China-Japan tensions: A diplomatic conundrum

Ifty Islam

China-Japan tensions over Chinese territorial claims over the South China Sea are unlikely to dissipate for the foreseeable future

  • Maritime disputes in the South China Sea
  • China’s increasingly aggressive assertion of its territorial claims on the South China Sea is fuelling Japan’s mistrust and anxiety

The heated exchange of words between China, the US and Japan at the Annual Shangri-La Dialogue, the premiere regional defence forum that was held at the end of May, is likely to prove far more than rhetoric and reflects a growing anxiety and mistrust between the world’s second and third biggest economies.

The catalyst has been China’s increasingly aggressive assertion of its territorial claims on the South China Sea that has not only increased frictions with its largest regional rival but also with a growing number of it’s other regional neighbours including Vietnam, Philippines, Malaysia and South Korea.

The flashpoints have been growing with reports on May 25 by Japan’s defence ministry that Chinese SU-27 fighters had come within 50m of a Japanese OP-3C surveillance plane close to the disputed Senkaku/Diaoyu Islands. Also last month, a Vietnamese fishing boat sank after it collided with a Chinese vessel near a controversial oil rig in the South China Sea and Vietnam has protested against China moving its oil rig to waters also claimed by Hanoi, at a spot near the disputed Paracel Islands.

A spokesman for China’s foreign ministry addressed a recent attempt by Vietnam to list its historical claims to the Paracel Islands, saying it was “absurd and laughable.” As a result of these tensions, there has been a number of attacks within Vietnam on Chinese factories as anti-China sentiment within the Vietnamese population ratchets up to the extent that the head of the Chinese police force formally asked his Vietnamese counterparty to ensure the safety of Chinese nationals there. It was also reported that more than 600 people thought to be Chinese nationals fled into Cambodia in fear of their safety. Meanwhile, the Philippines is in the process of taking China to a UN court over its territorial claims in the South China Sea.

In surprisingly forthright language at the Forum, US Defence Secretary Chuck Hagel stated that the US “would not look the other way when the fundamental principles of the international order are being threatened.” He went on to say that China was underlining its claims that the South China Sea was a “sea of peace, friendship and cooperation” by using coercive tactics.

Japanese Prime Minister Shinzo Abe also stated in keynote address at the forum that Japan would play “a more proactive role than it has until now in making peace in Asia and the world … Japan will offer its utmost support for the efforts of the countries of Asean [Association of Southeast Asian Nations] as they work to ensure the security of the seas and the skies.”

The Chinese response was also surprisingly direct with Deputy Chief of the Chinese General Staff General Wan Guanzhong, stating at the Shangri-La Forum that “The speeches by Mr Abe and Mr Hagel gave me the impression that they coordinated with each other, they supported each other, they encouraged each other and they took the advantage of speaking first . . . and staged provocative actions and challenges against China.” Chinese Vice-Foreign Minister Fu Ying, who was also at the summit, said Mr Abe was “trying to amend the security policy of Japan” in a move that was “worrying for the region.”

However, international pressure on China has not abated and at their June 3 meeting, G7 leaders stated in a joint communiqué: “We are deeply concerned by tensions in the East and South China Sea. We oppose any unilateral attempt by any party to assert its territorial or maritime claims through the use of intimidation, coercion or force.”

Another dimension that cannot be dismissed, is the sensitive issue of the potential nuclear re-arming of Japan. It has been reported that Japan is planning to start a $21bn nuclear reprocessing plant, triggering concern in China that the facility’s output could be diverted for use in an atomic bomb. The Chinese foreign ministry stated back in March that “Japan has stockpiled large volumes of sensitive nuclear materials, including not only plutonium but also uranium, and that’s far exceeding its normal needs.”

US Secretary of State John Kerry said at a March 13 senate subcommittee hearing: “We are working with Japan and the Republic of Korea in order to make sure they don’t feel so threatened that they move towards nuclearisation in self-help.” This was a topic that was addressed at last month’s Nuclear Security Summit in the Hague, Netherlands, that both PM Abe and Chinese President Xi Jinping attended.

The key questions are whether this escalation in hostility is temporary and will abate, and what are the geo-political and economic implications? On the former question, even if there is a near-term calming in the war of words, the underlying forces that are fuelling disagreements in the region are unlikely to diminish in significance for the foreseeable future.

These range from the most obvious economic importance of territorial claims on the potentially oil/commodity rich South China Sea, to historical animosities arising from a China that has suffered oppression at the hands of the Japanese from more than century back.

Then there is the geopolitical re-alignment and reality of moving from the unipolar world dominated by the United States of the last 25 years since the fall of the Berlin Wall to one where by 2015, China will be the world’s largest economy in PPP albeit still lagging behind the US in military expenditure and power by a wide margin. There is also the emergence of Asia’s two other would-be regional superpowers, Japan and India, that the US has to contend with.

But one might argue that an additional factor driving tensions in the region, is a tacit reliance on renewed nationalist fervour in China and Japan to mitigate and support both political transition and domestic economic challenges. In the case of China, the balancing once again of the economy away from an investment/export driven model to one with higher consumption will likely necessitate an acceptance of much lower growth of around 6% than the country has been used to over the past three decades.

This economic slowdown may risk undermining the legitimacy of the communist regime, especially sensitive with the transition to the new decade long Politburo leadership under President Xi Jinping. Similarly in Japan, nationalism, in addition to furthering PM Abe’s goal of strengthening Japanese Defence Force, may also mitigate some of the difficult structural reforms that will be necessary if Abenomics is to work in moving Japan out of a two decade depression and back to more acceptable trend in growth levels.

Coming back to the global geopolitical re-alignment, one might also argue that the US ineffectiveness in preventing Russia’s annexation of Crimea has renewed the Obama Administration’s commitment to preempt similar Chinese moves in the South China Sea by more aggressively re-iterating it’s strategic commitment to Japan’s security umbrella. A move to a new and more comprehensive China-Russia strategic alliance is by no means certain, given historical suspicions and Russian President Putin’s wariness of an economy four times that of Russia.

Nonetheless in his recent visit to Beijing, President Putin signed a $400bn 30 year gas supply agreement with China. China and Russia conducted joint naval drills. Furthermore, China and Russia have announced that they will deepen cooperation under the Conference on Interaction and Confidence Building in Asia (CICA), a new security organisation that excludes the US and Japan. Finally the two countries agreed to establish their own joint credit rating agency.

Another important question is potential implications of the landslide victory by newly elected Indian PM Narendra Modi. A thought provoking article, “Will economic empathy shared by Narendra Modi and Shinzo Abe enable Japan to play key role in India’s growth?” was published on June 1 in India’s influential “Economic Times.” The article noted: “It is the hottest cross-border bromance India has seen in a long time.

Newly elected Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe have been buddies for close to a decade now … The Modi-Abe equation is expected to have deeper and wider ramifications for India’s international relations. Japan is likely to be the centrepiece of Modi’s ‘look east’ policy. Defence and diplomatic ties between the two countries will get substantially scaled up.

And in sync with Modi’s thrust on economic diplomacy, bilateral economic and trade ties will get the biggest boost.” So a Japan-India economic and security alliance could supplement the long-term strategic link with the US in attempting to neutralise Chinese expansionism in the South China Sea.

The economic implications for China, Japan, India and other countries in the region are likely to be profound and challenging given the massive FDI into China seen by Japanese and Korean companies, as Chinese factories became the engine room for global manufacturing and supply chains.

As I suggested in a previous article (“Senkaku – Accelerating the China Relocation Trade,” FT, Dec 9, 2013) suggested geopolitical tensions would have an increasing influence on Japan’s economic diplomacy. I stated that “… it is becoming more apparent that political risk mitigation in the face of resurgent Chinese regional and territorial ambitions and aggressiveness will reinforce the macroeconomic justification for diversifying away from China.

Countries such as Indonesia, Vietnam, Bangladesh, Cambodia and Sri Lanka are likely to see a more focused and aggressive push from corporate Japan to step up FDI in 2014. Indeed the intersection of geopolitics and China balancing once again, is likely to be the dominant macro catalyst and opportunity for such countries for the coming decade.”

Japan’s greater activism in economic diplomacy as a result of China tensions, was amply illustrated by the recently concluded state visit by the Prime Minister Sheikh Hasina to Japan in May. The agreement by Japan PM Shinzo Abe, to commit Y600bn ($5.9bn) in economic assistance to Bangladesh over the next four to five years has the potential to catalyse growth in both countries. The joint communiqué has emphasised that the funds, mainly in low cost loans, will be used to build infrastructure projects in Bangladesh. PM Abe stated: “Bangladesh has great economic potential. In order to realise its potential and expedite further growth, Japan has come up with the concept of the Bay of Bengal industrial growth belt,” what PM Abe termed “The BIG-B.” The Japanese initiative sought to build on the recently announced BIMSTEC agreement for developing economic corridors via Bangladesh and Myanmar to link China, India and Japan. And in an important political sign of support, Bangladesh’s PM Hasina reaffirmed Bangladesh’s support for Japan’s aspiration to become a permanent member of the United Nations Security Council.

More than a year ago, Sheila A Smith of the Center for Foreign Relations, wrote an insightful report, “A Sino-Japanese clash in the East China Sea” (Contingency Planning Memorandum No 18, CFR, April, 2013). She noted: “Political miscalculation in Tokyo or Beijing, or unintended military interactions in and around the disputed islands, could escalate further, leading to an armed clash between Asia’s two largest powers …

Given current circumstances in the East China Sea, three contingencies are conceivable: first, an accidental or unintended incident in and around the disputed islands could trigger a military escalation of the crisis; second, either country could make a serious political miscalculation in an effort to demonstrate sovereign control; and third, either country could attempt to forcibly control the islands.”

She went on to note: “China’s dispute with the Philippines over the Scarborough Reef in the South China Sea has set a particularly dangerous precedent. Many leaders in the Asia-Pacific region are beginning to see China’s maritime behaviour as unpredictable and will be watching to see if Washington ultimately resists or accommodates Chinese military pressure on its periphery. The Japanese case will be decisive not only for Japan’s future choices but for many other allies and friends in the region adjusting to the rise of China.”

In conclusion, China-Japan tensions over Chinese territorial claims over the South China Sea are unlikely to dissipate for the foreseeable future. This is already triggering a broader geo-political alignment in the region with the US attempting to bolster its long-term regional ally, Japan. The economic implications will be significant and offer new opportunities for a broader range of countries in Asia as well as accelerating the relocation of factories from China to lower cost nations.

But the risks of an escalation in the conflict is also very much there and both the Chinese and Japanese governments need to remain ever-vigilant that armed confrontation does not emerge with disastrous consequences.

Source: Dhaka Tribune

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