Sino-Japanese trade volume is expected to continue growing in 2004 thanks to increasing economic interdependence, said a senior official at the Japanese Embassy in Beijing.

And China's rising imports from Japan have been a major player in Japan's economic recovery process, experts have suggested.

"The trade between Japan and China has expanded 100-fold in its value since the normalization of diplomatic relations in 1972... This growing trend will accelerate in the years to come," Chihiro Atsumi, economic affairs attache at the Japanese Embassy to China, told China Daily.

China and Japan have forged close economic relations over the past decades. This strong economic interdependence and complimentarity will further buoy bilateral trade, he said.

Jiang Ruiping, an expert on Japanese studies from the Beijing Foreign Affairs College, also predicted bright bilateral trade prospects for 2004.

His prediction is mostly based on signs of a recovering Japanese economy.

"Japan is likely to shrug off long-term economic stagnation as the country has quickened its economic recovery since 2002. This puts a very important dynamic on the growth of bilateral trade," Jiang said.

He also said China's further opening after accession to the World Trade Organization (WTO) will lure more Japanese investments and encourage Japanese enterprises to export more to China.

According to China General Administration of Customs figures, the two countries notched up a trade volume of US$133.6 billion in 2003, up around 31 per cent on the previous year, and Japan remains the biggest trading partner with China.

Atsumi partly attributed the sharp trade growth to China's rising significance in the global economy as a production base and a major market.

"China's accession to the WTO and further economic reforms in recent years have accelerated bilateral trade and mutual investment," he said.

According to the attache, China "has made efforts to implement its commitments and a number of positive developments have occurred."

Meanwhile, he also wants China to take further steps on tariff reduction for film, intellectual property rights protection and opening up of trade and distribution sectors.

Despite the optimism of overall trade prospects for 2004, Jiang cautioned that a trade imbalance might increase between the two countries.

Chinese official figures show that China's trade deficit with Japan stood at US$ 13.4 billion in November 2003.

Atsumi said this is because the two countries have adopted different statistical methods.

But "one thing is clear," Jiang said, "bilateral trade is going favorably towards Japan's trade surplus over China."

According to Japanese statistics, he explained, "from January to November in 2003, its exports to China rose at a brisk pace of 42.8 per cent on a yearly basis, while its imports from China increased only 21.3 per cent."

China's growing imports from Japan have played a decisive role in Japan's recent economic recovery, said Jiang.

Strong demand from China is helping soak up excess Japanese capacity in steel, paper, glass, cement, electronics, machine parts and other industries feeding China's investment and construction boom. Service industries in Japan, especially shipping, are also benefiting, as demand from China squeezes capacity and restores pricing power.

"China has been the source of (Japan's) export growth and exports have been the source of demand growth," Financial Times quoted Richard Jerram, economist at ING as saying. "As a result, capacity utilization in some industries has spiked higher."

Yukon Huang, the World Bank's country director and chief of mission in China, noted that Japan can benefit a lot from a growing China.

Huang recalls that there was concern in Japan several years ago that fast growth in China might have a negative impact on Japan.

But what is happening now is that the demand for imports for intermediary products and high quality equipment from China is increasing at a much faster pace than China's exports to Japan.

Such a development proves that concerns about a growing Chinese economy being a threat to Japan are "groundless," Huang said.

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