Abe shoots blanks in New York
By Brendan P O'Reilly
Japanese Prime Minister Shinzo Abe has used his time on the world stage to unleash a new verbal salvo against Beijing. While addressing the United Nations General Assembly, Abe decried "an immediate neighbor" for swelling its military budget by more than 10% annually. Abe, who plans on increasing Tokyo's military budget by 3% this year, defiantly exclaimed "So call me, if you want, a right-wing militarist." 
At a news conference in New York, Abe said Chinese vessels persistently test the waters around the disputed Senkaku/Diaoyu islands: "The intrusions by Chinese government vessels in our territorial waters are continuing, to our regret. However, Japan will
not make a concession on our territorial sovereignty." 
Official Chinese reaction was swift and cutting. The Chinese Ministry of National Defense claimed that its vessels are simply engaging in routine patrols and training. Spokesperson Geng Yansheng quoted an ancient Chinese proverb to counter Abe's claims: "A gentleman is open and poised; a petty man is unhappy and worried. Whoever is overreacting has a 'ghost' in his mind."
It has been over a year since Tokyo decided to "nationalize" a group of disputed, uninhabited islands in the East China Sea, leading to the current round of escalation. As deep tensions remain between the two powers, it is useful to examine the strategic environment behind the angry rhetoric in the foreground of Sino-Japanese relations.
Show me the money
Abe's dire warnings about increasing Chinese military spending miss a major point - Beijing's military budget has grown at roughly the same rate as China's overall economy. When GDP expanded at 10% every year, it made sense that military budgets also rapidly swelled. However, now that China's GDP growth rate is slowing, some strategic questions may arise if the increase in Chinese military spending outstrips the expansion of the general economy.
Meanwhile, Prime Minister Abe's call for a 3% increase in Japanese defense spending comes at a time when Japan's economy has picked up, and it also expected to grow by 3% this year. This year's budget for the Japanese armed forces will be the highest since the end of the Cold War.
The essential issue defining Sino-Japanese relations is a rapid and unprecedented shift in relative power between the two nations. China only overtook Japan as the world's second largest economy within the last three years; now the Chinese economy is half and again the size of Japan's. The simple fact is China has ever-increasing resources to spend on military hardware, while Japan does not. Even in the absence of a tragic history of invasion and massacre, and a lingering territorial dispute, this power dynamic would cause significant geopolitical tension.
Besides the hard figures on GDP and military spending, there are even more significant statistics affecting the most important bilateral relationship in East Asia. China is Japan's number one trading partner by a large margin. Japan is China's second-largest source of foreign trade, after the United States. The volume of trade between the two countries is well over US$300 billion per year - more than six times Abe's proposed military budget for Tokyo.
Even as Abe denounced China's military on the world stage, there were conciliatory gestures behind the scenes. A delegation of Chinese business leaders visited Japan. Chang Zhenming, chairman of CITIC, a Chinese state-owned investment company, came to Tokyo and said, "Most of the companies are investing in Japan. One corporate manager has even donated cars to help people affected by the Great East Japan Earthquake and tsunami."
A Japanese official who received the Chinese delegation said frankly: "The visit helps develop a mutually beneficial relationship between Japan and China based on common strategic interests. Problems do exist because we are neighbors, but dialogue is essential." 
Furthermore, last weekend Seoul hosted the Fifth Korea-Japan-China Cultural Ministers Meeting. This trilateral summit brought together top officials to promote a shared East Asian culture, and increase traditional exchanges between the three countries.
Despite these understated conciliatory exchanges, and the vast areas for mutual economic and cultural benefit between China and Japan, the relationship remains extremely strained at the top levels of government.
Last month Prime Minister Abe and Xi Jinping had a brief conversation at the sidelines of the G20 summit in Russia. Both leaders will attend the Asia-Pacific Economic Cooperation (APEC) meeting in Bali this week, but the Chinese Foreign Ministry has so far ruled out another meeting.
Spokesmen Hong Lei told a daily news briefing:
As for a meeting between the leaders of China and Japan, at present there is no arrangement for this. China has all along been asking Japan to face up to history and to facts, and have dialogue and negotiations with China over the Diaoyu Islands issue. But Japan has yet to give a response to this. We call on the Japanese leader to stop with the empty talk, and make real efforts to have talks and consultations with China, to overcome the difficulties in the development of bilateral ties.
In two cultures that place extreme value on the concept of face, it is difficult for either side to make the first move to patch up relations. This is particularly true when the governments of both countries are constrained by populations that hold overwhelmingly negative views of the other country.
Peace in our time?
Two days after Abe's speech blasting China's military expansion, Chinese Foreign Minister Wang Yi addressed the UN General Assembly. Wang acknowledged concerns about China's growing regional and global influence:
As China has enjoyed fast development over the years, some people are concerned that China may repeat the beaten track that a country will inevitably become arrogant and seek hegemony when it grows in strength and becomes powerful; and various versions of China threat have surfaced… However, what happened in the past cannot be applied indiscriminately to today's China … We are committed to working with others to establish a new type of international relations based on win-win cooperation and seek peaceful resolution of international and regional disputes. 
This direct promise to avoid the militarism of past superpowers is part of Beijing's attempt to mollify the concerns of China's neighbors, including Japan. There are several reasons why Wang's pledge may be grounded in strategic reality.
China borders more nations than any other country in the world - and some of these neighbors are significant global actors. In the event of a unilateral push for military supremacy, Beijing could find itself countered by a potent alliance involving India, Japan, and possibly Russia. China could face significant geopolitical resistance, even in the absence of the massive military assets of the United States in South Korea, Japan, and the Pacific.
Furthermore, it is very much in China's economic interests to avoid regional conflict. China does more international trade than any other country on earth. Any adventurism that threatened this trade would pose huge economic and political risks to the rulers in Beijing.
Due to power dynamics, domestic politics, and the many ghosts of the past, it will be difficult for China and Japan to patch up relations. However, given the economic and strategic realities of East Asia, in the long run both nations will have little choice but to reach some sort of accommodation.