Why Chinese-Japanese Economic Relations Are Improving

Despite heated political and online rhetoric, trade between China and Japan continues to grow. “In short, China has started to delink economics from politics,” no longer encouraging boycotts or protests in a quest for territorial concessions, explains Richard Katz for Foreign Affairs. “Chinese-Japanese economic relations (but not political ties) are set to get better, not worse.” The Chinese export sector relies on parts from Japan and Japanese firms rely on expansion plans elsewhere in Asia. Katz points out that Japan’s exports to China plummeted in late 2012, but have since rebounded, and “Japan’s exports to China are once again on a higher growth trajectory than its exports to the rest of the world.” Japanese foreign direct investment could decline from a record in 2012, and foreign firms diversify FDI. Katz notes: “Certainly, some companies are adopting a wait-and-see stance before committing new funds to China. And many are adopting a ‘China plus one’ strategy of making sure that they fund facilities in at least one other Asian country besides China.” Both nations will monitor if the Japanese prime minister’s visit to a war shrine affects business. – YaleGlobal