Economic and Trade Relations of China and Japan

China contains more than 5,000 years of history. This remarkably long past earns china the title of the oldest civilization in the world. The country possesses the largest population of 1.344 billion and a Gross Domestic Product (GDP) of $7.318 trillion in U.S. dollars ("World bank, china," 2011). Although China has an extremely high GDP, the extremely large population is a problem since they cannot provide enough resources for the entire population. This makes it imperative for China to trade and have relations with the world around them and participate in the global economy. That being said, with there incredibly dense population, they have a labor force of 795.5 million which allow them to be very large competition for the rest of the world. Since the 1970s, China has evolved from a closed, central system to a market-orientated system that makes China the world's largest exporter. This was accomplished by the gradual liberalization of prices, fiscal decentralization, creation of a diversified banking system, the growth of stock markets, the opening to foreign trade and investment, rapid growth of private sectors, and the decrease in collective agriculture ("Index mundi: China," 2012). In the more recent years, China has once again brought back their support for state-owned enterprises (SOE) for the purposes of economic security. The restructuring of the economy and resulting in efficiency gains have brought China to be the second largest economy in the world right behind the U.S. when it surpassed Japan in 2001. The Economic challenges that China faces include; reducing its high domestic savings rate and low domestic demand, reducing corruption and economic crimes, containing its pollution, raising standards of living, and sustaining jobs for their massive population. The government is also looking for alternative energy, focusing on nuclear energy development and other means. In March 1012, China adopted its 12th five-year plan, which focuses on the continuance of economic reforms and increasing domestic consumption to make the country's economy less dependent on exports in the future. Unfortunately, China is going to have a difficult time making that shift. Japan, in the Years after World War II, has maintained government-industry cooperation, mastery of high technology, and strong work ethic which enables them to be a highly technologically advanced economy. This was remarkable when taking into consideration that Japan was left in disastrous condition at the conclusion of World War II. The fascinating thing is that in the post-war economy, there were highly interlocking structures of manufacturing, suppliers, and distributers. The Japanese knew this as Keirstsu. On top of this, they even has a guarantee of lifetime employment for a large portion of their population. Unfortunately, this is now falling out dues to the pressures of global competition.As of 2012, Japan possesses a population of a little over 1.27 million on 377.8 kilometers of islands and its labor force has about 65.93 million people. They have a tiny agriculture sector that produces some of the highest crop yields in the world. Japan still has one of the highest fishing fleets and makes up about 15% of the clonal catch ("Index mundi: Japan," 2012). In the past few decades, Japan economy has been slowing down, in which was mentioned earlier, China supposing them in 2001, and India supposing them in 2011. Now Japan is the 4th largest economy in the world. Business investment and global demand for Japanese exports shortened and put Japan deeper into recession. They were able to recover until 2011, when an earthquake stopped manufacturing and created a tsunami. The damages, from the natural disaster ranged from $235 - 310 billion U.S. dollars. To help Japan recover, Japan has been discussing the move to open up Agricultural and service sectors to greater foreign competition. Moreover, they are planning to boost exports again through the U.S.- led Trans-Pacific Partnership Trade talks and by pursuing free-trade agreements (FTA) with the EU and others including China. Sadly, Japan has a government debt that is fare greater than its GDP. Japan and China are separated by the East China Sea, but they are historically connected and have had a an extremely complicated relationship. They have had a long history together since the ancient times. China has influenced Japan's Language (Kanji), Buddhism, pottery, architecture, and philosophy. The way that most people would describe their relationship is one that is "economically hot and politically cold." The perceptions of each other go as follows: For Japans's perception of China, they view them as culturally close. The Japanese people seem to have a sense of guilt for occupation and war time in China. China seems to hold that grudge very tightly. Japan has a slight fear of China as an aggressor over territorial disputes. China is also a competitor for resources, and Japan recognizes it. Japan has a sense of superiority over China. And China is viewed as an export market and the entered world aggress with them on that note. On the other side, China has a few perceptions of their own of Japan. They view them as geographically close. They believe that Japan has culturally benefited from them. They remember that Japan invaded China and took control of Taiwan. China still holds a grudge over this bad memory. China recognizes that Japan is allied with the U.S. in containing China, and that Japan is a source of Western ideas, development, economic aid, investment, and technology. In many ways, China and Japan, fear each other, and recognize the need to respect each other to flourish in the world today (Kee, 2005). The progress of a free trade agreement has been evolving for quite some time but looks like it may be some time for Japan and China. The trans-Pacific Partnership (TTP) is a multilateral free trade agreement which hopes to liberalize the economies of the Asia Pacific region.These countries included Brunei, Chile, New Zealand and Singapore on May 28, 2006, and in 2008; Australia, Malaysia, Peru, the United States, and Vietnam began negotiations to join the group. On November 2012, The TTP partner countries announced the outlines of the expanded version. It claims to promote innovation, enhance economic growth and development, and support the creation and retention of jobs in the nine Asia-pacific countries (Guoyou & Jin , 2012). The negotiations with Japan and China are still underway, but Japan seems very interested in joining. China has been actively pushing for its own FTA. They have trying to meet with Japan, and South Korea for trilateral FTA talks. Recent developments in May of 2012 have demonstrated once again that domestic affairs appear to carry more weight for the three national leaders than regional economic projects. On May 13, 2012, Chinese Premier Wen Jiabao met with the South Korean President Lee Myung-Bak and Japanese Prime Minister Yoshihiko Noda in Beijing for the annual China-Japn-Korea Trilateral Summit talks. The sad part was after summit when the Chinese president refused to meet Prime Minister Noda with no explanation. Speculators suggested that this was over territorial disputes. From China's perspective, the TTP is the U.S.'s initiative to return to Asia. This poses as challenge to China both economically and geopolitically. Despite this, China is still considering joining the TTP itself. Japan sees China's civilization as a shared East Asian Heritage whereas China views itself as the root of many Japanese cultures and practices. They have a number of problems that make up the conficts and tensions between the two nations. The issues between the two include war related issues such as apologies, compensation, Chinese forced labor, left over poison gas, and the Yasukuni Shrine. They also maintain a high energy competition over oil fields and Russian gas. In more recent matters, their is a dispute over territory. This pertains to the group of islands, know as the Senkaku islands in Japan, and the Diaoyu islands in China. The islands are by a count of 8 bodies of land, make up an area of about 7 square kilometers, and are located east of mainland china and southwest of Okinawa. According to the BBC, these islands matter very much because they are close to strategically close shipping lanes, offer rich fishing grounds, and are believed to contain oil deposits("Bbc news asia:," 2013). These islands are controlled by Japan. Each Country makes a case of why they think that these islands should belong to them. Japan claims that it surveyed the islands for 10 years and came to the conclusion it was uninhabited. Having that said, on January 14, 1895, they formally incorporated the islands into Japanese territory. After World War II Japan let go of a number of territories and islands including Taiwan under the Treaty of San Francisco in 1951. Under this treaty, the islands came under U.S. trusteeship and were returned to Japan in 1971, under the Okinawa Reversion Deal. Japan says that China made no objections until there was an issue of oil resources in the 1970s. Now China and Taiwan are pressing their claims. On the other side, China claims that these islands has belonged to them since accent times. One would wonder why no issue was brought up before when the Japanese were surveying the islands. When the treaty of San Francisco was being enacted and Taiwan was being returned, China says the islands should also been returned. Unfortunately, the leader Chiang Kai-Shek did not raise the issue because he depended on the U.S. for support. These claims have lead to a number of incidents. In 1996, Japan established a lighthouse on one of the islands. Chinese activist have sailed repeatedly to the islands and in one incident one of them jumped off the boat and drowned. In 2004, Japan arrested seven Chinese activist who landed on the main island. there has been a number of mini face-offs between Japanese patrol and Chinese and Taiwan Fishing boats. In 2005, 50 Taiwanese fishing vessels staged a protest in the area because of Japanese Patrol boats. In September 2010, Japan seized a Chinese trawler that collided with two coast guard boats close to the islands, sparking a serious diplomatic fight. Anti-Japanese protests have been held in several cities in China. After the History of these incidents Japan and China are sliding towards war, unless this dispute can be settled civilly. Over the course of history, China and Japan have lived in very close quarters they have been near each other not only geographically, but in lifestyles, belief systems, and culture. But just like two brothers may share the same mother and be family, it does not mean they will not disagree and fight with each other from time to time. As of recent news, China and Japan are having a difficult time settling the dispute between the Senkaku/Diaoyu islands. As a result of the Okinawa Reversion Deal, the U.S. has recognized the islands as Japanese Territory and China is infuriated by this and preparing troops ("The economist: The," 2013). If war is to happen then trade relations will have large strains on themselves as well as the rest of the world. We need to hope for the best and prepare for the worst.