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Mutual Assured Production
Why Trade Will Limit Conflict Between China and Japan
RICHARD KATZ is Editor of the semiweekly The Oriental Economist Alert and the monthly The Oriental Economist Report, both reports on Japan.See more by this author
During the Cold War, the United States and the Soviet Union carefully avoided triggering a nuclear war because of the assumption of “mutual assured destruction”: each knew that any such conflict would mean the obliteration of both countries. Today, even though tensions between China and Japan are rising, an economic version of mutual deterrence is preserving the uneasy status quo between the two sides.
Last fall, as the countries escalated their quarrel over an island chain that Japan has controlled for more than a century, many Chinese citizens boycotted Japanese products and took to the streets in anti-Japanese riots. This commotion, at times encouraged by the Chinese government, led the Japanese government to fear that Beijing might exploit Japan’s reliance on China as an export market to squeeze Tokyo into making territorial concessions. Throughout the crisis, Japan has doubted that China would ever try to forcibly seize the islands—barren rocks known in Chinese as the Diaoyu Islands and in Japanese as the Senkaku Islands -- if only because the United States has made it clear that it would come to Japan’s defense. Japanese security experts, however, have suggested that China might try other methods of intimidation, including a prolonged economic boycott.
But these fears have not materialized, for one simple reason: China needs to buy Japanese products as much as Japan needs to sell them. Many of the high-tech products assembled in and exported from China, often on behalf of American and European firms, use advanced Japanese-made parts. China could not boycott Japan, let alone precipitate an actual conflict, without stymieing the export-fueled economic miracle that underpins Communist Party rule.
For the moment, the combination of economic interdependence and Washington’s commitment to Japan’s defense will likely keep the peace. Still, an accidental clash of armed ships around the islands could lead to an unintended conflict. That is why defense officials from both countries have met with an eye to reducing that particular risk. With no resolution in sight, those who fear an escalation can nonetheless take solace in the fact that China and Japan stand to gain far more from trading than from fighting.
THE TIES THAT BIND