'One Belt One Road' could be key to new, improved Japan-China ties

XIAN/BEIJING/BANGKOK -- "This is the first case where Japan has cooperated with China to develop a high-speed railway network," declared Thai Deputy Prime Minister Somkid Jatusripitak this May during talks with then Japan Bank for International Cooperation (JIBC) Deputy Gov. Tadashi Maeda.

The deputy prime minister was expressing his expectations about a venture to connect three of Thailand's airports, jointly planned by Japan and China, by high-speed rail. A JIBC official asserted that the purpose of the meeting was simply a courtesy call and that "the plans for the Thai high-speed railway product are still not laid out concretely." However, the possibility that the Japanese and Chinese governments, which often stand in opposition to one another, are reversing their stance and working together on a project quickly garnered interest across the countries of Southeast Asia.

Directly following the statement, Chinese Premier Li Keqiang made a visit to Japan to speak directly with Prime Minister Shinzo Abe. During the meeting, they agreed to form a new public and private sector committee to discuss cooperation in the private economy of third-party countries. A forum held by political and business figures of the two nations is also planned to be held in Beijing on the sidelines of Prime Minister Abe's visit to China on Oct. 23 for the 40th anniversary of the Treaty of Peace and Friendship between Japan and China.

What led China to the development of an agreement with Japan about projects in other countries were setbacks faced by Chinese President Xi Jinping's economic policy to create a modern Silk Road: the "One Belt One Road" initiative. What began as a loose economic sphere imagined connecting China, Europe and the rest of Asia, has now expanded to include Africa and South America. New plans such as a "Silk Road on ice," including the North Pole, are also regularly mentioned in talks.

In order to win over the favor of the countries along these Silk Road routes, China is approaching the governments with proposals for infrastructure projects such as high-speed trains or harbors. However, countries with low capability to repay the funds for such ventures run the risk of defaulting on their debt. The U.S. International Development Center think tank warned that eight countries, including Laos and Pakistan, are shouldering excessive debt to China.

Concerns have already been raised about China's high-speed railway plans in Indonesia and Malaysia, which aim to procure development funds through real estate projects along the rail line, and delays have been numerous. The local operator of Hambantota port in southern Sri Lanka, which was built with support from China, has run into financial difficulties, and its operation rights have been taken over by a Chinese operator.

--- Japan expected to be savior of troubled One Belt One Road projects

Joining hands with Japan, which has previously led the way building infrastructure networks in developing Asian nations, is now envisaged as the beginning of a new trajectory for the strained One Belt One Road initiative.

For Japan as well, teaming up with China comes with considerable merit. The Asia Development Bank estimates that the demand for funds for infrastructure projects in Asia from 2016 to 2030 will be around 2.6 billion dollars, or roughly 300 billion yen. For years, China and Japan have competed to win such projects, and in many cases, the two countries ended up in a price reduction battle. But with Japan and China joining forces and dividing roles, it will mean that projects will be easier to acquire and the risk of price reduction can be avoided.

On the other hand, however, rapidly closing the space between China and Japan runs the risk of angering the U.S. administration under President Donald Trump.

Near Yangon, Myanmar's largest city, lies the Thilawa Special Economic Zone (SEZ), established three years ago and led by Japan. On Sept. 27, the SEZ received a joint visit by the U.S. and Japanese ambassadors in Myanmar. According to an individual familiar with the situation, the U.S. approached Japan with the offer for the inspection tour together.

Myanmar has faced harsh criticism from the U.S. and European countries over its treatment of its Muslim minority Rohingya people in the Rakhine State in the western part of the country. The Rakhine State is one of the focuses of the One Belt One Road initiative, and it also contains the Kyaukpyu Special Economic Zone, which is tied to the Chinese program. If the U.S. and Europe continue to distance themselves from the country due to the Rohingya issue, Myanmar could lean further toward China.

After the joint tour of the Thilawa SEZ, U.S. ambassador to Myanmar Scot Marciel urged the country to maintain wide-ranged relationships with the U.S., Japan, India and China. His Japanese counterpart Ichiro Maruyama said, "Support and investments that consider the economic development of Myanmar are needed." If One Belt One Road offers that kind of support, "then I have no objections and will cooperate," he continued, hinting at consideration for both Washington and Beijing.

Preceding government efforts, improvement in Chinese-Japanese relations in the private sector are already progressing. Japanese companies have more than 30,000 subsidies, branches and other footholds in China, by far outnumbering the U.S. in second place with roughly 8,600 businesses in China. According to China's Ministry of Commerce, direct investments by Japan rose last year over the figure from the previous year for the first time since the fallout in 2012, when diplomatic relations soured over Japan's nationalization of the Senkaku Islands in the East China Sea that China also claims.

Japan Business Federation (Keidanren) Chairman Hiroaki Nakanishi, who visited China in September, pointed out, "Political relations are beginning to thaw, and we have entered the next phase economically as well." He emphasized that the situation is "not about taking sides."

--- Strategic friendliness toward Japan not new for China

When Deng Xiaping, the top leader of China in the 1980s, visited Japan in October 1978, he rode the shinkansen bullet train on his way to Kansai in western Japan. When asked about his thoughts on the high-speed rail, he said, "It's incredibly fast. I feel as though we are running while being chased." Deng's visit is considered to be one of the factors that led to China's political policies reforming and opening up the country to the world and beginning its modernization.

In a Nov. 28, 2008 article in the Chinese Community Party's newspaper the People's Daily, upon visiting a Japanese automobile manufacturing plant, Deng says that he "understood what modernization is," and observed Japan's modernized factories. It is written that it was then that he began planning China's move toward a similar goal.

During his visit to Japan, Deng exchanged documents ratifying the Treaty of Peace and Friendship between Japan and China and put the accord into effect. At the time, while China and the Soviet Union were both socialist countries, they had started to show differences in course, and the treaty with Japan incorporated what can be perceived as anti-Soviet reference of "anti-hegemony."

Some 40 years ago, China strategically formed a bond with Japan to push back against the Soviet Union, and used that connection to modernize the country with Japanese technology. Now, as China navigates a trade war with the United States, it is searching for ways to develop its relationship with Japan.

It is possible that the One Belt One Road initiative will promote big changes in the relationship between Beijing and Tokyo, and attract other countries on the modern Silk Road along the way.

(Japanese original by Joji Uramatsu and Kiyohiro Akama, China General Bureau, and Shinichi Nishiwaki, Asia General Bureau)