July 12, 2016
Economic Ties Will Hopefully Pacify Any Chinese Aggression
The red stars mark locations in China where there is investment from Japan's KHI. Examples of KHI investment in China is in the areas of cement and equipment making factories. (Map courtesy KHI).
Today's Court at the Hague's South China Sea ruling may make China more aggressive generally. This aggression may flow on to Japan as a separate strategic competitor in the East China Sea. Nevertheless China should not forget it is valued as an important member of the interlinked world economic system. This particularly benefits China and its trade partners.
It is up to large scale analytical agencies to discern the relative importance for China of strategic and economic relations with Japan. While China and Japan experience political and strategic tension they also have deep and long-term economic ties. Slower growth in China’s economy over the last two years may well have increased the importance for China of trade with Japan.
China’s major economic dealings with Japan are in terms of exports and imports. Looking at the right sidebar of https://en.wikipedia.org/wiki/Economy_of_China - for China’s US$2.28 Trillion in exports in 2015.
- 16.9% represented Chinese exports to the US,
- 15.5% to Hong Kong (though arguably internal “trade”), and
- 6.4% to Japan (representing about US$0.15 Trillion or US$150 Billion) by my reckoning.
Of China’s US$1.68 Trillion in imports in 2015:
- 9.7% was from South Korea, and
- 8.3% from Japan (representing about US$0.14 or US$140 Billion)
with the US not far behind.
A much smaller but still important China-Japan economic aspect is Japanese Official Development Assistance (ODA) to China.
Following the normalisation of diplomatic relations between Japan and China from September 29, 1979, Japan played a major role in the development of China through large contributions of Official Development Assistance (ODA) [see 1 and 2 below] and other activities such as investment and technical assistance.
This is, in part, due to Japanese regret for the invasion of China by Imperial Japan. But, the Chinese Government remains unimpressed and continues to emphasise the invasion while ignoring modern Japan’s substantial contribution of ODA . Recently, Dr. Michael Pillsbury, the adviser of US Department of Defense criticised ODA of Japan to China . As China's economy has grown even larger than Japan's Japanese ODA to China has economically diminished.
 http://www.mofa.go.jp/files/000103746.pdf (in English) “Review on Japan’s ODA to China”
 http://www.mofa.go.jp/policy/oda/region/e_asia/china/index.html (in English) "Overview of ODA to China" ODA to China began in 1979 and from that time to the present, approximately 3.3164 trillion yen (about US$32 Billion) in loan aid (yen loans), 157.2 billion yen (about US$1.5 Billion) in grant aid, and 181.7 billion yen (about US$1.8 Billion) in technical cooperation have been implemented.
 http://www.mofa.go.jp/files/000128001.pdf (English) "Japan's ODA Disbursements to China by Fiscal Year"
 http://www.news-postseven.com/archives/20160129_376559.html (in Japanese - need to right-click-mouse) (NEW POST SEVEN, 2016.01.29 07:00).
So economic ties are extensive but the Japanese public should still be cautious about China. Too many Japanese still do not seem to recognise China as a strategic challenger that can threaten Japan's existence. The might of China is a threat and a challenge to Japan. This has been a long term trend since China exploded H-Bombs in the 1960s.
There is an argument that Japanese ODA, investment and technical assistance only make China strategically stronger. An economic relationship may be mutually beneficial but Japanese companies should be careful not to export dual (civilian-military) use technologies to China. This includes such areas as aerospace, diesel engine, electronics and marine propeller technology.
But in terms of current tensions any Chinese military aggression prompted by the Hague Court ruling regarding the South China Sea may flow on to aggressive moves against Japanese interests in the East China Sea. The flow-on effects of the South China Sea ruling are being watched closely in Australia and also Japan.
S and Pete
Posted by Peter Coates