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Economic Factors Affecting Sino-Japanese Relations Essay

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Updated: Nov 28th, 2021


The signing of the Sino-Japanese Long-Term Trade Agreement and the treaty of Peace and Friendship in 1978 signaled the beginning of political and economic cooperation between China and Japan (Kim & Nanto, 1985). Japan is currently the largest trading partner to China providing both financial and technical support to the country (Newby, 1989). It has contributed largely to economic development. However, over recent years, the relationship between the two countries has been deteriorating.

Threats to Japanese regional economic supremacy

The two countries used to have healthy cooperation in the energy sector in the 1990s but competition for petroleum supplies from Russia has intensified between them over the last two decades (Liao, 2006). Russia seems intent to exploit the rivalry over its resource (Giragosian, 2006). Indeed, competition for African energy and mineral resources is intensifying resulting in a sort of a scramble that is taking shape between them (Andrews-Speed, 2005). The bullish Chinese economy which is a sharp contrast with the Japanese frail economy has elicited anxiety in Japan which viewed China as a threat to its regional economic supremacy in East Asia (Zhaokui, n.d.). The Japan Economic Research center predicts the Japanese economy to stagnate at a range of less than two percent growth over the next two decades which paints a very gloomy picture of the economy. This is a far cry from the Chinese economy which is expected to maintain its robust growth rate at between 7 to 10% over the same period.

The Japanese economy has been deteriorating since the 1990s while China has shown consistent growth for the last two decades. For a long time, Japan had established itself as an indomitable economic authority in East Asia (Zhaokui, n.d.). The prospect of the Chinese economy becoming stronger than the Japanese has not gone down so well with the Japanese. This has led to a spate of growing strong sentiment against China. Most of these negative feelings seem to stem out from unwarranted jealousy by leadership which has infiltrated into society. The thought of the emergence of another economic power in the region is sending jitters from all corners of the country. As a matter of fact, one of its leaders Kiichi Saeki claimed that even without considering China’s expansionist ambitions posed a threat of establishing an empire around the neighboring countries. Such sentiments harbored by leaders have continued to fuel suspicion among the Japanese population besides the authorities. Many Japanese are worried that with the unprecedented growth of their neighbor, there might result in a struggle for leadership in the region while other fear that China might seek revenge from the Japanese years of devastating incursions into the country.

For some time there has been rising protectionism of their respective economies from each other. For example, in 2000 Japan imposed penalties of excess imports from China for onions, fresh mushrooms, and rush mat. This was met with sharp criticism from their Chinese counterparts provoking a wave of trade wars between them. In 2000, China was exporting goods US$ 50billion accounting for 15% of Japanese overall imports which was only second after the US whose exports to the country accounted for 19% of its imports. Despite the trade restrictions, bilateral trade volume amounted to US$ 236 billion which was a 20.6% increase from 2006 (Liping, 2009).

Imports from China have continued streaming into the country which is undergoing deflation leading to continued fall of domestic prices of its products. The continuous inflow of cheap commodities from China has only served to drive the country deeper into deflation. This has prompted the country to impose restrictive measures on selected Chinese products which threaten its manufacturing industry-leading to the collapse of some firms. By taking this move the government seemed to have succumbed to agitations from the industrial players which meant to shield their companies from Chinese competition. The result of the move was an increase in tensions between the two countries.

Japanese for a long time has been one of the greatest financiers of development aid to the country besides Germany and the USA especially since 1979. The significant reduction in financial support has led to a negative impact on Sino-Japanese ties. This financial support was crucial in the growth of the Chinese economy contributing heavily to the current robust growth. The pulling back of the finding could be interpreted to have an ill agenda further complicating the relationship. Indeed, analysts view the move as motivated by the current fiscal crisis and the deteriorating bilateral relationships between the two countries.

Much of the Japanese fiscal expenditure goes to financing the ODA while the country grapples with the means of reducing its fiscal expenditure. Japan has for a long time supported a huge proportion of the Chinese 5-year plan by funding development infrastructure, agriculture, environment, and industrial development. This has definitely played a paramount role in Chinese economic modernization. This prompted China to denounce its claim to reparation against Japan. Japanese foreign direct investment in China has been declining relative to its investments in the other East Asian economies indicating signs of bad blood between the two countries (Du, 1998). Today, there are growing negative sentiments in Japan over what is viewed as a lack of gratitude by China for ODA and the perceived misuse of ODA funds for the militarization process. Some Japanese have voiced concerns that the ODA has led to increased competition of China against Japan, an opinion that is likely to fuel the decision to decrease the ODA. This will most likely fuel the diplomatic row permeating the Sino-Japanese relationship.

Premier Junichiro Koizumi came to power on the promise of instituting economic reforms that would help to lift the country from years of the financial crisis. However, his failure to carry out his campaign pledge effectively fueled nationalism in Japan further straining the Sino-Japanese relationship. Koizumi’s failure stems from his lack of proper understanding of the developmental issues at hand which caused the reforms to miss the desired effect. Another possible reason was the failure of the society to acknowledge the reforms which had an effect of thawing the Sino-Japanese relationship further (Takeo, 2006). The result was that people tended to displace their frustrations towards China by blaming it for its economic woes.

Japanese has displayed strong opposition to East Asian cooperation. It has been very keen on the establishment of free trade bilateral agreements with American, European countries, Russia, Singapore, India, and Korea while paying very little attention to East Asian economic cooperation. Japan has vehemently opposed regional cooperation initiatives which have not done any good to cement its relationship with China. Furthermore, some Japanese have advanced a currency devaluation policy, a move intended to displace the countries domestic woes to its neighbors which has not been received well by the neighbors.


Sino-Japanese relations have been warm but for the last two decades when Japan started experiencing an economic crisis which has caused some growing animosity and suspicion between the two trade partners. The bullish Chinese economy has however caused uneasiness among the Japanese populace who view Chinese growth as a challenge to their economic status quo in the region. As a result of their large economic influence in East Asia, poor bilateral relations will not only impair the two countries but also impact negatively the development of the East Asian region (People’s Daily Online, n.d.).

Reference list

Andrews-Speed, P. (2005). China’s Energy Woes: Running on Empty, Far Eastern Economic Review, Vol. 168 No. 6, 2005.

Du, J. (1998). Sino-Japanese Economic Relations: Issues and prospects. Journal of regional Development studies. Web.

Giragosian, R. (2006). . Institute for the Analysis of Global Security. Web.

Kim, H.N. & Nanto, R.K. (1985). Emerging patterns of Sino-Japanese Economic Cooperation. Springer Netherlands. Web.

Liao, X. (2006). The petroleum factor in Sino–Japanese relations: beyond energy cooperation. International Relations of the Asia Pacific Vol. 7 No. 1, Oxford, Oxford University Press.

Liping, H. (2009). Sino-Japanese Economic Relations: A Chinese Perspective. gotoread.com. Web.

Newby, L. (1989). Sino-Japanese Relations: China’s Perspective. The Journal of Asian Studies, Vol. 48, No. 4 (Nov., 1989), pp. 834-835, Association for Asian Studies.

People’s Daily Online. Economic price paid for Sino-Japanese cold political relations, People’s Daily. Web.

Takeo, K. (2006). Beyond the Lost Decade, , University of Tokyo. Web.

Zhaokui, F. Factors Shaping Sino-Japanese Relations, Institute of Asia Pacific studies. Web.

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