EAST ASIA: Sino-Japanese Ties Hit New Low

By IPS Correspondents Reprint | | Print |

Antoaneta Bezlova

BEIJING, Mar 28 2006 (IPS) - If bilateral ties between China and Japan can be described as “cold politically and warm economically”, then they have hit a new low. Differences over the wartime past and regional influence have now spilled over into business and economic issues, threatening to damage the fragile status quo between Tokyo and Beijing.

Tokyo’s decision, last week, to suspend decisions on new yen loans to China because of the tense political climate has stirred sentiments here. While Japan announced previously that it was winding down aid to China from 2008 because of Beijing’s growing economic might, last week Tokyo explicitly linked the freeze in loans to politics.

Announcing the decision, Shinzo Abe, chief cabinet secretary, said it was being done ”because of various situations surrounding Sino-Japanese relations”.

”The justification Abe gave for the delay is clear evidence of one thing: Japan is ready to put its economic ties with China under the sway of political upheaval,” said the English-language China Daily in an editorial on the weekend.

The official reaction was no less grave. China and Japan are facing ”a complicated situation and severe hardship in their relationship,” Qin Gang, a spokesman for the foreign ministry, said at a regular press briefing.

“Such an agreement on loans is mutually beneficial,” Qin said. “It is not a charity given by one country to another.”

Japanese officials and businessmen have often complained that soft loans given to China over the last 25 years have not been properly recognised by the Chinese government.

Few of them fail to notice that places like Beijing’s glitzy international airport display little recognition of the fact that it was built with Japanese money and, deliberately or not, leave the public in the dark as to the origin of the funds.

So it was an admission of a kind when ‘China Daily’ credited Japan’s official development assistance (ODA) to China with “greatly helping to drive China’s growth”. “The ODA from Japan has funded large-scale infrastructure projects in China ranging from roads and airports to power stations,” it said.

Since 1979, when Japanese development aid started pouring in, China has received a total of 25.7 billion US dollars in soft loans.

But the nature of the loans has changed over the years, Chinese scholars say.

“While in the early 1980s the development aid from Japan was indeed for development purposes, since late 1990s Tokyo has increasingly used the money as a foreign policy card,” says Liu Jiangyong, expert on Japan at the International Relations Institute of Tsinghua University.

The current freeze is a typical example, Liu says. “The Japanese government is playing the ODA as a foreign policy card to test China’s bottom line.”

Relations between Tokyo and Beijing have sharply deteriorated since Prime Minister Junichiro Koizumi came to power in 2001 and began to pay annual visits to the Yasukuni shrine where a number of World War II criminals are buried along with millions of Japan’s war dead.

The pilgrimages have drawn a strong reaction from Beijing. China, which blames Japan for its failure to recognise atrocities committed during its occupation of the country, has refused to hold bilateral summits until Koizumi renounces his visits to the shrine.

Beijing has repeatedly said these visits are one of the biggest hurdles to developing bilateral ties. But Koizumi insists he visits the shrine to pray for peace. On Monday, he criticised Beijing again for what Tokyo sees as an unreasonable stance.

“It makes no sense for China not to hold summit meetings because of the visits to Yasukuni,” Koizumi was quoted as telling a parliamentary committee.

While Yasukuni is the most inflammatory issue between Beijing and Tokyo, the two sides have slugged it out over issues of greater direct consequence for the regional balance of power. Among these are territorial disputes, the proposed reform of the United Nations Security Council, relations with Taiwan and oil contracts in Central Asia and Africa.

Taiwan – the independently ruled island, which China regards as a renegade province that must be reunited with the mainland, is seemingly the issue that could cause further political friction and poison the bilateral ties.

In recent months, Tokyo has dropped its carefully maintained distance from the affairs of the island – a former Japanese colony from 1895 to 1945, and adopted a more pro-active attitude towards the status quo in the Taiwan Straits. It has aligned itself more closely with the United States, which is sworn by the Taiwan Relations Act to defend the island territory if it is attacked.

This has caused Beijing to worry, given Japan’s cooperation with the U.S. on missile defence and its joint security agenda. But Japanese politicians have blamed the tilt towards the U.S. on China’s military build up and the rising tensions between Taipei and Beijing.

“The murky relations between China and Taiwan, and an increase in China’s military muscle, can be seen as major destabilising factors in East Asia,” a strategy report issued Monday by the Japanese National Institute for Defence Studies, a government-funded think tank, said.

China’s military spending has risen by double-digit percentage for the last few years. Beijing announced earlier this month that its defence budget would rise to 35 billion dollars in 2006, up 15 percent from 2005.

Meanwhile, Beijing has continued increasing the number of short-range ballistic missiles targeted at Taiwan, thus expanding the potential for disrupting north Asian stability.

Commercial and economic ties between Tokyo and Beijing have so far remained sound but as diplomatic strain is growing, this could change. The potential risk is that as political frictions have affected the trends of Japan’s development aid they could also impact Japan’s economic commitment to China.

Japanese foreign investment into China topped six billion dollars in 2005, up 14 percent from 2004. Last year, the two countries clinched a record high trade volume of 189 billion dollars. China is now Japan’s biggest trade partner. Japan ranks as the third-largest trade partner to China, after the EU and the U.S.