Frenemies

There’s more to the Sino-Japanese rivalry than meets the eye. Antonio Graceffo, a lecturer at Shanghai University, explores the economic interdependence of China and Japan:

China and Japan, the two economic goliaths of the Asia Pacific region, have a very unique relationship. On the one hand, they are dependent on one another for trade. On the other hand, events dating back to before the Second World War have made it difficult for the Chinese population to trust Japan.

By 2007, the bilateral trade relationship between China and Japan had already become the third largest in the world, accounting for roughly one-fifth of global trade.

Japan is hungry for Chinese agricultural exports and needs the Chinese market for products such as cars, televisions and machinery; while China needs Japanese investment, capital equipment and know-how.

Follow the money. For all the talk about Sino-Japanese antipathy, China in 2015 imported more from Japan than from the US, and Japan imported more than twice as much from China as from the US. Of course, trade can co-exist with geopolitical tensions that lead to war; as Edward Luttwak pointed out in Turbo-Capitalism, “No two economies were more interdependent than the French and the German in August 1914, or the German and Soviet in June 1941.” Acrimony over disputed islands put a damper on China-Japan trade in 2012-13, although trade picked up again in the following years. “Unresolved” issues from the WWII era are another source of friction that could endanger trade. Also, China and Japan compete with each other to secure trade routes and infrastructure projects throughout Asia, as detailed in the Graceffo essay.

However, I don’t think any of these issues will prove serious enough to derail what looks like an increasingly strong, mutually beneficial economic partnership between Asia’s great pair of frenemies.

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