying the region, including Japan, with natural resources. Its exclusive economic zone (EEZ) arouses the lust of the two countries, because it contains abundant fish stocks and probably significant hydrocarbon deposits. This is not the only competition between China and Japan for energy resources: they are already in conflict over the exploitation of deposits 600 km further north, where they engaged in a “war of drilling.”

The second dimension of this territorial dispute is the weight of history in the relations between the two nations. Chinese activists have purposely chosen August 15, the anniversary of Japan’s surrender in 1945, to plant Chinese flags on the main island of the archipelago. The large anti-Japanese demonstrations that took place in China since – including on September 18, the anniversary of the Mukden Incident, which served as a pretext for the invasion of Manchuria by Japan in 1931 – have shown by their violence the underlying memorial issues. The suffering among Chinese people that militarist Japan inflicted has left deep scars and resentment against the former invader, which reappear at the slightest incident, despite several apologies made by Tokyo. The emotional climate makes the resolution of this territorial dispute impossible in the near future, all the more so as historical and legal arguments advanced by each party to justify its sovereignty are extremely complex.

Thirdly, it is the rivalry between the two dominant powers in Asia that provides the background of this seemingly minor territorial dispute. Distrust and antagonism between the two rivals reflect their ambitions and concerns for their respective roles and places in Asia. While Japan is weakened, China imposes more and more of its influence in the region, including on militarily. Under the guise of defending the “core interests” of the country, Beijing is asserting its maritime ambitions in the China Sea. For example, in the South China Sea, tension in the Spratly and Paracels archipelagos is increasing between China and surrounding countries, including the Philippines. In the recent White Paper on Defence published on 31 July, Tokyo expresses its concerns about the maritime ambitions of its powerful neighbour and the doubling of the Chinese military budget in the past five years. If China continues at the current pace in its economic expansion, diplomatic dynamism and the modernization of its army, it will impose its dominance in Asia within the next few decades. Japan cannot easily accept such a reversal of the turbulent history that binds it to its neighbour. It strives to contain China’s ambitions both at the economic and strategic levels. Reaffirmation of its sovereignty over the Senkaku has therefore to be understood in this context.

Moreover, both governments’ handling of the crisis is influenced by a semstive political context in each country. In China, the saga of the Bo Xilai family has cast a harsh light on some major dysfunctions within the Communist Party and disrupted the staging of a smooth transfer of power to a new leadership this autumn. In Japan, the situation is very precarious for the Noda Cabinet and snap elections are likely by the end of the year. The authorities in Beijing and Tokyo want to prevent the crisis from escalating but, given the domestic political contexts, they have to stiffen their diplomatic stances in order to satisfy their feverish opinions. In China, patriotism thrives on the success of the country but also on deep anti-Japanese feelings, which the authorities use to strengthen their legitimacy. Japan is also caught in a spiral of distrust and animosity vis-à-vis its larger neighbour. Some nationalist groups, small in numbers but quite uninhibited, are campaigning for recovering all the instruments of power, including military, to hedge against the growing influence of China.

The final outcome of this territorial dispute will probably be the same as in 2010. The problem will remain without solution and the points of view will not get closer. Perhaps some limited economic sanctions will be applied by Beijing in the coming weeks. But when the political situation in both countries clears up (after the probable early elections in Japan and the 18th Party Congress of the CCP), realism will prevail. The two economies are highly interdependent and China itself would not emerge unscathed from a trade war. The economic and financial cooperation will continue, but in a configuration characterized by instability and possibly even conflicts.

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