Rising tensions between Beijing, Tokyo
Dec 05 2013
Under the new leaders, both countries have embarked on new paths to stimulate and reform their economies. During the past 20 years, Japan had had lacklustre growth. With a bold new initiative called “Abenomics”, prime minister Abe intends to give new life to the Japanese economy. Up till now, his initiatives have been successful, growth has picked up strongly, the stock market is thriving and, in general, the mood amongst consumers as well as amongst industries is upbeat. Abe has taken bold steps on the monetary and currency fronts, namely reducing the external value of the Japanese yen substantially and providing thereby much relief to the export industry. However, in order for the rejuvenation of the Japanese economy to be sustainable, substantial structural reforms are needed; a task that Abe still has to undertake.
In China, it is not so much the slightly weaker economic growth, but its very nature that gives cause for concern. The new leadership has managed to keep a creditable growth momentum. However, for the dynamics of the Chinese economy to be sustainable and lasting, the country requires bold structural reforms. These must cover the financial sector, where a serious lack of transparency is cause for concern about its viability and stability. The reforms must also be bold by opening up the Chinese economy to substantially stronger market forces. This, of course, goes against the entrenched interests of the state-owned enterprises that are very powerful. Finally, Xi Jinping and his crew must come clear on the currency front. China claims to be a world power and boasts the world’s second biggest economy. Under these circumstances, the yuan reminbi has to become one of the world’s leading currencies. This again requires that the Chinese currency is fully convertible. While the first important steps in this direction have been taken, the decisive move has to be made.
Looking at the economies of both Japan and China, one would, therefore, think that these are times when both countries should focus on domestic issues. There are enough challenges to be mastered, and in the case of China, the success in modernising the economy is a precondition for future social and political stability. However, at present, both Tokyo and Beijing are ratcheting up national feelings and military as well as diplomatic tensions about a few uninhabited islands and rocks in the East China Sea. A few days ago, the Chinese unilaterally established a new air defence identification zone over vast swaths of the East China Sea. Beijing demands that flights through this zone be announced to the Chinese air surveillance and that in case of non-compliance, its air force will take appropriate defensive measures.
The US, Japan and South Korea have lodged strong protests against this unilateral move. Japanese and American military aircraft have flown through the zone without informing the Chinese. Washington has, however, advised civilian airlines to comply with the new Chinese rules, while Tokyo has issued no such recommendation. Chinese military aircraft are patrolling the zone at present. Up till now, no untoward incident has occurred, but the situation is prone to mistakes and overreaction. In the past, there have been skirmishes on the seas around the disputed islands that the Japanese call the Senkaku Islands and the Chinese Diaoyutai. The risks are considerable that there might be a grave incident in the air and that both sides react with force. The situation is all the more worrying since there exists no “hot line” between Beijing and Tokyo. In fact, ever since they took over power, Abe and Xi have been carefully avoiding meeting each other.
The world is watching the enormous economic success of the Chinese with great interest. Everybody is talking of an “Asian century”. Indeed, the shifts of economic power from the west to Asia, particularly to south-east and north-east Asia are evident. However, one should not forget that in the 21st century, it would not only be the economic miracles, but also the major conflicts that will take place in Asia. In the Far East, we have three hotspots, the Korean Peninsula, the Sino-Japanese conflict and Taiwan. Washington is aware that the Pacific will be the main theatre of rivalry between the two super powers of the 21st century, China and the US. In all this, it must be very worrying that, apart from bilateral treaties with the US, there exists no international security architecture in Asia. An escalation of the Sino-Japanese rivalry and even open warfare between the two neighbours would be disastrous for the whole world.
(The writer is the Far East correspondent of Swiss daily Neue Zurcher Zeitung)