twelve- nautical- mile zone that Japan administered. With these actions, the
Chinese government made it clear to Japan that it was prepared to go to
great lengths to show that it was the dominant power in Asia, and that the
Japa nese would be in trou ble if they did not follow China’s requests.
Not until a year later, in October 2013, did relations between China and
Japan in the area of the islands began to stabilize. Until that time, China was
sending as many as four patrols a week to the islands’ territorial waters.
Thereafter, it sent only one patrol every several weeks, thus reducing the
chance of an incident. The Japa nese also worked to avoid any escalation of
the dispute by not building on the islands.
To the Japa nese, the Chinese reaction to their purchase of the three is-
lands seemed excessive, but by 2012 it was clear to Japan’s leaders that Chi-
na’s military and economic power had surpassed Japan’s and they had no
choice but to accept that real ity. However, as in earlier centuries, Japan was
determined not to bow down.
For many of the Chinese who had grudgingly recognized since 1895 that
Japan was stronger and more modern, China had returned to its proper
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place in the world and in its relationship with Japan. Now, with a stronger
military and a larger economy, as well as the legacy of a great ancient civili-
zation, China could again look down on Japan. But Chinese leaders did not
yet have the relaxed confidence that the United States enjoyed between 1945
and 2008 as the world’s unquestioned leading power. To them, the demand
that Japan must recognize its history meant not only that it must acknowl-
edge past cruelties but also that it must recognize that China had become
the leading nation in Asia. At the same time, many Japa nese remained de-
termined, as Empress Suiko was in 607, that while Japan would acknowl-
edge the greatness of China, China should treat Japan with re spect.
Xi Jinping, Abe Shinzo, and the Stabilization of Relations
After the rapid changes of prime ministers in Japan between 1994 and 2012,
the long, stable relationship between Abe Shinzo, who was elected again in
2012 (currently serving until 2021) and China’s Xi Jinping (president from
2012 until at least 2022) has enabled the two leaders, after firming up their
respective po liti cal bases, to move slowly and steadily toward stabilizing the
relationship between China and Japan.
When Abe Shinzo first served as prime minister from 2006 to 2007,
both Chinese and Japa nese leaders wanted to improve relations following
the standoff from the Koizumi era, and Abe’s relations with Hu Jintao’s
China went relatively smoothly. But Abe had a conservative po liti cal base
and he had enjoyed good relations with his grand father, Kishi Nobusuke,
who had been accused of being a class- A war criminal for his role in guiding
the economy during World War II. Abe wanted to change Article 9 of the
Japa nese Constitution to allow Japan to become a normal country with reg-
ular armed forces (instead of only “self- defense forces”). In December 2013, a
year after he returned to office, Abe displayed his conservative credentials by
visiting the Yasukuni Shrine. Not only Chinese but also Koreans and West-
erners criticized him for this. Abe was proud and patriotic, but after he made
his po liti cal statement by visiting the Yasukuni Shrine, he chose to be prag-
matic. While in office, he did not again visit the Yasukuni Shrine.
After the years of po liti cal instability from 1994 to 2012, the Japa nese
public longed for a prime minister who could provide steady leadership.
During his first year after returning to the position of prime minister in
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The Deterioration of Sino- Japanese Relations, 1992–2018
2012, Abe introduced the economic policy known as “Abenomics,” which
provided a short- term stimulus for the economy and boosted his popularity.
His chief cabinet secretary, Suga Yoshihide, proved skillful in working with
other po liti cal leaders to manage Abe’s agenda. Abe continued to support
the defense alliance with the United States, but he avoided being provoca-
tive to China. Abe managed to maintain support and to win a third term,
which allows him to remain in office until 2021, the year after Tokyo is sched-
uled to host the Olympics.
Abe came to office within months of the 2012 confrontations over
Japan’s purchase of three of the Senkaku / Diaoyu Islands. China’s ships and
planes continued to put pressure on Japan in the area. Japan had already
established an Air Defense Identification Zone (ADIZ), which required
any airplane flying over the islands to give Japan prior notification, and in
2013 China announced it was establishing its own ADIZ over the islands.
Four Japa nese airline companies initially made their planes comply, but later,
when the Japa nese government told them not to notify China, they ceased
notification.
Continuing Economic Relations
Just as trade between China and Japan continued during the Qing and
Tokugawa periods, when po liti cal relations between the two countries were
lacking, so trade between China and Japan continued after 1992 despite po-
liti cal prob lems. In fact, in 2004 when relations between China and Japan
were very tense, China’s trade with Japan surpassed its trade with the United
States.
Although the Japa nese worried when the size of China’s economy
eclipsed Japan’s, in many ways Japan is fortunate to be located next to the
world’s most populous country, particularly now that Chinese per capita
incomes have risen to middle-class levels. For 150 years it has been the dream
of Japa nese business leaders to access the Chinese market. Late in the nine-
teenth century, the Chinese were so poor that only a few could afford the
products that Japan then offered— silk, cotton cloth, laver (a seaweed), and
dried squid. Today the Chinese population is ten times that of Japan, and
for Japa nese companies it means a market of 1.4 billion consumers with in-
creasingly sophisticated taste and considerable disposable income.
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For many Japa nese companies, the sales and profits from operations out-
side of Japan are larger than those from their domestic business. Japan’s
annual repatriation of profits from overseas investments has increased five
times since 2000, and by 2014 they amounted to about $200 billion per
year. During recent de cades, when domestic GDP was growing at 1 percent
or less, Japan’s overseas operations were growing at an annual rate of
5 percent or more. Japan’s balance of trade with China has generally been
positive, in stark contrast to the U.S. balance of trade with China.
Japa nese investment in China began to grow in the mid-1990s as Chi-
nese economic growth sped up, and it increased again after China joined the
WTO in 2001. The amount of new investment declined slightly after 2010,
but trade began to grow again in 2014. More companies from Japa n have
been conduct
ing business in China than companies from any other country.
In October 2016, for example, some 32,300 Japa nese firms were operating in
China. The United States was second, with some 8,400 firms.
Japa nese firms have adapted to the changing opportunities in China,
moving from producing light industrial goods with low technology to pro-
ducing heavy industrial goods and goods with higher technology. By the
twenty- first century, as Chinese family incomes had risen, Japan increased its
sales of consumer goods in China and expanded its investments in the ser vice
sector. Between 2006 and 2014, for example, the proportion of Japa nese in-
vestments in China in the ser vice sector grew from 24 percent to 39 percent.
Japa nese companies that invested in China in the 1980s generally took
a long- term perspective. As the Chinese economy grew, the Chinese became
skilled at using the prospects of its huge market to insist that foreign com-
panies build factories in China and pass on their latest technology. Yet Japa-
nese companies, unlike many Western companies that passed on their
latest technology to gain short- term profits, were generally more cautious
about sharing their newest technology in their factories in China. They were
aware that Chinese employees of foreign companies who became familiar
with foreign technology and management would often leave to form their
own companies, taking with them the technological knowledge they had
gained from their former employer. Japa nese companies, in contrast, have
been more likely to provide their Chinese employees with long- term incen-
tives, such as supplying housing that employees gradually acquire as their
own over many years with the com pany. They have also integrated their pro-
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The Deterioration of Sino- Japanese Relations, 1992–2018
duction in China with Chinese companies and sourced high- technology
components in Japan, so that it is not easy for Chinese companies to break
off from their Japa nese partners.
Despite the po liti cal tensions, Japan’s largest trading companies have ad-
ministrative offices throughout China that have become as large or larger
than their offices in the United States. The largest Japa nese trading com-
pany in the Chinese market, Itochu, has offices in fourteen cities. Other
major trading companies in China— Mitsubishi, Mitsui, and Sumitomo—
have offices in all major Chinese cities, with local staff under the leader-
ship of Japa nese officials who have learned Mandarin and, in some cases,
even local Chinese dialects. They have learned about local politics and mar-
kets and have made connections with local officials to learn how to operate
in the Chinese environment. By linking up with the large Japa nese trading
companies in China, small Japa nese companies can gain information about
the Chinese market and make local connections that are needed to conduct
business.
Japa nese firms generally keep a low profile in China to avoid anti-
Japanese outbursts, and they tend to pay their Chinese employees slightly
more than Chinese or Western firms do to compensate for anti- Japanese
sentiments. They have continued to benefit from the good reputation of
Japa nese products, even during periods of anti- Japanese demonstrations
when Chinese protesters have boycotted Japa nese firms and damaged Japa-
nese property. All these efforts have helped Japa nese companies remain in
China even during periods of heightened po liti cal tensions. Effective
working relationships between Japa nese and Chinese businesses have pro-
vided ballast for the relationship.
At the same time, many Japa nese firms have found ways to reduce the
risks of depending entirely on their production in China by diversifying their
investments to work with other Asian countries. After the 2005 attacks on
Japa nese goods, a popu lar expression among Japa nese industrialists investing
in China was “China plus one.” A Japa nese com pany that built a factory in
China also built a factory elsewhere, so that if the factory in China were to
encounter trou ble due to nationalist outbreaks, the com pany could quickly
expand operations elsewhere to meet its production goals. In the years after
2010 the Japa nese increased their new investments in industrial plants in
Southeast Asia and India more than their new investments in China, both
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china and japan
because of concern about boycotts and attacks on Japa nese property and
because of rising Chinese labor costs. But the Japa nese have found ways to
deal with risk while remaining active in the Chinese market.
Business leaders in Japa nese headquarters consider it an impor tant part
of their responsibility to maintain good working relations with Chinese of-
ficials, in Beijing and in the regions. When Diet member Nikai Toshihiro,
a former economic bureaucrat and former chief cabinet secretary, travels to
Beijing, for example, he often takes with him several hundred people with
business interests in China. When Prime Minister Abe visited China in
October 2018, he was accompanied by more than 500 Japa nese business-
people with interests in China. Since there are direct flights from Tokyo
or Osaka to several large Chinese cities, it is now pos si ble for a Japa nese
businessperson to fly to China in the morning, have one or two meetings,
and return the same eve ning.
Despite government tensions, a program initiated by Deng Xiaoping
and Nakasone Yasuhiro in 1983 that enables local Chinese governments to
request retired Japa nese technical workers (over the age of sixty) to come
to China to work in their locality has continued without interruption. By
2018, some 4,700 retired Japa nese technicians had been employed by local
governments in China, and they have been much appreciated for bringing
in new technology.
The Easing of Tensions since 2014
In June 2014 Fukuda Yasuo, who had been head of China’s Boao Forum
after retiring as prime minister in 2008, traveled to Beijing, where he met
with President Xi Jinping and China’s leading diplomats, Yang Jiechi and
Wang Yi. During his visit, he and his Chinese hosts worked out a four- point
mechanism for reducing the risk that an accident near the Senkaku / Diaoyu
Islands might lead to a broader conflict. Fukuda and Xi also laid the founda-
tion for a meeting between Abe and Xi in November 2014. Since Fukuda’s
visit, there has been a very slow but steady improvement in relations.
For two years after Abe returned to the post of prime minister in 2012,
China refused Japan’s requests for a meeting between Abe and Xi Jinping,
but it would have been awkward for them not to meet when Abe attended
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The Deterioration of Sino- Japanese Relations, 1992–2018
a meeting of the Asia- Pacific Economic Cooperation (APEC) in Beijing
in November 2014. They did meet at the APEC conference, and when the
two leaders posed for photo graphs after their twenty- minute conversation,
they each pouted to show their respective home audiences that they had not
been too soft on the other co
untry. Aides on the two sides reported, however,
that the two leaders were in fact quite cordial during their brief meeting.
During his seventeen years working in Fujian, Xi Jinping had often met with
Japa nese visitors, and the Japa nese who spoke with him reported that Xi
was businesslike and not personally anti- Japanese.
In April 2015, to celebrate the sixtieth anniversary of the Bandung Con-
ference of Non- Aligned Nations, at which Zhou Enlai played a major role,
Abe and Xi met for half an hour and discussed again how the two coun-
tries might cooperate to reduce tensions. For the public, they posed dis-
playing cordial smiles, reflecting pro gress in the relationship but not so
much pro gress as to disturb the left- wing Chinese and right- wing Japa nese.
Although high- level Japa nese and Chinese po liti cal leaders rarely meet,
diplomats have met slightly more often. The Chinese have generally assigned
as ambassador to Tokyo highly skilled Japanese- language specialists, such
as Tang Jiaxuan or Wang Yi, but aside from their diplomatic assignments,
they had not lived in Japan. Their Japa nese counter parts report that Chi-
nese diplomats sometimes criticize Japan severely, using set phrases, be-
hav ior that makes it difficult to sustain friendships with them. However,
Cheng Yonghua, who became China’s ambassador to Japan in 2010, had
gone to Japan in 1975 to attend Soka University ( under the Buddhist sect
Soka Gakkai), where he had a chance to develop personal relationships with
the Japa nese before he entered the Chinese Ministry of Foreign Affairs in
1977. As in earlier centuries, the Buddhist connection provided a basis of trust
that underpinned business relations between the two countries. Cheng’s wife,
who received her Ph.D. from Tokyo University, also has Japa nese acquain-
tances from outside diplomatic channels. Cheng has maintained good
working relationships with the Japa nese and has been allowed by leaders in
Beijing to remain as ambassador for a much longer term than usual.
In 2012 Japan appointed a professional diplomat, Nishimiya Shinichi, a
China and U.S. specialist, to replace Ambassador Niwa Uichiro, who was
not a China specialist but a former president of Itochu, the most successful
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Japa nese trading com pany in China. Nishimiya died suddenly before taking
China and Japan Page 61