Why Chinese-Japanese Economic Relations Are Improving

Delinking Trade From Politics

A Japanese flag in front of a picture of Chairman Mao at Tiananmen Square in Beijing, October 8, 2006. Reinhard Krause / Courtesy Reuters

When it comes to Japan, China seems torn. On security issues, it is becoming increasingly hawkish -- witness its recent declaration of an Air Defense Identification Zone (ADIZ) over the Senkaku (Diaoyu) Islands in the East China Sea. But on economic ties -- from Japanese imports to Japanese investments -- it is becoming increasingly dovish. In short, China has started to delink economics from politics.

This represents a big reversal from last year, when the Middle Kingdom believed that it could use Japan’s dependence on the Chinese market to wrest territorial concessions from Japan. In the summer and fall of 2012, riots and boycotts of Japanese products -- some of them encouraged by the Chinese government -- spread across China after Yoshihiko Noda, who was then Japan’s prime minister, bought from their private Japanese owner some of the Senkaku (Diaoyu) Islands, which are controlled by Japan but also claimed by China.

A sign that China has given up on that gambit was seen in Chinese media reporting on the visit of a top-level Japanese business delegation to Beijing in November. China’s state-owned TV network, CCTV, reported, “Putting aside their countries’ diplomatic deadlock, the two sides are seeking better economic ties.” To be sure, the normalization of economic ties could be interrupted by Japanese Prime Minister Shinzo Abe’s widely criticized December 26 visit to the Yasukuni Shrine, which is controversial because it honors, among others, 14 Class-A World War II–era war criminals. But otherwise, Chinese-Japanese economic relations (but not political ties) are set to get better, not worse.

The delinking limits the ways that Beijing can pressure Tokyo -- or induce Japanese business to pressure Abe. In turn, it forces China to rely on policies, such as the ADIZ, that could alienate other Asian neighbors. For example, in its ADIZ, China has included air space not only above the Senkaku/Diaoyu Islands but also above a Korean-held island. Moreover, China’s ADIZ, unlike those of other nations, affects civilian passenger

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