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China-Japan flames scald
business
By J Sean Curtin
The angry wave of anti-Japanese protests
sweeping China for the past three weeks has
generated a deep sense of unease in the business
community as it threatens bilateral economic ties.
Many fear that the current tensions, sparked
initially by the approval of eight revisionist
Japanese history textbooks, could significantly
disrupt booming trade and investment flows.
Tokyo stocks plummeted across the board on
Monday, with the key Nikkei index recording its
biggest one-day loss in 11 months and ending at a
four-month low. About 81 stocks fell for every one
that gained on the Tokyo Stock Exchange's first
section, its broadest decline since September 12,
2001, the day after the terror strikes in the
United States. Monday's drop wiped US$115 billion
off the value of stocks included in the Topix,
reported Bloomberg.
Since the
demonstrations begun, Japanese nationals working
in China have begun to feel increasingly uneasy,
and some are already planning to leave. Business
confidence has taken a severe knock, especially
after this weekend's violent anti-Japanese
disturbances in Shanghai, a city where more than
40,000 Japanese expatriates live. Chinese threats
to boycott Japanese goods as well as an escalating
dispute about exploration rights in the East China
Sea are edging a tense situation toward breaking
point.
Until now, healthy bilateral trade
volumes have been largely unaffected by poor
Sino-Japanese political dialogue. However, there
are very real indications that unless political
leaders moderate their tough nationalist rhetoric,
mutually beneficial economic bonds could start to
deteriorate. Sunday's awkward meeting of Japanese
Foreign Minister Nobutaka Machimura and his
Chinese counterpart Li Zhaoxing in Beijing
produced little discernable progress. Tokyo
demanded an apology for the demonstrations and
Beijing refused to give one.
Linda Yueh,
an expert on the Chinese economy at the London
School of Economics (LSE), warned, "There is
potential for serious economic consequences,
particularly with the suggestion of a boycott of
Japanese goods in China." Despite the present
strains, she is hopeful that sound economic logic
will prevail. "The strong and growing economic
ties between the two countries, particularly in
terms of trade and investment, have the potential
to withstand the current tense political
situation."
China is Japan's biggest
trading partner, accounting for 20.1% of its trade
in 2004. In concrete terms, it was worth a
staggering 22.2005 trillion yen ($206.56 billion)
in 2004 with exports to China hitting 11.8278
trillion yen and imports totting up to 10.3727
trillion yen. Major Japanese firms such as Toyota
Motor Corp are expanding rapidly in China while
big Chinese players such as the Shanghai Electric
Group are entering the Japanese market.
Any disruption to investment flows would
seriously damage both economies, increasing the
chances of harming bilateral commerce. Professor
Christopher Pokarier, an economist at Waseda
University who recently returned from Shanghai,
says, "While it is always difficult to put a firm
figure on the economic cost of worsening
Sino-Japanese relations, politics can and does
impact on business. The effects are difficult to
separate out from other developments in the
business environment but nonetheless might be felt
through regulatory impacts on Japanese firms
operating in China, demand for Chinese products,
and poorer progress on bilateral resolution of
barriers to closer economic engagement."
The Chinese authorities have attempted to
ease tensions by restricting demonstrations,
ordering the media not to report the disturbances
and temporarily closing some universities, which
have acted as hotbeds for anti-Japan protests.
However, it is unclear how anti-Japanese sentiment
can be effectively contained now that it has been
so passionately ignited. The most recent
demonstration in Shanghai, Shenzhen and other
cities clearly indicate that anti-Japanese
feelings are spreading and protesters are prepared
to defy bans on demonstrations.
In recent
years, a variety of incidents have sparked
anti-Japanese protests and riots, but none
succeeded in damaging trading links or developed
into a meaningful boycott. The latest outbursts
arose in conjunction with a movement to boycott
Japanese products, but this campaign has so far
failed to have any significant impact. For the
present, most Chinese consumers are not shunning
Japanese goods, allowing Japanese businesses to
operate almost normally. Japanese supermarket
chain Ito-Yokado successfully opened a huge new
store in Beijing last Thursday without incident.
Once its doors were open, it was swarmed with
thousands of keen Chinese shoppers. For the
moment, Japanese companies are breathing an uneasy
sigh of relief, but there is palpable sense of
uncertainty about the future.
A senior
Japanese executive living in Beijing told Asia
Times Online, "The current problems stem from poor
political management and have absolutely nothing
to do with the way we conduct our business in
China. The failure of politicians is threatening
successful ventures. This cannot be and must not
be allowed to happen. What the Japanese and
Chinese leaders must do is resolve their
differences before they harm our economic
prospects."
Despite the current gloom,
many business people still believe economics will
prevail. A Shanghai-based Japanese businessman who
did not wish to be identified told Asia Times
Online, "If we can rise above the current
passions, we see it is not in China's or Japan's
economic interest to have bad relations. We have
invested billions of yen in China and it would be
economic suicide for both to attempt to disengage
from this process." Many Japanese in Shanghai were
heartened last week when the municipal government
announced that it would not allow any
anti-Japanese protests. However, the fact that on
Saturday tens of thousands of people defied these
warnings and staged violent demonstrations
illustrates how easily nationalist passions can
defeat economic logic.
Phil Deans,
director of the Contemporary China Institute at
the School of Oriental and African Studies (SOAS)
in London, said: "The situation for Chinese
nationals residing in Japan and individual
Japanese living in China is becoming more
precarious, and the two governments must be
worried about the possible consequences of
specific acts of violence and possible reprisals
further damaging the relationship."
The
wife of a Japanese business executive said: "Since
these demonstrations, I have felt uncomfortable. I
worried about the safety of my children. They go
to a Japanese school and I am scared it might be
the target of a demonstration. When I am out
shopping, I never speak Japanese. We keep a low
profile. It is not a happy situation."
Professor Pokarier said: "The new caution
of Japanese business communities and their
families in China might have an impact on the
deployment of Japanese executives to China. This
might have indirect, but nonetheless important,
implications for business relations between the
two nations."
While a host of decades-old
historical, territorial and political issues have
plagued Tokyo's relations with its neighbors, many
lay the blame for the current tense climate
squarely on the shoulders of Prime Minister
Junichiro Koizumi. A Beijing-based Japanese sales
executive who has watched with alarm as political
relations have steadily worsened in recent years
said: "I blame this situation solely on Koizumi.
We should apologize more to China. It just doesn't
make sense to unnecessarily upset China. Koizumi
should stop his [Yasukuni] shrine visits. It is
hurting our investments and threatening the lives
of the Japanese people working in China."
Said Ryoji Yamauchi, a political
commentator and president of Asahikawa University:
"Koizumi is the most nationalist prime minister
since the end of the war. His insensitive behavior
has offended millions of Asians and is largely
responsible for our current difficulties with
China."
The Chinese leadership has
repeatedly singled out Koizumi's pilgrimages to
the war-tainted Yasukuni Shrine as the main factor
inhibiting bilateral political dialogue. Yasukuni
serves as a memorial to Japan's war dead, but
since 1978 has also controversially honored 14
Class A war criminals, including the wartime
leader General Hideki Tojo. Beijing regards the
shrine as the spiritual symbol of Japan's brutal
wartime regime and therefore considers
prime-ministerial patronage as unacceptable in the
same way Israel would not tolerate German leaders
visiting a Nazi memorial.
Since taking
office in April 2001, Koizumi has made a
high-profile excursion to the shrine every year,
sparking widespread regional protests on each
occasion. These pilgrimages are seen as the reason
he has not been allowed to visit China since
October 2001. Only one previous Japanese prime
minister, Yasuhiro Nakasone, visited the shrine
while in office back in 1985. His single outing
sparked such intense protests that until Koizumi,
Japanese leaders avoided the establishment in
deference to Chinese sensitivities.
Yiyi
Lu, a researcher at the Royal Institute for
International Affairs in London, said: "In the
past, when China protested against the Japanese
prime minister's visit to the Yasukuni Shrine, the
PM would take notice and make amends. The current
one just tells China to take a hike. Japan has
become much more assertive recently, not worrying
about offending China as it did before. This new
assertiveness is something the Chinese government
and the public are not used to, therefore it
sparks a lot of anger."
Koizumi denies
that his contentious shrine forays are directly
connected to rising anti-Japan sentiment and the
recent protests. "Those are separate issues," he
told a disbelieving press conference recently,
adding, "The situation has developed over a long
period." He has grudgingly conceded that there is
"some" connection, but declines to say whether he
will pay homage at the shrine this year. Both
Chinese President Hu Jintao and Premier Wen Jiabao
have personally warned Koizumi not to go this year
as 2005 marks the 60th anniversary of the end of
World War II. If Koizumi defies Beijing, much more
violent and widespread protests will probably
erupt in China, increasing the risk of damaging
economic ties.
J Sean Curtin is
a GLOCOM fellow at the Tokyo-based Japanese
Institute of Global Communications.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.) |
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