Protests in China Against Japan Reflect Regional Power...

Protests in China Against Japan Reflect Regional Power Struggle

By SEBASTIAN MOFFETT in Tokyo and CHARLES HUTZLER in Beijing
April 20, 2005

Recent anti-Japanese demonstrations in China have reopened old wounds from their shared past, but the standoff is really about the future of the world's most dynamic economic area as it works through a long-term shift in the regional balance of power.

Tens of thousands of Chinese began demonstrating three weeks ago over Japan's approval of new history textbooks that Chinese say whitewash Japan's World War II aggression on the mainland. Tokyo's bid for permanent membership in the United Nations Security Council also fueled the protests.

Though the demonstrations have been mostly peaceful, several Japanese students have been beaten up. Some cars were overturned and windows in the Japanese Embassy in Beijing were smashed. China's foreign minister yesterday urged Chinese not to continue protesting, in the highest-level public appeal for restraint. But similar calls by police last week weren't heeded in Shanghai, site of the largest demonstration so far. And the protests have already touched off one of the worst crises since Japan and China restored diplomatic ties 33 years ago.

Efforts to patch up relations, including a visit to Beijing last weekend by the Japanese foreign minister, so far have failed. Diplomats are trying to arrange a meeting between Japanese Prime Minister Junichiro Koizumi and Chinese President Hu Jintao this weekend during the Asia-Africa conference in Jakarta, Indonesia. But yesterday Mr. Koizumi said that "if it's going to be the exchange of harsh words, it's better not to meet."

If economic relations, which have survived previous diplomatic spats, also sour, the regional repercussions could be serious. Beijing sees economic might as the wellspring of its superpower ambitions, and investment by Japanese corporations -- from car makers to department-store chains -- has been a crucial part of this. Japanese businesses employ a million Chinese -- a significant piece of the labor force in a country that worries unemployment could breed instability.

Beneath the recent quarrels lies a thinly veiled competition for regional dominance. With a gross domestic product nearly half the size of the U.S.'s, Japan is still the world's second-largest economy. Over the past decade or so, it has modernized its military and sent troops overseas for the first time since World War II. Recently, parliamentarians have been preparing a revision of the pacifist clauses in Japan's constitution to allow it to play a greater part in regional security operations.

Tokyo has the world's fourth-largest defense budget, at $42.5 billion in 2003. It trails only the U.S., China and France. Beijing has sharply increased military spending over the past 15 years. Its announced military budget of $30 billion for this year is believed to understate the true level of spending; Western analysts place the actual figure at about $60 billion.

But Japan's economy is hardly growing now, and its population is forecast to shrink. Meanwhile, China's economy has averaged 9% annual growth for the past 25 years and, according to a recent U.S. intelligence estimate, is on course to overtake Japan by 2020.

Unlike Japan, China already has nuclear weapons and a seat on the Security Council, the U.N.'s main body for resolving international disputes.

"For most of history, China was dominant, but in the 20th century, Japan was," says Ryosei Kokubun, director of Keio University's Institute of East Asian Studies in Tokyo. "In the 21st century, the two countries are going to be on equal footing for the first time." This continuing power shift means "there's a kind of psychological cold war" between the nations, he says.

Economic relations are thriving. China last year overtook the U.S. as Japan's biggest trading partner, when trade with Hong Kong is included. Japan-China trade volume last year -- the total of what each exports to the other -- came to $206.8 billion, up from $114.81 billion in 2000, according to Japan's Ministry of Finance. Japan-U.S. trade volume last year totaled $190.91 billion, down from $215.51 billion in 2000.

Exports to China were a major reason why the Japanese economy managed to return to growth during the past two years after long sluggishness. Japan's biggest exports to China are electrical parts and machinery, used in Chinese factories. From China, Japan's major imports include finished electronics products and clothing.

Japanese foreign direct investment in China was 355.3 billion yen ($3.33 billion at current exchange rates) in 2003 -- third behind its direct investment in the U.S. and the Netherlands.

Many Japanese companies doing business in China say it is too early to think about withdrawal because of the violent protests. But that might change if it becomes hard for them to attract Chinese employees or suppliers, cautions Koichi Haji, chief economist at NLI Research Institute in Tokyo. "Japanese products might not sell in China, or Japanese manufacturers might not be able to produce in China to export to the U.S. and the rest of the world," he says. "Japanese export competitiveness could fall."

In the U.S., there is concern that the friction could disturb growth in a region seen as a huge potential source of demand for U.S. products. Stretched militarily in the Middle East, the U.S. is strengthening its longstanding security alliance with Tokyo, hoping Japan will help contain East Asian trouble spots such as North Korea and Taiwan.

U.S. efforts to promote Japan as a power in the region have stoked fears in Beijing that its own ambitions could be stifled. "[Beijing's] opposition to the alliance is making China a problem," says Denny Roy of the Asia-Pacific Center for Security Studies, a think tank for the U.S. military's Pacific Command.

That puts at risk a broad U.S. agenda for staying engaged in an economically and strategically critical region. U.S. requests this year for China to pressure neighboring North Korea to resume stalled negotiations on its nuclear program were met by Chinese foot-dragging. After months of improving ties with its rival Taiwan -- and winning Washington's praise for doing so -- China last month soured the mood by passing a law that threatens a military attack against the island.

The power shift between China and Japan is being played out against a background of increasingly prickly public opinion in both countries.

The Chinese Communist Party uses its control over education and the media to push a version of history in which it led the Chinese people to victory over the Japanese military, which occupied much of China from 1931 to 1945. The lesson: Only a strong China under Communist leadership can keep predatory foreign powers at bay. The government regulator for radio, film and television this month approved 40 historical dramas for TV airing this year, 35 of them related to the war against Japan. The National Drama Institute next month will stage a play, "The Devil Soldiers I've Known," in which remorseful Japanese soldiers discuss the brutalities inflicted on the Chinese.

But while nationalism helps raise the popularity of the Communist Party, such a strategy could backfire if the government is then seen as weak by failing to stand up to Japan. "China wants to be No. 1 in the region," says Chen Shengluo, a politics expert at China Youth University for Political Sciences in Beijing, a school affiliated with the Communist Youth League. "The [nationalist] trend is still under control, but there are a lot of destabilizing factors."

In Tokyo, Mr. Koizumi has paid far more attention to public opinion than his predecessors. Until a few years ago, Japanese leaders derived their authority from power brokers in the ruling Liberal Democratic Party, who were happy for Japan to spend time and money to maintain quiet relations with China. Mr. Koizumi has no such factional backing, but instead stays in office because he is popular. So his government acts along the lines expected by the Japanese public -- and surveys show feelings toward China are less friendly than at any time in recent memory.

One way that's affecting Japanese policy is in development aid. Japan has given China 3.34 trillion yen ($31.27 billion at current exchange rates) in development assistance since 1979. This money contributed to China's spectacular rise, helping build projects from sewage-treatment facilities to Beijing's showpiece glass-and-steel airport.

But many Japanese worry Tokyo has been financing the growth of a threat. Earlier this year, Japan's foreign minister said that in three years, Japan probably would stop yen-denominated loans, which last year accounted for 90% of its aid to China.

"In Japan now, politicians have an interest in being tough on China -- to show that they stand up for Japan," says Robert Dujarric, a senior associate at the National Institute for Public Policy, a think tank specializing in international security issues.

Even before the recent demonstrations, there had been a spate of mutual probing during the past several months. In November, the Chinese military sent a submerged submarine into Japanese waters without the apparent approval of the Beijing leadership, U.S. and Chinese scholars with ties to their countries' security establishments said. The mission was intended as a clear demonstration to the U.S. and Japan that the Chinese navy was familiar with an area that would be tactically important in a conflict, the scholars said. Last week, Tokyo broke with decades of policy to signal to energy companies that they could test-drill for natural gas in waters disputed by China.

And in a move certain to inflame sentiment further, a group of Japanese nationalist lawmakers plans to worship this week at Tokyo's Yasukuni Shrine, which honors Japan's 2.5 million war dead. Because those include executed war criminals, such visits anger Chinese and South Koreans. Yesterday, a Chinese Foreign Ministry spokesman asked the lawmakers to call off the visit and "refrain from doing anything that might harm the feelings of Asian people."

A big worry would be if serious scuffles with Japan or the U.S. scared away crucial foreign investment. If tensions grow, says Fred Hu, a managing director at Goldman Sachs in Hong Kong and a frequent adviser to Chinese officials on economic policy, "this has the potential to set back all the progress East Asia has made and put the region back in a cold war."