China/Japan politics: Bristling

FROM THE ECONOMIST INTELLIGENCE UNIT

In September relations between China and Japan deteriorated to their worst level in years after a maritime collision in disputed territory. The diplomatic stand-off that followed appears to have been mostly smoothed over, but the reactions of both sides drew on a deep reservoir of historical animosity and strategic mistrust. In coming years, these underlying irritants may shape a more antagonistic relationship as both sides struggle to adjust to the shifting balance of power that China’s rise entails. Although economic interdependence will remain a powerful force for restraint, episodes of serious friction between the world’s second- and third-largest economies are likely to recur.

The trigger for the recent rise in tensions was Japan’s arrest of a Chinese fishing-boat crew after their vessel rammed two Japanese coast guard patrol boats on September 7th. The collisions took place near a smattering of rocky islets called the Senkaku by the Japanese and the Diaoyu by the Chinese. Sovereignty over the islands is disputed.

China reacted to the arrests by cutting off high-level diplomatic relations, demanding the fishermen’s immediate release and repeatedly summoning the Japanese ambassador in Beijing. Japan’s decision to release all but the boat’s captain failed to calm the dispute. Instead, China piled on the pressure by cancelling student exchanges and tour groups, and allowing anti-Japanese protests to take place in Beijing, albeit on a limited scale. China also arrested four Japanese citizens in China, accusing them of videoing military sites, and suspended joint development of a disputed offshore gasfield in the East China Sea. Chinese customs officials also appear to have curtailed shipments of rare earths to Japan. (Rare earths are mineral elements required for the production of many high-tech devices.)

A new stage

Periodic tensions between China and Japan are nothing new, but the escalation of the current dispute seemed to be particularly rapid and serious. It was also notable that Japan’s release of the fishing-boat captain on September 25th failed to placate China. In the past, China has let such matters drop following concessions from the other side, but in this case China responded with a demand for an official apology and monetary compensation. Tokyo, which seemed stung by the failure of its climb-down to appease Beijing, reacted by demanding compensation for the damaged boats. In any case, the dispute has failed to die down—one of Japan’s alleged spy-videographers remains in Chinese custody, and the hold-up of rare-earth exports, which China denies, seems unresolved.

At first glance, the failure of the dispute to fizzle out naturally makes little sense. China and Japan have many reasons to place a high value on peace, stability and co-operation. Not least, bilateral trade has surged in recent years. Total trade volumes quadrupled between 1999 and 2008, climbing from US$66bn to US$267bn. China has been Japan’s largest trading partner since 2004, and in 2009 Japanese exports to China overtook those to the US for the first time ever. The two countries have also pursued a number of compatible policy goals, such as signing currency-swap agreements with other East Asian economies. And there are many areas—such as product safety and environmental protection—in which close co-operation is both mutually desirable and politically safe.

Against this background of shared interests and rising economic interdependence, the vehemence of the current dispute seems incongruous. Why are the world’s second- and third-largest economies risking major damage to their relationship over a few tiny, uninhabited islands? The answer is that the dispute serves as a focal point for several underlying sources of tension in Sino-Japanese relations: energy competition, historical animosity and domestic nationalism, and strategic rivalry. These irritants will continue to generate bilateral tensions and geopolitical risks even when—or if—the islands dispute is defused.

* Energy competition. China and Japan already compete for energy resources and will continue to do so. This is an unavoidable result of Japan’s paucity of domestic energy resources—particularly oil—combined with China’s soaring demand for energy to fuel its rapid economic growth. Energy-security concerns are an underlying driver not only of the Senkaku/Diaoyu dispute but also of recurrent Sino-Japanese tensions in the East China Sea and of China’s sovereignty claim over virtually the entire South China Sea.

* Nationalism and historical issues. Chinese resentment of Japan’s brutal occupation in the last century remains deep-seated. Indeed, the perception gap between the two populations has widened over the past few years. Whereas Japanese popular support for public expressions of historical remorse is fading as a result of generational change, anti-Japanese sentiment appears to be intensifying among the younger generation in China, partly because of the ruling Chinese Communist Party’s efforts to step up “patriotic education” after violently crushing anti-government protests in 1989. As a result, a groundswell of public support emerges whenever China reacts to a perceived slight by Japan. This is good for the Chinese government’s domestic legitimacy but bad for its ability to conduct pragmatic foreign policy.

* Strategic rivalry. China’s military build-up and its rise as an economic power worry Japan from a long-term strategic viewpoint. The two countries have officially agreed not to regard each other as threats, but the very fact that both sides periodically feel compelled to state this point highlights their mutual suspicion. For the first time in history, both Japan and China are strong powers. Although they could get along much more smoothly than they do now, they will remain natural rivals for regional supremacy.

A more assertive China?

These factors have troubled Sino-Japanese relations for years now, but the current dispute seemed to bring them to the fore. Japan’s failure to release the fishermen earlier may have been a message from the new Japanese administration that it will take a strong line defending its territorial claims. Equally, internal political dynamics may be playing a role in China’s response. Jostling is under way within the political elite ahead of the next round of party leadership appointments in 2012. Aspiring leaders are competing for the political support of the People’s Liberation Army’s top brass, giving the traditionally hardline military a freer hand to influence foreign policy.

Another part of the explanation may be that China sees testing Japan as an indirect way to send messages to the US. The US recently infuriated China by declaring a national interest in the peaceful resolution of disputes in the South China Sea. This was in reaction to China’s announcement that the South China Sea is a “core interest”—language normally reserved for issues such as Tibet and Taiwan where China’s position is non-negotiable. Chinese military analysts have interpreted the US position on the South China Sea, along with the US’s defence relationship with Taiwan and the US-Japan alliance (which includes a US commitment to defend the Senkaku/Diaoyu islands), as aimed at preventing China from regaining its rightful place as a regional power.

However, if China’s recent actions are partly an attempt to push back against the US and its allies, the regional response so far suggests that this will be counter-productive. China’s strident behaviour during the islands dispute may well reinvigorate US-Japan defence relations, much as China’s refusal to blame North Korea for sinking a South Korean navy ship in March has reinvigorated relations between the US and South Korean armed forces. Meanwhile, China’s assertiveness in the South China Sea appears to be driving closer ties between the US and the Association of South-East Asian Nations, including rapidly warming military-to-military relations between the US and Vietnam. In the wake of China’s strident reaction to Japan’s arrest of a Chinese fisherman in disputed territory, Vietnam has begun protesting against China’s routine detention of Vietnamese fishermen in disputed areas of the South China Sea.

For the past few decades, China’s unofficial foreign-policy maxim was Deng Xiaoping’s advice to “hide our capabilities and bide our time”, which implied keeping a low international profile and focusing on domestic development. But China’s recent actions suggest that at least some elements of the leadership now believe that the country can and should pursue its interests more assertively. It remains too early to judge that China is in the process of abandoning its strategic restraint, but it’s already clear that China’s neighbours find the possibility deeply unsettling.

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