2 China s Japan Policy: Adjusting to New Challenges

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1 Introduction This book is an analysis of the PRC leaders formulation of their Japan policy and an attempt to explain it within the framework of their overall foreign policy. It concentrates therefore, on their conceptualization of international developments and their rationale at every shift and turn in their Japan policy. Attempts are also made to analyze the Japanese leaders perceptions of international developments. A logical development of Mao Zedong s leaning to one side position was the conclusion of the Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance in February The major target of the treaty, however, was not the US, but Japan. It fully illustrated the significance of Japan in the PRC s foreign policy framework in its very early years, and the Chinese leadership s concern about the emergence of a potential Washington Tokyo Taipei axis directed against the PRC. Throughout the 1950s and early 1960s, the PRC s Japan policy followed the development of the Cold War closely; and Chinese leaders were keen to exploit opportunities available for the improvement of the bilateral relationship. At the same time, the special conditions of Japan, including its geographical and cultural proximity to China as well as the war guilt on the part of some Japanese, allowed the Chinese authorities to initiate people to people diplomacy and a united front offensive with Japan during this period. Beijing s appeal to Japan for good neighbourly relations in October 1953 along the lines of the Five Principles of Peaceful Co-existence, in fact, preceded their formal formulation a year later. After the chaos and disruptions in the PRC during the Cultural Revolution, PRC leaders had to turn their attention to the Soviet military threat. The PRC considered that a united front against the two superpowers would be much strengthened or weakened with or without the participation of Japan; and in the exploitation of the contradiction between the two superpowers, Japan carries the weight that could significantly tip the scale against either of them. Although 1

2 2 China s Japan Policy: Adjusting to New Challenges the PRC s official interpretation of its foreign policy was naturally couched within the orthodox Marxist Leninist framework, there was a distinct element of balance of power. In exerting pressure on the Liberal Democratic Party, Japan (LDP) government to normalize relations with the PRC and accept its terms, PRC leaders attempted to and were very skilful in exploiting the contradictions between the US and Japan in the early 1970s. There was a very big gap between Japan as an ardent supporter of the US s anti-communist crusade in the Asia-Pacific region and Japan as an active participant in a united front struggling against the hegemonism of both superpowers. While a foreign policy of equi-distance 1 might be an ideal for many Japanese, relations between Japan and the US remained the most important factor in Japan s diplomacy. The PRC leadership indicated its appreciation of this, as demonstrated by its acceptance of the US Japan Security Treaty. The aggravation of the contradictions between the US and Japan was also abandoned after the normalization of Sino-Japanese relations. In the crucial years before the normalization of Sino-Japanese relations, the most significant feature of PRC leaders united front in Japan was its gradual expansion from sole reliance on the pro-prc factions of the Japan Socialist Party (JSP) and a few Maoist organizations to include all the opposition parties with the ambiguous exception of the Japanese Communist Party (JCP), the majority of the mass media, the anti-mainstream factions of the LDP, the business world, and finally, some LDP mainstream factions. Undeniably certain factors in the Japanese domestic scene also facilitated this spectacular broadening of the unified front. This book focuses on the PRC s united front strategy at both the international level and the Japanese domestic level in this period. A detailed study of the operations of the united front strategy at both levels contributes to an understanding of the decision-making processes and operations of the PRC foreign policy. Obviously, the domestic political scene in Japan continues to be a significant factor affecting Sino-Japanese relations. The definition of the priorities in the bilateral relationship on the part of Beijing in different periods is interesting. In the normalization of Sino-Japanese relations in 1972, PRC leaders concentrated on the Taiwan issue and were ready 1 There was a small segment of Japanese politicians and academics who advocated improvement in Sino-Japanese relations and the maintenance of equi-distance between Japan and the US and between Japan and the PRC. The pacifists in Japan usually appeal for a policy of equi-distance between Japan and all major powers, or between Japan and all the countries in the world.

3 Introduction 3 to put aside the Diaoyu/Senkaku Islands dispute. In the subsequent conclusion of the Sino-Japanese treaty of peace and friendship in August 1978, PRC leaders focused on securing an anti-hegemony clause in the treaty and were willing to avoid the Diaoyutai Islands issue and the war indemnity issue again. The breakthrough in Sino-Japanese relations coincided with the establishment of diplomatic relations between China and the US in the following December. In fact, it was the endorsement of the anti-hegemony clause by the Carter administration which facilitated the Fukuda Takeo government s acceptance of the clause. The significance of these two achievements in Chinese foreign policy can best be examined together with that of a number of important events in the Asia-Pacific region in the second half of 1978 and early 1979, including the visits of Deng Xiaoping to Japan and Southeast Asia, and the Soviet response in the form of a treaty of friendship and co-operation with Vietnam, a treaty of friendship, goodneighbourliness and co-operation with Afghanistan and the visit to Southeast Asia of the Soviet deputy foreign minister, Nicholai Firyubin, as well as that of the Vietnamese prime minister, Pham Van Dong. These manoeuvres finally led to the Vietnamese invasion of Democratic Kampuchea in January 1979 and the Sino- Vietnamese border war in February March, following an earlier visit of Deng Xiaoping to the US and Japan. There was a brief period of pseudo-alliance among China, the US and Japan. The events mentioned above reflected China s move towards the West and Japan in order to counter Soviet expansion. At the same time, China began to launch its programme of economic reforms and opening to the external world; and foreign policy had to serve the new national mission of modernization. Relations with Japan became a test case for China s modernization diplomacy. The complementarity between the two economies led to rapid increases in bilateral trade, and simultaneously, huge trade deficits on the part of China in the early half of the decade. Beginning from 1979, China became a recipient of Japan s official development assistance; and until recent years, Japan was the major source of foreign aid for China. Throughout the era of economic reforms and opening to the external world, economic ties remained a very important aspect of the bilateral relationship in preventing any serious deterioration. But naturally there were economic conflicts too. Since the mid-1980s, China had been stepping up its efforts to tap the capital and advanced technology of the developed countries to serve its modernization programme. Despite the significance of Japan in China s modernization, Beijing

4 4 China s Japan Policy: Adjusting to New Challenges was not happy with Japan s lack of commitment in terms of investment in China and technology transfers in the 1980s and the early 1990s. When economic disputes interacted with emotionally charged issues like the Japanese school textbooks treatment of their historical relationship with China and when Japan s defence expenditure surpassed the 1% Gross National Product (GNP) limit, mutual economic benefits alone could not be an adequate foundation for longterm friendship and trust between the two Asian giants. China also wanted to diversify its economic ties and reduce its dependence on Japan. Japanese newspapers were quick to detect that, since 1986, China had appeared to favour Western Europe over Japan. 2 In 1986, China s trade with Japan was reduced by 20%, while that with Europe increased by almost 40%. The Bank of China and the China International Trust and Investment Corporation, too, had been eager to issue bonds in the Eurodollar market instead of relying too much on the capital market in Tokyo. In the 1980s, when the two countries shared strong common security and economic interests, and when the two nations enjoyed very friendly perceptions of each other, elements of conflict related to inadequate trust and the historical legacy still existed. They became more significant subsequently when common interests were diluted. In , Chinese leaders adjusted their foreign policy and formulated an independent foreign policy line of peace. In striving for a peaceful international environment to realize China s modernization programme, Chinese leaders became aware of the adverse impact on China s relations with the Third World through moving too close to the US and Japan in the late 1970s. While continuing to insist on the general principle of combatting hegemonism, Chinese leaders abandoned their efforts to form the broadest possible united front against hegemonism. In fact, they moved to improve relations with both the US and the Soviet Union, and, on the basis of peaceful co-existence, develop trade and various forms of economic, cultural, scientific and technological exchanges. The domestic difficulties of the Soviet Union prompted it to improve Sino- Soviet relations with China and eventually accepted China s conditions for the normalization of the bilateral relationship. When Mikhail Gorbachev visited Beijing in May 1989 and secured the full normalization of state-to-state and Partyto-Party relations with China, China managed to have good relations with all major countries of the world which posed no threat to China then. Earlier in December 2 Ming Pao (a Hong Kong Chinese newspaper), October 20, 1987.

5 Introduction , the then Prime Minister Rajiv Gandhi arrived at Beijing to improve Sino- Indian relations. But this ideal state was soon disrupted by the Tiananmen Incident and the fall of Berlin Wall. Despite the purge of Zhao Ziyang and his supporters who were accused of advocating complete Westernization, the Chinese leadership declared in the communiqué of the Fourth Plenum of the Thirteenth Central Committee of the Communist Party of China (CPC) released on June 24, 1989 that the policies of reform and opening to the outside world will continue to be steadfastly carried out as before and that China will never go back to the old closed door path. 3 The communiqué also reaffirmed that China s independent, self-reliant and peaceful foreign policy would not change, and China would, on the basis of the Five Principles of Peaceful Co-existence, continue to develop friendly relations with other countries. The Chinese leadership appeared to be just as eager to attract foreign investment. The authorities concerned were more willing to concede to reach agreements because they felt their bargaining position had been weakened. In the following two to three years, Germany was reunified; the former East European satellites of the Soviet Union abandoned socialism and opted for independence; and, finally, the Soviet Union disintegrated. These developments, plus the impressive victory of the Western countries in the Gulf War, seemed to indicate that the US had become the sole superpower in the world. There was a view in China during these years that as the remaining major socialist country, China would become the next main target for the peaceful evolution strategy of the West. Reports in the Western media about the Pope and the Reagan administration supporting Solidarity in Poland, in the past, obviously lent support to such a view. Despite the sense of insecurity among Chinese leaders, they had to be given credit for not responding to the domestic and international turmoil by resorting to radical or isolationist strategies. Under the guidance of Deng Xiaoping, Chinese leaders refused to assume leadership of the international Communist movement and take up the responsibility of the former Soviet Union. They were very critical of the attempts by the US and, to a lesser extent, by other Western countries to impose their systems and values on other countries, but they consistently continued their efforts of improving relations with the West after the Tiananmen 3 For the text of the communiqué, see Beijing Review, Vol. 32, No. 28, July 3 9, 1989, pp

6 6 China s Japan Policy: Adjusting to New Challenges Incident. Beijing certainly appreciated that Japan refused to impose sanctions on China and offered to serve as a bridge between China and the West in the wake of the Tiananmen Incident. Chinese leaders continued to adopt a pragmatic and realistic approach to foreign relations. They wanted to maintain a peaceful international environment to concentrate on China s modernization. They considered that international competition in the coming decades would be on the basis of comprehensive national power, and that China had wasted much precious time already. China would have to make sure that its economic, scientific and technological gaps with the advanced Western countries are narrowing, and not widening. In this context, Chinese leaders recognized the increasing significance of economic regionalism and regional trading blocs. In 1991, China became a dialogue partner of Association of Southeast Asian Nations (ASEAN), a member of the Asian Pacific Economic Co-operation, and expressed support for the Malaysian proposal for an East Asian Economic Caucus excluding the US. Despite some hesitation, it also joined the ASEAN Regional Forum which was launched in Directions for an institutional framework strengthening economic co-operation among East and Southeast Asian countries were still very fluid, but they would have an important impact on the respective roles of the US and Japan in the region. China understood that it could not afford to be left out in shaping this institutional framework. Japan welcomed China s active participation in regional economic co-operation. More important still, soon after Deng Xiaoping s southern tour in early 1992, major Japanese manufacturers considered the market environment and the quality of labour in China satisfactory to engage in sub-contracting work for them. Hence, manufacturing operations began to move to China s coastal cities, helping China to emerge as the workshop of the world, and to be integrated into the multinational corporations international production chains. Sino-Japanese trade became much more balanced because a substantial portion of the products assembled in China was exported to Japan. The breakup of the Soviet Union resulted in the disappearance of the strategic triangle. In strategic terms, this meant that China could no longer exploit the differences between the two superpowers and play one off against the other. Thus, China s strategic value, in the eyes of the Western countries, would be much depreciated when compared with that in the late 1970s, when Soviet military power reached its peak. Hence, the Western countries would be less inhibited in

7 Introduction 7 criticizing and exerting pressure on China regarding issues ranging from weapons proliferation to trade, human rights, etc. Japan obviously did not take part in these criticisms, but the common security interests between China and Japan were weakening, and contradictions appeared. In response to the Taiwan Straits crisis in 1995 and 1996 in the wake of Lee Tenghui s informal visit to the US, the Clinton administration stepped up defence cooperation with Japan. When President Bill Clinton visited Japan in April 1996, both governments agreed to strengthen the bilateral security alliance, with Japan assuming additional responsibilities. In September 1997, they announced the revised US Japan defence co-operation guidelines, expanding the scope of defence co-operation to include Japan s surrounding areas. 4 A number of Japanese cabinet ministers and politicians have since stated that the surrounding areas of Japan would naturally include Taiwan. When the Chinese authorities asked for clarification, the Japanese government s official response has been that emergencies in the surrounding areas of Japan are not a geographical concept, but a state of affairs. The Chinese authorities naturally thought that the Japanese government was avoiding the question, because while emergencies may be a state of affairs, surrounding areas must have a territory boundary. In April 1999, the Japanese House of Councillors passed the related legislation concerning the implementation of the guidelines, thus completing the domestic legislative process. According to the revised guidelines, US forces based in Japan were granted greater access to airports and port facilities in the country. At the same time, Japan s Self-Defence Forces received authorization to back up US troops by carrying out search-andrescue missions, evacuations, and mine-sweeping. It was actually the North Korean threat which provided the impetus for Japan s military modernization in recent years. In the eyes of Beijing, however, the North Korean threat was only an excuse used by the Japanese government. Beijing considered that Japan s military modernization had been directed against China. The Chinese leadership was particularly concerned about the Theatre Missile Defence (TMD) system based on destroyers acquired from the US equipped with the missile-hunting Aegis radar system. Until recently, Chinese leaders perceived such pressures as a conspiracy to slow down China s economic growth by prompting the diversion of resources to military modernization. 4 See Joseph Y.S. Cheng, China s Asian Policy in the early twenty-first century: adjusting to its increasing strength, Journal of Asian Public Policy, Vol. 1, No. 3, November 2008, p. 244.

8 8 China s Japan Policy: Adjusting to New Challenges The above developments adversely affected Sino-Japanese relations. Both governments, as a result, failed to muster the political will to exploit the potentially positive aspects of their bilateral relationship. Both China and Japan were interested in promoting multipolarity in international relations. Within the Asia-Pacific region, Japan was perceived to be pursuing a multilateral balance to maintain a regional strategic equilibrium and stability so as to create more room for Japan to manoeuvre and to facilitate Japan to assume the role of a major political power. This involved the rejection of a subordinate role in alliance with the US, and the establishment of an equal partnership in the bilateral relationship. This is in line with the Chinese leadership s promotion of multipolarity, and support for Japan s attempts to reduce control by the US to strengthen its relations with Europe, and to adopt a return to Asia posture. The Sino-Japanese common interest in promoting multipolarity, however, has been compromised by the following considerations according to the analysis of China s Japan experts. In the first place, while Japan would like to have a more mature and stable relationship with China from a strategic point of view, it has been interfering in China s democratization process and human rights issue, which reflects an ideological confrontation. Second, while Japan supports China s economic reforms and opening to the outside world through the provision of economic and technological assistance, it is worried about the emergence of a strong China and therefore sets various limits on such assistance. Finally, while Japan hopes China would exert its influence as a major power, participating fully in international mediation and reconciliation mechanisms, it also adopts various measures to restrain China s influence. Hence, Chinese foreign policy researchers perceive the following characteristics in Japan s China policy. In the first place, Japan s China policy largely serves its broad diplomatic strategies in handling its relations with the major powers of the world; Japan also attempts to exploit the bilateral relationship to enhance its influence in the Asia-Pacific region and in international affairs in general. Further, in the past couple of decades, Japan s China policy has shifted from an emphasis on economic issues to an emphasis on both economic and political issues; it is even willing to make economic concessions to other countries in exchange for political support to serve its ambition to become a major political power. Finally, the Japanese government and its political elites have been trying to downplay the significance of the historical legacy in the bilateral relationship, that is, Japan s past aggression against China.

9 Introduction 9 Undeniably, mutual distrust between China and Japan has been increasing in recent years, and it has been exacerbated both by the Taiwan issue and the failure to resolve the historical legacy of the Second World War. Japan is already a political power with formidable military strength. China s economy and military capabilities will continue to develop. How a powerful China would live with a powerful Japan poses a question never experienced by the two countries in their modern history. This adjustment process has been made all the more difficult by the lack of a satisfactory settlement of the Sino-Japanese historical legacy. The Chinese nation considers that the Japanese authorities have yet to make a formal apology to China concerning Japan s aggression against China in the Second World War, and the Chinese intelligentsia often criticizes the Chinese authorities for being weak in dealing with Japan. The spontaneous anti-japanese protests in several Chinese cities in April 2005 probably caught the Chinese leadership by surprise, and it in turn feels the pressure to stand firm in dealing with Japan. Since the split of the LDP in 1993, the left-wing political parties in Japan soon lost much of their influence. The new party system also called for stronger leadership from the prime minister in foreign policy, and more consultation among the conservative parties which believe that the promotion of nationalism would strengthen their prospective political appeal. The LDP and the conservatives in the Democratic Party of Japan (DPJ) have been successful to a considerable extent in pushing to turn Japan into a normal state. Several pieces of legislation since the mid-1990s have generally facilitated the dispatching of Japanese troops overseas, including service in the combat zone in Iraq after the US-led coalition s military victory. Rising nationalism in both countries made it very difficult to manage the Sino- Japanese relations. There was no exchange of formal state visits from 1998 to the end of the Koizumi Junichiro administration in Worse still, the deteriorating atmosphere exacerbated mutual suspicions of each other s military modernization plans. Various types of conspiracy theories easily emerge concerning Japan s constitutional revision and support for Taiwan. Prime Minister Koizumi Junichiro s annual visit to the Yasukuni Shrine in the period became a serious controversy, as leaders on both sides could not afford to back down. Both countries exploration of energy resources in the disputed areas in the East China Sea continued to generate tensions and minor confrontations. Chinese leaders have not given up expressing their desire to improve the bilateral relationship even in the most difficult times. Their sincerity should not be

10 10 China s Japan Policy: Adjusting to New Challenges doubted as China has been attempting to cultivate relations with Japan since Friendly relations with Japan are naturally an important part of China s strategy to secure a peaceful international environment for modernization; and Beijing wants to prevent Japan from going nuclear or engaging in massive rearmament. At the same time, the Chinese authorities hope to see an independent Japan pushing for multipolarity, instead of developing closer security ties with the US. After all, Sino-Japanese relations have generally been considered a failure in Chinese foreign policy in the recent decade. In contrast to the difficulties in the political relationship, Sino-Japanese economic exchanges progressed significiantly. Bilateral trade increased from US$83.17 billion in 2000 to US$ billion in 2005; and during the Koizumi administration it exceeded US$200 billion in Japan s foreign direct investment (FDI) in China increased from US$4.35 billion in 2001 to US$6.53 billion in At the end of November 2006, cumulative actual investment of Japan in China reached US$57.45 billion, just behind Hong Kong and the US. 5 Japan s FDI in China has many favourable characteristics: (i) the ratio of actual investment to contractual investment is very high comparatively, (ii) the proportion of investment in the manufacturing sector is high, and (iii) the operations of most investment projects have been satisfactory. According to the experts in Japan, in the manufacturing, electrical, and transportation machinery sectors, technology exports almost reached 50% of the total investment. This shows that FDI has been a significant vehicle for technology transfer; and FDI from Japanese enterprises has contributed to raising the technology level of China s manufacturing industries. Certainly Japan s FDI in China has been a very important factor contributing to the bilateral trade. China s inexpensive labour supply, skilled labour, cheap land, and improving investment environment have provided strong incentives for Japanese enterprises to integrate their manufacturing operations in China into their international production chains and to produce final products aiming at the markets in the US and the European Union. A turning point finally arrived when Abe Shinzo succeeded Koizumi Junichiro as prime minister in September Despite his earlier position on China, Abe visited China and South Korea in his first foreign visit in October The Chinese leadership warmly responded to this ice-breaking trip; and Premier Wen 5 Joseph Y.S. Cheng, China s Japan Policy: Seeking Stability and Improvement in Uncertainties, China: An International Journal, Vol. 9, No. 2, September 2011, pp

11 Introduction 11 Jiabao visited Japan in the following April. Abe had to step down in September 2007, taking responsibility for the LDP s severe loss in the House of Councillors elections and the scandals of several of his cabinet ministers. Abe was succeeded by Fukuda Yasuo, who was perceived to be friendlier towards China. Among various gestures, he promised that he would not visit the Yasukuni Shrine. The Chinese leadership did not see the changes of prime ministers in Japan as having significant impact on Sino-Japanese relations. After all, Koizumi, Abe, and Fukuda all came from the same faction with Kishi Nobusuke as the leader in the 1950s. As reflected by the publications of the Japan experts in China, Beijing s main concern has been the rising influence of the right-wing forces in Japan which it perceives as the major factor leading to the deterioration in the bilateral relationship in recent years. Chinese leaders, however, made good use of the thaw in the bilateral relationship so as to contain its deterioration and to improve the political atmosphere in order to build the foundation for more significant improvement in the relationship with Japan in the near future. Fukuda Yasuo visited China at the end of 2007; and Hu Jintao visited Japan in May 2008, the first Chinese head of state arriving in Japan in a decade. There were reports that a solution would be likely concerning the bilateral disputes on the exploitation of oil and gas in the East China Sea. Obviously both governments made serious efforts to enhance mutual trust, symbolized by the joint statement in May 2008 on the comprehensive promotion of a mutually beneficial relationship based on common strategic interests. Aso Taro succeeded Fukuda in September Aso was not perceived as friendly towards the PRC because he had proposed the arc of freedom and prosperity to strengthen Japan s relations with democratic countries at PRC s periphery to limit the latter s influence. However, Sino-Japanese relations encountered no major disputes during his tenure as premier. In the general election in August 2009, the LDP was defeated by the DPJ. Japan experts in the PRC initially believed that the DPJ government would accord a higher priority to Japan s relations with the PRC in the broad strategic context of adjusting its relations with the US. These experts, however, recognized that there were many groups and leaders within the party with diverse and even opposing views on the PRC; and the PRC media often identify DPJ leaders and ministers as friendly or hostile towards their country. The proposals of Hatoyama Yukio, the first prime minister of the DPJ government, for a unified Asian currency and an East Asian Community to be promoted

12 12 China s Japan Policy: Adjusting to New Challenges by Japan, the PRC and South Korea were appreciated by Beijing. In January 2010, Hatoyama withdrew the Japanese naval vessels in the Indian Ocean that had been supporting the oil supply operations for the US forces in Iraq and Afghanistan when the legal authorization expired. He disclosed Japan s secret agreement with the US on the access to Japanese ports by American naval ships carrying nuclear weapons; and decided to re-negotiate the 2006 agreements on the US base in Futenma, Okinawa. While the Barack Obama administration became concerned about his foreign policy orientations, the PRC s Japan experts subsequently admitted that the PRC authorities probably should have shown stronger support for his East Asian Community proposal. Pressure from the US was seen by the PRC as a part of the factors leading to Hatoyama s resignation in June Kan Naoto, his successor, abandoned the DPJ s electoral pledge in demanding the US to remove the Futenma base from Okinawa. In the first month of his administration, Kan cancelled his visit to the Shanghai Expo scheduled in June 2010; and in the following September, his cabinet endorsed the 2010 edition of the Defence White Paper which was rather critical of the PRC. Then came the emotional detention of a Fujian fishing boat and its captain in early September. The Japanese authorities even attempted to prosecute the captain according to Japan s domestic law. Responses from both the PRC government and the Chinese people were very strong; and it was said that the Obama administration had played a mediation role. The incident probably marked the beginning of a period of escalating tension between the PRC and Japan focusing on the territorial disputes. In the following two years, large-scale confrontational military exercises between Japan and the US sometimes involving South Korea, India and some ASEAN countries on one hand, and the PRC on the other, became almost routine. Security co-operation further strengthened between the US and Japan, including the announcement in September 2012 that the US would deploy a second advanced radar system in Japan in an effort to enhance its missile defence architecture normally targeted against North Korea. While the weak DPJ government continued to turn inwards because of economic difficulties associated with the global economic slowdown and frequent changes of prime ministers and re-organizations of cabinets, the PRC leadership has also been troubled by the deteriorating external and domestic environments. Declining economic growth rates and the increasing number of mass incidents coincided with the preparations for the Eighteenth Party Congress in November

13 Introduction which was expected to announce the new leadership lineup. Regional territorial disputes in the East China Sea and South China Sea and the perceived assertiveness of the PRC positions encouraged its neighbours to strengthen their hedging strategies involving largely the enhancement of their security ties with the US, thus, facilitating the return to Asia policy of the Obama administration. The atmosphere did not favour serious initiatives from Beijing and Tokyo to improve relations; and in late August and September 2012, their territorial dispute again escalated upon the announcement of the Noda Yoshihiko administration in September that it would buy three of the Diaoyutai (Senkaku) Islands from their alleged owner, a Japanese citizen, for almost US$30 million. This was seen as a serious provocative act by the PRC, unilaterally disturbing the status quo in an attempt to strengthen the Japanese claim to the sovereignty of the islands. Formal exchanges were effected and both governments dispatched their naval and coast guard vessels routinely to the vicinity of the disputed islands to demonstrate their sovereignty claims, aimed largely to satisfy their domestic demands. The Ma Ying-jeou government in Taiwan had to act likewise under similar domestic pressures. The dispute triggered off widespread anti-japan protests in about 180 Chinese cities in September. There were suspicions that they had been encouraged by the PRC authorities, but the emotional outburst was obviously spontaneous and expected. These protests seemed to have longer-term effect this time, demonstrating their seriousness. Apparently, they led to a boycott of Japanese goods, especially automobiles; and in view of Japan s dependence on the China market, the worries were immediately shown in the stock market. In the wake of the protests in the PRC, Nissan motors shares dropped 5% in the Tokyo stock market, Uniqlo-owned Fast Retailing fell 7% and Honda Motors was down by 2.5%. 6 A similar pattern was repeated along the lines of the detention of the PRC fishing boat incident in September On October 11, 2012, Luo Zhaohui, head of the PRC foreign ministry s Asian affairs department, made a secret trip to Tokyo to meet Sugiyama Shinsuke, the director-general of the Asian and Oceanic affairs bureau at Japan s foreign ministry. The latter indicated that the diplomats exchanged opinions on the dispute and held preparatory talks for a higher-level 6 China protests: Fears rise over Japan China trade ties, BBC News-Business, September 18, Available at:

14 14 China s Japan Policy: Adjusting to New Challenges meeting between the two governments to take place at an unspecified date. 7 At the same time, the US sent a team of former senior diplomats including former Deputy Secretary of State Richard Armitage and former Deputy Secretary of State James Steinberg to visit Japan and the PRC in late October 2012 to encourage them to mend relations damaged by the recent territorial dispute. 8 In the study of the PRC s Japan policy in this book, there are a number of significant observations which also constitute the trends of analysis. In the first place, because of the importance of Japan, the PRC s Japan policy remains at all times an essential part of its foreign policy framework. The foundation of this foreign policy framework has been gradually evolving, from the initial emphasis of an orthodox Marxist Leninist analysis of world considerations up till the late 1960s, towards the increasing involvement of an element of anti-soviet hegemonism in the following decade and a half or so, to a search and maintenance of a peaceful international environment concentrating on modernization in the last two decades of the previous century, and the inclusion of serious considerations to enhance the PRC s international status and influence in recent years. The PRC s Japan policy basically follows this evolution, but because of its significance, there were important allowances made for it and specific roles assigned to it. In the early 1950s, despite the Korean War and the Cold War, its newly-established alliance with the Soviet Union, and the absence of formal diplomatic relations, the PRC eagerly approached the sympathetic organizations and politicians in Japan, laying the foundation for a united front strategy which later assumed a significant role in the normalization of relations in the early 1970s. In , when the PRC leadership led by Deng Xiaoping was formulating its modernization programme, Japan was approached for foreign aid which in the following two decades, made a substantial contribution to the PRC s economic development and trade expansion. No other country s foreign aid programme to the PRC could compare with that of Japan. Japan s importance may be seen from another perspective. The PRC leadership focused on the Taiwan issue in the normalization of relations in It demanded no war indemnity and was willing to shelve the Diaoyutai (Senkaku) islands dispute. Beijing s negotiating position reflected the substantial role of Japan in the Taiwan question. Again, in the negotiation on the bilateral peace treaty in 7 The New York Times, October 15, The Japan Times, October 22, 2012.

15 Introduction , the PRC leadership focused on an anti-hegemony clause, as Soviet expansion was one of its most important considerations then. As before, it abandoned the demand for war reparations and shelved the territorial dispute. The priority accorded to the absorption of Japan into the anti-hegemony international united front was obvious. Economic ties have contributed a very important part of the bilateral relationship, though their significance varies in different periods of time. In the early 1950s, despite his pro-american position, the Japanese Prime Minister Yoshida Shigeru was reluctant to conclude a peace treaty with the Kuomintang government in Taiwan because he had the vast China market in mind which traditionally was most important to Japan s trade. Japan s subsequent economic success much reduced the attraction of the China market; but the latter remained an important consideration in the PRC s people-to-people diplomacy in the 1950s and 1960s. In the early 1970s, it re-emerged as the dominant factor to induce Japan s major corporations to join the united front in support of normalizing relations with the PRC. They were disappointed though in the following years until the PRC launched its modernization programme. The complementarity between the two economies served as a strong pillar supporting close relations between the countries in the following two decades. Despite complaints of huge deficits and inadequate technology transfer from the PRC, trade and investment flows continued to expand. Slightly before the mid- 1990s, Japan s multinational corporations began to move their hard manufacturing operations to the PRC which helped to reduce the bilateral trade deficit and to enhance technology transfer, enabling the PRC to become the factory of the world. Japan and the PRC were satisfied with the division of labour then. Despite the cool political relations during the Koizumi Junichiro administration, economic ties remained warm and were largely unaffected. Thus, economic relationship helped to reject the dependence theory which the PRC think-tanks and media espoused in the 1960s and 1970s. Like South Korea and Taiwan, the PRC has been able to close the economic and technological gap and begin to pose some competition to Japan, demonstrating the attraction of the flying geese regional economies development model. The replacement of Japan as the number two economy in the world in 2010, however, contributes to the emerging China threat perception in Japan. Despite the importance of the bilateral economic ties to each other and the strong complementarity of the two economies, the serious differences between

16 16 China s Japan Policy: Adjusting to New Challenges the PRC and Japan has been a serious obstacle in regional economic integration. The ideal scenario naturally is the post-world War II Franco German economic co-operation leading finally to the establishment of the European Union, ensuring peace in the continent and promoting development among its member countries. Unfortunately the difficulties in the PRC Japan relationship have resulted in bilateral free trade arrangements between ASEAN on one hand, and the PRC, Japan, South Korea and India on the other. The prospects for further progress in regional economic integration are limited, as the escalation of the territorial disputes in the region since 2010 has seriously exacerbated the differences not only between the PRC and Japan but throughout the region. The relationship between the PRC and Japan has been characterized by their close historical, geographical and cultural ties which can be both assets and liabilities. These ties mean that ordinary people in both countries are keenly interested in the relationship, and they, especially the Chinese, can be highly emotional over the historical legacy and the territorial dispute. Before the end of the 1970s, the PRC leadership was in firm control of foreign policy and Chinese people s participation was very limited, and a considerable segment of the older generation in Japan including the political and business elites had a war guilt towards the Chinese nation. These factors enabled the historical and cultural ties to be fully exploited in the promotion of better relations by both governments, and they helped to explain the success of the PRC leadership s united front strategy in Japan in the 1970s. But beginning from the 1980s, rising nationalism in the PRC, highlighted by the significance of the history textbook controversies and the visits to the Yasukuni Shrine by leading Japanese politicians, forced the PRC leadership to adopt a strong position. Meanwhile, the right-wing forces in Japan also exploited the issues to promote their version of Japan s imperial history and the restoration of Japan as a normal state including constitutional revision. The anti-japan student protests in late 1986 had domestic political implications too as many student participants wanted to use the protests to show their support for the reformist leader Hu Yaobang, though with the opposite effect. These controversies and the subsequent escalation of the Diaoyutai (Senkaku) Islands dispute became more emotional in the context of rising nationalism in both countries, which is mainly directed against the other side. In the case of the PRC, rising nationalism demands a strengthening of the country s international status and influence as well as the removal of the humiliation and shame in the one century or more following the Opium War. Japan s lack of sincere reflection and a

17 Introduction 17 formal apology plus the fact that China s share and suffering were most acute in its relations with Japan naturally make Japan the prime target of its nationalism. On the part of Japan, its nationalism has been emerging as its people and especially its younger generation want to get rid of its war guilt and make Japan a normal state. Many Japanese also want their country s contribution to the international community duly recognized. At the same time, there is a concern with Japan s relative decline because of its ageing population; the PRC s rise; and other trends. As the PRC is the principal country which keeps on reminding Japan of the historical issues and Japan s relative decline is perceived largely in the context of the PRC s rise and its strong regional competition, the PRC is perceived as the major target of Japan s rising nationalism. Japanese politicians realize that standing firm against the PRC may be highly popular in domestic politics. The rising nationalism in both countries targeting against each other has led to deteriorating relations between the people in both countries. This trend in turn reinforces the tendency of both governments to stand firm in the bilateral disputes; the usual protests during the serious controversies, especially those in the PRC, also limit the flexibility on the part of the leaders in both countries in their attempts to defuse the disputes and reduce tension. Under such circumstances, there are often irrational exaggeration of the China threat in Japan and the revival of Japanese militarism in the PRC. It has to be emphasized, however, that both governments do not want to see a sharp deterioration in the bilateral relationship. PRC leaders understand that though they can no longer expect Japan to become a neutral country, the idealistic objective in the 1970s, they do not intend to drive Japan to the close embrace of the US for a joint containment of the rise of the PRC. The worse scenario is the gradual re-militarization of Japan and its acquisition of nuclear weapons, tempting North Korea, South Korea and even Taiwan to follow suit. Wars between major powers are unthinkable, despite an emotional territorial dispute. The PRC still desires a peaceful international environment to concentrate on modernization, as it realizes that it will still take decades to catch up with the most advanced countries of the world in terms of comprehensive national power. The US too understands the serious danger of the escalating tension between the PRC and Japan. This is why both Beijing and Tokyo try hard to maintain a dialogue immediately after every controversy and dispute, and often the US assumes a mediating role. Note: there is a danger that frequent conflicts undercut the potential of a renewal of dialogue, while mutual perceptions at the people-to-people level

18 18 China s Japan Policy: Adjusting to New Challenges continue to worsen. Meanwhile, economic ties in the recent decade do not seem to have been adversely affected by the disputes in any serious manner, reflecting the logic and strength of market forces. Trade between the PRC and Japan grew 14.3% in 2011 to reach US$345 billion; but in the first eight months of 2012, it fell 1.4% to US$218.7 billion. Japan s investment in the PRC rose 16% on 2011 amounting to US$12.6 billion, compared with US$14.7 billion in the US; in the first eight months of 2012, Japan s investment in the PRC increased by only 16%, compared with a 50% increase in the same period in Serious efforts are called for to break the circle of dispute, renewed dialogue, and dispute again. These efforts require more favourable international and domestic environments which appear to be hard to come by in the near future. 9 Martin Fackler and Ian Johnson, Sleeping Islands and a Smoldering Dispute, The New York Times, September 20, 2012; and ibid., October 15, 2012.