Japan should not see China as its new rival

Ruan Wei, Author, 'Born in China', Norinchukin Research Institute Co., The Asahi Shimbun, Tokyo

In recent years, as the Chinese economy and external exchanges keep expanding, China is trying to break away from its conventional system in terms of foreign relations. An example is the agreement reached in November to conclude a free trade agreement (FTA) with the Association of Southeast Asian Nations (ASEAN) within the next 10 years.

In Japan, the agreement received wide coverage from the standpoint that struggle for leadership between Japan and China would intensify in Southeast Asia. At least from the Chinese vantage point, however, I don't think China signed the agreement eying Japan as a rival. On the contrary, China believes that only when Japan takes part in the framework can a full-scale Asian economic bloc be realized.

Since China broke up with the former Soviet Union in the 1960s, it has always remained reluctant to form alliances with other countries or surrounding areas or be part of multilateral cooperative organizations. In other words, it has always stood by the basic policy of "nonalignment."

However, in terms of the economy, China has kept an eye on other major economies, such as the United States and Japan, to not allow them to assume leadership in the region.

When Japan proposed the establishment of the Asian Monetary Fund (AMF) in November 1997, the U.S. immediately raised objections, while China neither supported nor opposed it.

When I asked a Beijing official the reason behind China's ambiguous attitude, the official replied: "Honestly speaking, we did not understand what AMF was at the time."

China was probably wary of Japan's economic initiative because it did not understand AMF's contents.

I think 1997 marked a turning point in China's policy. In 1998, for the first time, China expressed expectations for Japan to make a more positive contribution to stabilize Asian currencies. In 1999, it accepted Prime Minister Keizo Obuchi's proposal to hold a summit meeting of Japanese, Chinese and South Korean leaders at the ASEAN-plus-three meeting. The following year, it agreed to make it an annual event.

China surprised other countries by proposing to establish a working group to study the possibility for China to conclude an FTA with ASEAN.

ASEAN members agreed to the Chinese proposal, probably to save Beijing's face because they though the plan was unlikely to materialize.

A year later, however, based on the results of research of the working group and examples of other regions, China voluntarily proposed partial liberalization of its agricultural market and promised to provide preferential treatment to Indochinese countries that are lagging behind in development.

China's effort made ASEAN members realize that the proposed FTA would benefit all concerned countries and, as a result, they agreed to promote the establishment of FTA.

One factor behind China's inclination toward regionalism is its understanding that a stable external environment is indispensable for its domestic economic growth.

Witnessing the chain reaction of currency crises spreading around Asia, China realized that no single country can fight the hedge-fund offensive by itself. Beijing started to accept the new idea of "multilateral economic security."

It also learned that U.S. and European economies are advancing into other regional markets while at the same time building a solid foothold locally by forming regional economic blocs.

To cover the limitations of the World Trade Organization, more than 120 FTAs are already in place around the world. In fact, Japan, China and the Republic of Korea (South Korea) are about the only major countries that have yet to sign them.

Stability and advancement of the ASEAN economy also lead to increased Chinese exports. The conclusion of FTA helps secure an export market that is not easily affected by arbitrary trade policies and agrees with the current Chinese trade policy that aims at dispersing countries of export.

According to research conducted by the working group, the conclusion of FTA between China and ASEAN is expected to boost exports by 50 percent on both sides. It is also expected to raise the gross domestic products of ASEAN by 1 percent and China by 0.3 percent, respectively.

China also hopes to dispel the anxiety of its neighbors against the Chinese economy by promoting regionalism and encouraging other participants to jointly reap the benefits. Furthermore, in terms of diplomatic and military strategy, China hopes that forming a community with ASEAN would upset U.S. attempts to besiege China.

Actually, China's wooing of ASEAN also takes into consideration Japan in some ways. Instead of defeating Japan, China wants to engage it more positively. For the last three years, Chinese economist Hu Angang has been proposing the establishment of a Japan-China FTA. According to Hu, however, Japan has been negative about this proposal, partly because of its lack of confidence resulting from a slumping economy and also because of strong domestic resistance against liberalization of agricultural products.

Previously, China eyed Japan as a rival. But China has grown so confident in itself that it now wants Japan to be part of a regional economic bloc.

In January, Prime Minister Junichiro Koizumi toured ASEAN countries and proposed a framework of economic cooperation. ASEAN countries welcomed the proposal because it can serve as a balancer for China's economic offensive. But the Japanese media commented on it in comparison with the China-ASEAN FTA discussion. However, unlike a few years ago, most Chinese media organizations supported the idea of Japan-ASEAN cooperation.

With the participation of Japan, the formation of an East Asian economic bloc has become more realistic. Incidentally, FTA between mainland China, Hong Kong and Macau may materialize within two to three years at the earliest. Japan is urged to show a more positive stance to act together with China.