Economic relations are the silver lining

China Daily | Updated: 2012-07-03 07:59

Editor's note: From conflicts over the Diaoyu Islands to the dispute over China's rare earths exports policy, China-Japan relations are dipping to a new low. In an annual survey on these relations released in June, 80 percent of the interviewees - a record high - believed that the bilateral relations are "not good".

But don't be too pessimistic. When we look at the outlook for the China-Japan economic and trade relations, things are much positive. At the two-day eighth Beijing-Tokyo Forum, which began on Monday, almost all the participants from the two countries, including the current and former government officials and corporate managers, reached a consensus that China and Japan need to join hands, especially at a time when the European debt crisis is deepening, and that the opportunities for future cooperation is immense.

China Daily talked to some of them about why and how the two Asian economies could cooperate in the future, the following is the list of questions and their answers.

What is the significance of strengthening the economic and trade cooperation between China and Japan amid the European debt crisis?

How can the China-Japan-South Korea FTA mechanism improve the economic and trade cooperation in the region?

What measures can be taken by the two countries' governments to facilitate the economic and trade cooperation, especially to boost the growth of small and medium-sized enterprises?

Sun Zhenyu

Former chinese ambassador to wto and chairman with the China Society for World Trade Organization Studies

China and Japan are both important trade partners for the European Union, and the two neighbors face the same challenges when the eurozone suffers poor economic growth.

We two countries have a responsibility to help the EU out of the debt crisis, which needs us to work together and seek efficient methods to solve the problems.

It is in the interest of both China and Japan to reduce the risks from the European crisis by improving bilateral trade relations and preventing trade protectionism.

Increasing the bailout fund for the EU through the IMF framework is one of the most significant ways. Japan promised to inject $60 billion into the pool and China agreed to add $43 billion - a good example of the cooperation between the two countries.

Now, the economic integration of China, Japan and South Korea is seeing unprecedented good opportunities, and this requires these three economies to further open up markets and facilitate trade cooperation.

It is time to accelerate the negotiation of a free trade area among the three countries, because their total GDP reached 19.6 percent of the global economy and the exports were 18.5 percent of the world's total in 2010.

The China-Japan free trade area can add about $46.7 billion to Japan's exports annually, and it lifts Japan's GDP by 0.66 percent. The FTA mechanism is a supplement to the multilateral trading system, not a replacement.

China is expected to continually open the capital market and promote the internationalization of renminbi, which can support the direct investment and industrial cooperation between the two countries.

China can learn from the fiscal policies of the Japanese government, to structurally reform tax policies and support the development of small and medium-sized companies, especially in the high-tech, energy conservation and environmental protection sectors.

Akira Kojima

Member of Board of Trustees of the National Graduate Institute for Policy Studies

Although the debt crisis is confined to Europe, the global economic system has changed. So the Asian economy must modify the economic growth model, instead of depending on the United States and Europe.

Asian economies, including China and Japan, must cooperate with each other to expand the Asian market.

The two nations could develop cooperation in a wide range of sectors, infrastructure in particular. They could jointly develop harbors and airports across Asia, and by doing that, they could expand the network in Asia and in doing so grow the Asian economy.

We all know that the three nations of China, Japan and South Korea are discussing a trilateral free trade agreement. An FTA is necessary and a steppingstone to expanding the Asian market.

We know that many European nations had expanding debt and the bubble burst. So the debt crisis broke out, and the banking system is suffering.

The Asia-Pacific region has money, and the money is here, so we can use the money at hand, instead of borrowing from the non-Asian banks.

China and Japan need to conduct more exchanges in the capital and bond markets. The two governments have taken steps toward that, but more measures are needed.

Wei Jiafu

Chairman of the board of China Ocean Shipping (Group) Company

It is the time for China and Japan to tackle the crisis together, as every participant in economic globalization cannot avoid the shocks from the indebted eurozone, even in the Asian region that saw the world's fastest economic growth in the past few years.

Our two countries have different competitive power in exported products, which can satisfy market demand in Asia if we achieve the regional economic integration with developing the trade relationship.

The launch of China-Japan-South Korea FTA is a significant opportunity to exert the huge market potential in Asia with such a large population. It is expected that economic growth, supported by the free trade mechanism, may maintain a higher rate than the world's average level.

This requires that we further develop the trade market by stimulating domestic consumption, aiming to achieve economic balance in the region and sustainable development.

More specifically, accelerating harbor integration based on cooperative constructions in East Asia can improve the efficiency and reduce costs of multilateral trade in the area.

China and Japan have common goals and interests in the area of "green economy", which is expected to be the new industrial growth hot spot in the coming years.

The two neighbors need to build the information-sharing mechanism and work together to establish the international standards in this industry, because that is likely to be the new engine of the economic growth in East Asia.

As China is further opening up the capital market, more private funds owned by the small business will participate in the cross-border investments and help strengthen the financial cooperation between the two countries.

Toshiro Mutoh

Chairman of Daiwa Institute of Research and former vice-president of the Bank of Japan

This downside risk aroused by the European crisis is challenging its trade with both China and Japan, and we two countries should work together to save the EU, for example by raising bailout money through the International Monetary Fund.

The eurozone crisis provides more room for cooperation between China and Japan. We can expect more policies between the two governments to improve economic and trade cooperation, because thus will benefit both countries.

I agree with China about the cooperation of the FTA. At the same time, we have the agenda to join the Trans-Pacific Partnership. China may think that the FTA is enough for the time being, but Japan also has interest to trade with countries such as Australia and the United States.

I don't think the two mechanisms - FTA and TPP - contradict each other. And the negotiation of the FTA will be accelerated, because we will solve the disputes together.

We have truly realized the importance of direct transaction between renminbi and the Japanese yen since last month, and we are trying to promote the bond market in the Chinese currency. Besides, there are other cooperation agendas in the financial sector to strengthen the cooperation between the two countries, such as the Chiang Mai Initiative, a multilateral currency swap arrangement among the 10 members of the Association of Southeast Asian Nations, China, Japan, and South Korea.

There will be more exchanges of opinion between Japan and China to promote small and medium-sized businesses, such as for the improvement of the supply chain system, or financial institutions assisting them. In addition, to bring about and share merger and acquisitions experiences can promote their operations.

Wang Yiming

Vice-president of the Academy of Macroeconomic Research of the National Development and Reform Commission

The continued fermentation of the European debt crisis and the uncertainty of the US economic recovery have seriously affected China and Japan's exports because the two largest Asian economies greatly rely on the outside markets and resources.

The growth rate of China's whole-year exports is likely to decrease by 10 percentage points from a year earlier, which may drag down the GDP by about 1 percentage point.

The situation requires the two neighbors to bolster their economic and trade relations to reduce the impact of the international financial turbulence, as well as the price fluctuations of crude oil and minerals, amid the broadened European depression.

The economic and trade cooperation between China and Japan continued to develop although the global financial crisis cooled the regional growth in Asia. The trade value between the two countries has been growing on average by 10 percent annually during the past five years.

As a Japanese media source said earlier, the recovery of the Japanese economy depends to some extent on the growth of exports to China. The domestic demand expansion policies of China, as well as the accelerated investment into the country's central and western regions, can provide commercial opportunities for Japan.

The broader China-Japan economic and trade relationships can increase market demand in East Asia and then boost global business amid the lackluster environment.

The China-Japan-South Korea FTA will be the world's third-largest trade center after the EU and North American free trade areas, which can help to stabilize political relations between the three countries.

China and Japan can jointly invest in European infrastructure construction projects and emerging industry, combining Japan's mature overseas investment experience and Chinese companies' "go out" strategy with large capital, which can also facilitate the expansion of small-scale business in both countries.

Direct investment in the eurozone is a better choice to help the debt-stricken countries recover than investing in the sovereign bonds under the European Financial Stability Facility framework.

As Japan has developed technology in strategic emerging industries and China has the aim of developing those sectors, such as the new-energy industry, there is broad room for cooperation between the two neighbors.

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