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 [3]. Recently, Dr. Michael Pillsbury, the adviser of US Department of Defense criticised ODA of Japan to China [4]. As China's economy has grown even larger than Japan's Japanese ODA to China has economically diminished.

[1] http://www.mofa.go.jp/files/000103746.pdf (in English) “Review on Japan’s ODA to China”
[2] 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.
[3] http://www.mofa.go.jp/files/000128001.pdf  (English) "Japan's ODA Disbursements to China by Fiscal Year"
[4] 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


Anonymous said...

Hi Pete

The judgement by the Hague Court of Arbitration puts China in hysterics. According to latest information, in the worst-case scenario, China may send submarines equipped with nuclear missiles in the South China Sea [1].

Chinese proverb says “A wise man keeps away from danger”, but, if your neighbors are dangerous, what should you do?

[1] Newsweek, Japanese edition, July/19/2016, page 21.


Peter Coates said...

Hi S

Yes it is a difficult situation.

The Philippines may have wanted support from the US against China. But:

1. Accoding to Russia's RT https://www.rt.com/news/350940-china-criticize-usa-hague-ruling/ “The US is always selective when it comes to the application of international law: citing international law when it sees fit and discarding international law when it sees otherwise. It keeps urging others to abide by the United Nations Convention on the Law of the Sea (UNCLOS) while refusing to ratify the Convention to this day,” he added. and

2. https://en.wikipedia.org/wiki/United_States_and_the_International_Criminal_Court : "The United States is not a participant in the International Criminal Court (ICC) [of the Hague]. Also India and Indonesia do not consider themselves covered by the Court.

So it appears those countries that are powerful (and some have nuclear weapons) don't need to worry about Hague Court rulings.



Peter Coates said...

Interesting, it seems that China's defiant reaction to the Hague ruling does NOT have the support of China's usual ally, Russia, http://thediplomat.com/2016/07/did-russia-just-ask-china-to-buzz-off-on-the-south-china-sea/


Anonymous said...

Hi Pete

Moscow’s call for compliance of international law is natural. Maintenance of its interests which include Vladivostok, the Arctic Ocean and Kuril Islands is most important for Russia. These national interests are protected by the Russian Force and international treaties, except Kuril Islands. In fact, Russia must protect her interest on the Arctic Ocean from China who is now challenging the international order in the post-World War II. China is challenging not only USA but also Russia. That’s why Russia supports the decision of Hague which does not admit egoistic and new interpretation of the international law.

To prevent marine advance by China, corporation with Russia is critically important. Such idea may be rather difficult to accept for big brother, USA, but it is one of the most realistic and effective ideas.


Peter Coates said...

Hi S

Yes. As China rises in power and defies international feeling and international law, Russia will become more worried.

China will indeed increasingly compete with Russia for resources in the Arctic Ocean, like oil. They are, of course neighbours, sharing a border.

The following is almost forgotten because the Russian and Chinese fellow communist dictatorships covered it up https://en.wikipedia.org/wiki/Sino-Soviet_border_conflict:

"The Sino-Soviet border conflict was a seven-month undeclared military conflict between the Soviet Union and China at the height of the Sino-Soviet split in 1969.

Eastern border

On March 2, 1969, a group of People's Liberation Army (PLA) troops ambushed Soviet border guards on Zhenbao Island. The Soviets suffered 59 dead, including a senior colonel, and 94 wounded.[12] They retaliated on March 15 by bombarding Chinese troop concentrations on the Chinese bank of the Ussuri River and by storming Zhenbao Island.[12] The Soviets sent four then-secret T-62 tanks to attack the Chinese patrols on the island from the other side of the river. One of the leading tanks was hit and the tank commander was killed.

...On March 15, 1969, the Chinese troops were repelled from Zhenbao Island (Damansky Island) with significant losses and did not return until September of that year, when Soviet border guards received the order to not open fire against them.

Western border

Further border clashes occurred in August 1969, this time along the western section of the Sino-Soviet border in Xinjiang. After the Tasiti incident and the Bacha Dao incident, the Tielieketi Incident finally broke out. Chinese troops suffered 28 losses. Heightened tensions raised the prospect of an all-out nuclear exchange between China and the Soviet Union .[13] In the early 1960s, the United States had "probed" the level of Soviet interest in joint action against Chinese nuclear weapons facilities; now the Soviets probed what the United States' reaction would be if the USSR attacked the facilities."

I bet Chinese Wikipedia wouldn't include the paragraphs above.