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Editorial: Mutual dependence key to stability between Japan, China

Although Japan made rapid economic expansions during the postwar period, China has come from behind and overtaken its neighbor, reaching the stage where it is fighting against the United States for global leadership. Tokyo is now lost in its search for a way to get along with Beijing. The 40 years following the signing of the Treaty on Peace and Friendship between Japan and China have brought tremendous changes to the bilateral relationship.

China's dramatic economic growth can be said to have started with this one remark: "We'll do all we can to help you." Those words came from Konosuke Matsushita, the founder of Matsushita Electric Industrial Co., now Panasonic, on Oct. 28, 1978. On that day, Chinese deputy premier Deng Xiaoping was visiting the company's television production lines in Osaka following his attendance at a ceremony to exchange ratification documents of the peace and friendship treaty.

Deng, who came to the western Japan city on a shinkansen bullet train, asked Matsushita to extend full support for the modernization of Chinese industries. Without hesitating, Matsushita replied with the above answer. Two months later, China announced a policy of reform and openness designed to promote a shift to a market economy.

As Matsushita launched the first joint venture with a Chinese state enterprise after the end of World War II in 1987, Japanese corporations started full-fledged entry into the market in China.

--- Senkaku Islands issue exposes weaknesses in bilateral ties

China has since absorbed Japanese technology, and Japan has compensated its lost price competitiveness due to a rapid appreciation of the yen with cheap labor in China. A mutual beneficial relationship has emerged.

Bilateral trade between Japan and China has ballooned, with China surpassing the United States as Japan's largest trading partner in the 2000s.

Such economic ties, however, proved weak in the face of confrontations between the two nations when massive anti-Japanese demonstrations occurred in many parts of China in 2012 after Japan nationalized the Senkaku Islands in the East China Sea, which Japan control but China claims.

The demonstrations hit local facilities of Panasonic, even though the company was supposed be a benefactor of China's modernization. As a result, corporate exchange and tourism have suffered. Mutual dependence based on increasing trade and investment was not enough to prevent such an outcome.

The bilateral relationship has since improved and so has economic exchange. Chinese tourists' spending in Japan is now an important pillar of the Japanese economy.

But the interaction between the Japanese and Chinese economies is neither balanced nor reciprocal.

For China, which has come to occupy a leading position in the world, Japan is just one of its important trading partners. For Japan, meanwhile, China's importance is to continue growing as a trading market and as a source of tourists who will make up for shrinking domestic consumption.

The lack of reciprocity is evident in direct investments by each other. According to Ministry of Finance data, Japanese direct investments in China stood at 1.1 trillion yen in 2017, while Chinese money flowing into Japan was only 10 percent of that figure. Considering the relative size of the Chinese economy, more entry into Japan is reasonable.

A promising sector can be tourism, which is likely to contribute to regional revitalization. Some Chinese investors are buying local Japanese inns and inviting Chinese tourists. Now efforts are needed to make this trend a lasting one.

--- Tackling common challenges

If those Chinese investors get involved in their local communities in Japan and establish a win-win relationship, they will be able to use their experience to improve the quality of tourism services in China and attract more Japanese tourists.

Tourism and real estate should not be the only areas of cooperation between Japan and China. We should strengthen our collaboration in the fields of new technology development and corporate management. Japanese companies should open their doors wider to foreign talents as the domestic youth population dwindles.

Indeed, strict enforcement of the rule of fairness is vital in areas such as the protection of intellectual property. Japan should cooperate with other advanced nations such as the U.S. and Europe to demand China act appropriately as a major economic power.

Mutual dependence can deepen between Japan and China through joint efforts to tackle common challenges. Promising targets of cooperation include environmental protection such as improving air and water quality and food safety, as well as the introduction of services and a regulatory framework for the aging of society, which is also expected to advance rapidly in China.

As for the "One Belt One Road" infrastructure investment initiative promoted by China as a national project, the government of Japan should remain behind the private sector and let companies make their own decisions. It is too risky for the state to get involved too far. Japanese corporations can accumulate experience on how to deal with the initiative as they cooperate with companies from third countries.

We cannot deny the possibility of bilateral relations between Japan and China turning sour on the political level. Therefore, a mechanism to halt a deterioration in the relationship between the two countries is critically important.

Japan and China should aim to strengthen the web of ties that benefits both countries, not just one.

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