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    Greater China
     Dec 1, 2012


Page 1 of 2
Is China trying to implode Japan's economy?

By Peter Lee

Is the People's Republic of China (PRC) trying to implode the Japanese economy? It is starting to look that way. The PRC has counterprogramed the US pivot to Asia - and US advantages in military and softpower - by leveraging its economic strengths.

When Japan kicked off this year's edition of the Senkaku (Diaoyu) Follies with the national purchase of the uninhabited rocks, the PRC leadership responded by giving free rein to nationalist Nipponphobic demonstrations, boycotts, and occasional anti-Japanese thuggery - and then refused to allow relations to renormalize.

The PRC frequently reiterates a hardline position during the press

 

conferences of the Ministry of Foreign Affairs. For instance, on November 19:
Q: Is there arrangement of meeting between the Chinese and Japanese leaders during the East Asian Leaders' meetings? What is your comment on the prospect of Sino-Japanese relations?

A: As far as I know, there is no arrangement of Sino-Japanese bilateral meeting during the East Asian Leaders' meetings.

On your second question, as is known to all, Japan's illegal "purchase" of the Diaoyu Islands has led Sino-Japanese relations to the current difficult situation. Japan should bear full responsibility. China hopes the Japanese side will seriously reflect on and correct its mistakes, show sincerity and make concrete efforts to properly settle the current problems and push bilateral relations back to the normal track of development.
By this framing, "pushing bilateral relations back to the normal track of development" would involve the Japanese government publicly repudiating the island purchase.

That simply isn't going to happen.

Japanese public opinion is rock-solid behind Japan's claims to the Senkakus, a situation that has more to do with fear and mistrust of Rising China in the Land of the Rising Sun than it has to do with the validity and value of Japan's claims to a cluster of uninhabited Taiwanese islands.

As the Japanese parliamentary elections - announced for December 16 - approach, the PRC is doing nothing to reduce the political profile of the issue, or its unpopularity in Japan. Chinese coast guard vessels have continually patrolled the waters near the Senkakus, allowing the Japanese media to report this affront in a style reminiscent of America's humiliation during the Iran hostage crisis:
Chinese vessels sail near Senkakus for 20th day [1]
Chinese vessels near Senkakus 30 days in a row [2]
And so on.

The widely accepted explanation for the PRC willfully pitching Sino-Japanese relations into the deep freeze is knee-jerk Chinese nationalism, with the emphasis on "jerk". A variation on this explanation is "weak and divided Chinese government is trying to look strong for internal political reasons", an explanation that has been trotted out for decades by every government that found its tit caught in a Chinese wringer, here floated by the current Noda government to explain the current crisis and obligingly circulated by the Asahi Shimbun:
In September, the Noda administration officially decided to put three of the Senkaku Islands under state ownership, before China's Communist Party Congress was held.

"If we purchased [the Senkaku Islands] immediately after the new leadership was established, it would bring shame to China," a source close to Noda said. "We will be able to improve our relationship with the new leadership if we finish putting [the Senkakus] under state ownership during Hu Jintao's era."

However, the friction between Japan and China has only worsened. The Noda administration has further strengthened the belief that the new leadership in Beijing is unstable, and Xi has no choice but to take a hard-line stance against Japan, according to an official at the prime minister's office. [3]
Unfortunately for Prime Minister Yoshihiko Noda, a nice Reuters backgrounder on the Senkaku purchase reveals that the central government could have delayed the sale of the islands to the city of Tokyo for an indeterminate period of time, thereby sparing the tender feelings of the new Chinese leadership, by insisting on parliamentary review, surveys and other bureaucratic hoo-hah; indeed, a key reason why the right-wing owner abandoned his ideological soul mate, Shintaro Ishihara, to sell to the central government was because he needed to see the money pronto in order to pay down a mountain of debts.

If Noda wants to see what hardline posturing driven by leadership instability looks like, he can take a peek in the mirror. [4]

The PRC's high-profile, unyielding position on the Senkakus seems to reflect something other than reflexive nationalism, political weakness, or the blunderings of a disoriented and incapable elite. It appears that the Beijing leadership may have decided to edge beyond using the Senkaku dispute as a mere demonstration of its economic countermeasures to the US pivot into Asia, to thinking seriously about actually trying to kick a key prop out from under the US initiative - a vital, but weakened and vulnerable ally: Japan.

I previously argued that the PRC had decided that the best riposte to the US/Japanese strategy of using maritime disputes to polarize East Asia diplomatically and militarily to China's detriment was to eschew overt government-ordered military or economic action - such as the counterproductive slowdown in rare earth exports to Japan during the 2010 Captain Zhan stand-off - in favor of "popular" but state-sanctioned economic retaliation against Japanese economic interests inside China. [5]

There is every indication that this strategy is ongoing - and working.

Japanese exports to China experienced double-digit drops in September and October. Japanese investment in China dropped over 30% in October year-on-year. What is perhaps most unnerving for Japanese leaders is that the nation is now dealing with monthly trade deficits for the first time in 30 years, having experienced four in a row since August 2012, and the Senkaku crisis is definitely not helping.

At present, the most important question is whether the PRC is simply pursuing its traditional strategy of motivating Japan Inc - the powerful Japanese business community that looks to China for growth and profits - to pressure the Liberal Democratic Party (LDP) into a more China-friendly stance... or whether the PRC wants to put a significant, permanent dent into the economy of its local strategic competitor, Japan.

Government mouthpiece China Daily recently ran an op-ed by think-tanker Jin Baisong that explored a rather sinister tangent - whether the slowdown in Sino-Japanese trade was significantly debilitating the Japanese economy:
Some recent discussions in the media have centered on whether the Japanese economy really relies as heavily on China as is made out to be
. Jin's answer: Yes!
In my analysis, Japan's direct and indirect exports to China are estimated to be 30% of Japan's total exports. Besides, 60 to 70% of China's total exports to Japan are operated by Japanese companies. Therefore, Japanese companies not only play a key role in expanding China's exports to Japan, but also get the lion's share of the profits.

The Japanese economy is "gravely ill" now. Ever since Japan played out the farce of "purchasing" China's Diaoyu Islands, Sino-Japanese trade has been suffering seriously, compromising the performance of Japanese enterprises in China.
He concludes that there is nothing the Chinese government can or should do about it, simultaneously shielding the PRC regime from culpability in any economic warfare accusation:
But Japan cannot blame China for its economic downslide because the Chinese government has taken measures to safeguard the legitimate rights and interests of foreign companies, including Japanese companies, doing business in China. In fact, Premier Wen Jiabao has repeatedly said all enterprises registered in China are Chinese enterprises and their products are Chinese products. Chinese laws protect all enterprises, including Japanese-funded enterprises.

So Japan has only itself to blame for the economic mess it is in. [6]

Continued 1 2 






China pushes back against Japan (Sep 29, '12)

Beijing steers clear of skirmishes (Sep 11, '12)

US eyes spoiler role in Japan-China dispute (Sep 5, '12)

 

 
 



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