In his recent meeting with Japanese Prime Minister Junichiro Koizumi, Chinese President Hu Jintao cliearly pointed out that China and Japan are both countries of important influence in the Asian region and the world at large, improper handling of bilateral relations will not only be disadvantageous to the two countries, but will also affect stability and development in the Asian region, for this reason, it is imperative to reverse the current difficult situation in Sino-Japanese relations as soon as possible. This difficult situation in Sino-Japanese ties is primarily caused by Japan's mistaken words and deeds on the question of history and the Taiwan issue, which has led to cold bilateral political relations, the "cold political relations" have, in turn, given rise to noteworthy economic consequences in bilateral, regional and global aspects.

Bilateral aspect: "political cold" is leading to "economic cold"

With regard to the current difficult situation in Sino-Japanese relations, various social circles mostly describe it in such words as "political cold and economic heat". Superficially, the development of Sino-Japanese economic relations seems to be very "hot", but an in-depth analysis will reveal signs in Sino-Japanese economic ties tending to become cold:

(1) Relative slow development of Sino-Japanese economic and trade relations. For instance, in 2002, 2003 and 2004, China's foreign trade grew 21.8 percent, 37.1 percent and 35.7 percent respectively, while its trade with Japan increased only 16.2 percent, 31.1 percent and 25.7 percent respectively, lower than the level of the overall foreign trade growth. The proportion of trade with Japan to China's foreign trade fell from 16.4 percent in 2002 to 14.5 percent in 2004, this proportion once reached as high as 23.6 percent in 1985. By 2004, Japan's long-term status of keeping China as the No.1 trading partner had been replaced by the European Union (EU). In 2004 foreign direct investment (the amount of paid-in investment) grew 13.32 percent, while Japan's direct investment in China increased only 7.87 percent.

(2) Drastic reduction in Japan's economic aid to China. Japan's official development assistance (ODA) to China once played an important role in the development of Sino-Japanese relations. By the end of 2004, the total amount of Japan's ODA to China reached 3333.5 billion yen, including 3133.1 billion yen worth of loans. But after 2000, Japan's ODA to China began to experience a drastic reduction, of which Japanese loans plummeted from 214.4 billion yen in 2000 to 85.9 billion yen in 2004, a nearly 60 percent reduction. Currently, the placing of China in Japan's ODA objects has fallen from the first to the third.

(3) Continuous Sino-Japanese economic-trade frictions in recent years, obvious lagging in cooperative process. Examples for this are cited as follows: Sino-Japanese trading disputes triggered by the emergency import restrictions imposed by the Japanese government in April 2001 on three kinds of Chinese agricultural products, frictions in the aspect of policy on the exchange rate between the yen and the yuan in recent years, as well as competition between China and Japan in the aspect regarding Russian oil pipeline construction. Along with the expansion of economic and trading relations, the emergence of some frictions and disputes are normal phenomena, but the point is that so far there is no obvious sign of establishing an effective cooperative mechanism between China and Japan, especially the Japanese side adopts a very passive attitude toward the matter.

Regional aspect: Hindering the progress of East Asian economic cooperation

Regional economic integration is a general trend in today's world. Recent East-Asian regional economic cooperation has indeed witnessed certain progress, but there also exist some distinct defects, lagging far behind the progress of European and North-American regional economic cooperation. There are many factors causing the lagging progress in East-Asian regional economic cooperation, but Sino-Japanese "political cold" is one of the principal obstacles.

European and North-American experiences indicate that big countries and coordination among them are crucial to the smooth progress of regional economic cooperation. Similarly, without the hand-in-hand advancement of China and Japan, it would be difficult for East-Asian economic cooperation to achieve smooth progress. In fact, the economic status of China and Japan in East Asia is much higher than the economic status of France and Germany in Europe. For instance, the proportion assumed by France and Germany to the total economic volume of the 25 EU member countries is less than 40 percent, while the proportion assumed by China and Japan to the total economic volume of 13 Asian countries (10 ASEAN member states plus China, Japan and the ROK) exceeds 80 percent. China and Japan that occupy significant positions have failed to play a leading role in jointly promoting East-Asian economic cooperation through cooperation and coordination for lack of sufficient mutual trust in the political aspect, and have thus hindered the smooth progress of East-Asian economic cooperation. This situation has found expression in the main aspects of financial cooperation and in the liberalization of regional trade in East-Asian economic cooperation.

Global aspect: Weakened ability to resist economic risks

The current global economy is in the process of a new round of growth, the highest growth record was set last year over the past 30 years, but at the same time the global economy also faces very big risks, especially the radical rise in oil price and the continued devaluation of the US dollar which has brought extremely serious risks to and exerted great impacts on China and Japan. In the first 10 months of last year alone, international oil price swelled 70 percent, the oil futures price in the New York Commodity Exchange was US$32.5 per barrel in January last year, the figure exceeded US$55 per barrel in October, and once further exceeded US$58 per barrel in April this year. China and Japan have to depend mainly on import of oil, so it is imaginable what influence the fluctuation of oil price has on the economies of the two countries. Let's come to see the situation regarding the depreciation of the US dollar, the exchange rate of US dollar to euro was 0.82:1 in October 2002, by the end of 2004, it once came down to 1.35:1, with the devaluation surpassing 60 percent, the devaluation of the US dollar to yen also exceeded 30 percent in the same period, once falling from 1:135 to 1:102. China and Japan are the world's second and first foreign exchange reserves countries, the continuous substantial devaluation of the US dollar is bound to inflict huge property loss on the two countries, if the Japanese side indulges in one-sidedly forcing the revaluation of the RMB, hardly expectable consequences will result. In the face of the rise of oil price and the devaluation of the US dollar-- a kind of global risk, if China and Japan guard against it by relying merely on their own strength, and even adopt the beggar-my-neighbor countermeasures, that not only could hardly achieve anticipated results, but also would increase losses from risks to both sides.

By People's Daily Online