Over recent decades, Sino-Japanese relations have been defined by repeated predictions of conflict and hostility between the two East Asian states (The Guardian, 2014; McCurry, 2014). These predictions appeared to be coming true in the early 2010s, following the escalation of the territorial dispute in the East China Sea and renewed calls for Japanese remilitarisation (Lee, 2011; Sieg, 2019). Yet since 2017, Sino-Japanese relations have been experiencing a détente characterised by increased economic cooperation. Resultantly, an optimistic case can be made that this détente could result in sustained cooperation between China and Japan (CGTN, 2019; Nakamura, 2020). However, the détente will eventually give way to renewed tensions and hostility.

This article presents the pessimistic rebuttal to the optimistic case for sustained cooperation. Discussion starts with an overview of the origins of the détente in US foreign-economic policy and its defining characteristics of economic cooperation and the concept of Hot Politics, Cold Economics. This is followed by an exploration of the optimistic case for sustained cooperation based on Sino-Japanese participation in the establishment of a regional rules-based order and evidence for economic interdependence between the two countries. The final section of this article presents a pessimistic rebuttal to the points raised in the optimistic case. This rebuttal includes an analysis of the changing context of Sino-Japanese relations, evidence for the presence of competition for regional influence, and a discussion of the failings of the Hot Economics, Cold Politics concept. This discussion pessimistically concludes that the changing context, regional competition and underlying political issues of Sino-Japanese relations will see an end to the détente.

The Origins and Characteristics of the Sino-Japanese Détente

The origins of the Sino-Japanese détente are externally driven, rooted in both China and Japan’s relationship with the USA. The current trade war between China and the USA has diminished China’s trade and investment income. Investment and trade revenue streams are essential for China as they offset the structural constraints on its economy, namely declining labour force growth and slowing productivity (World Bank, n.d.). The US-China trade war has diminished these revenue streams significantly, with the value of Chinese exports to the USA falling by $53 billion in the first nine months of 2019 (Liesman, 2019). As a result of this antagonistic US policy, China turned to the world’s third largest economy, Japan, as an alternative source for lost income. This is evident given that, in anticipation of a trade war with the US, China increased bilateral trade with Japan by 7.8% and established itself as Japan’s second largest trading partner (Ministry of Commerce People’s Republic of China, 2017). Increased economic cooperation with Japan is therefore a direct result of antagonistic US foreign-economic policy.

Meanwhile, the Trump administration’s threat to withdraw US troops from East Asia if Japan failed to expand its own military has impelled Japan towards cooperation with China (Klinger et al., 2019). Trump’s position is problematic for Japan as Article 9 of its constitution severely limits Japanese military capabilities. Thus, Japan depends on its US ally for military security in terms of providing both a military deterrence to would-be attackers and enhancing the operational effectiveness of Japan’s defence force (Chiang, 2019). Due to its constitutional restrictions on military force, Japan has traditionally engaged other nations economically to discourage any potential hostilities (Tamaki, 2020). The threat of US withdrawal from the region has similarly encouraged Japan to engage economically with China. Capitalising on China’s willingness to engage, Japan has used economic cooperation as a mitigation to any future Chinese threat (Brito, 2019). This strategy aims to ensure national security in the absence of a US military presence in the region.

With one party desiring economic security while the other is using economic engagement as means to pursue national security, the Sino-Japanese détente is heavily characterised by increased economic cooperation. This has seen the resumption of the China-Japan high-level economic dialogue, which had been suspended for eight years (Nikkei, 2018; Hurst, 2018). Additionally, China and Japan have embarked upon new avenues of economic cooperation in the form of joint-macroeconomic ventures. A Sino-Japanese committee has been established to promote cooperation and prevent competition in the planned Asian infrastructure projects over the next decade, predicted to be worth $26 trillion (Shimada, 2018). This joint-macroeconomic venture presents a long-term plan for Sino-Japanese economic cooperation and has established engagement among Japanese businesses for the Belt and Road Initiative, China’s global programme of infrastructure projects in developing nations (Mastro, 2019; Ito, 2019).

This economic cooperation is a direct contrast to the early 2010s, when economics was a tool for political gain in a confrontational Sino-Japanese relationship. For example, in 2010, against a backdrop of large-scale anti-Japanese protests, China threatened Japanese manufacturing by cutting rare earth exports over the territorial dispute in the East China Sea (Green et al., 2017).

Whilst economic cooperation has increased, engagement between China and Japan over the political issues in their relationship is limited. This is in accordance with the concept of Hot Politics, Cold Economics. This is the idea that China and Japan can engage one another through intense economic cooperation and that this will transcend the contentious political issues in their relationship (Dreyer, 2014). Such issues include competition over regional influence, Japanese attempts at Article 9 reform and the territorial dispute in the East China Sea (Lee, 2011; He, 2013; Chiang, 2019).

It is evident that the concept of Hot Economics, Cold Politics is at play in the current détente in the rhetoric used. For example, Xinhua, China’s state media company, has described the détente as a ‘win-win’ and for ‘mutual benefit’ whilst stating that China and Japan are ‘reserving differences’ (Xinhua, 2020). Given the external origins of the détente it is logical to conclude that the ‘win-win’ is economic in nature, whilst the differences to which Xinhua refer are the seemingly irreconcilable viewpoints of China and Japan over the political issues in their relationship.

An Optimistic Case

An optimistic case can be made that the Sino-Japanese détente will lead to sustained cooperation between China and Japan. This case is found in liberal internationalism, a theory of international relations positing that peace is achievable through the promotion of a rules-based order and interdependence between international actors (Ikenberry et al., 2018). The logic underpinning this viewpoint is that with established rules actors can predict one another’s behaviour, while interdependence makes conflict too costly for those involved. The validity of this logic has been tested using data models from historical case studies, concluding that increased economic engagement between two communities correlates with a reduced likelihood of conflict emerging in said communities’ relationship (Ashan et al., 2020).

The recent announcement of a new regional trading bloc which boasts both China and Japan as members suggests that both countries are interested in establishing and engaging with a rules-based order. The Regional Comprehensive Economic Partnership provides rules for economic engagement between member states with provisions for the regulation of intellectual property rights, financial services and e-commerce (BBC News, 2020a). While the Regional Comprehensive Economic Partnership is an economic bloc, the European Union sets precedent for the remit of such organisations to grow overtime (Carnegie Endowment, 2010) and evolve into broader political, social and policy cooperation (European Commission, 2020).

Franco-German relations might provide insight into the future of China and Japan’s relationship within the Regional Comprehensive Economic Partnership. This is because, like China and Japan, France and Germany have a history filled with rivalry and conflict, but their shared experience as founders and leaders of the European Union has, at least in part, helped to forge a sustained relationship of cooperation and friendship (Gardner Feldman, 2019). Accordingly, through their shared experience of collaborating to establish an economic rules-based order, it is plausible that China and Japan will establish a socio-political rules-based order in which their cooperative relationship can be sustained.

With respects to interdependence, China’s dependence on Japan is a key motivator for participation in the détente. This is because China is dependent on Japan as a major source of investment and trade income in order to mitigate its aforementioned structural economic issues. In 2018 alone China received $124 billion in direct investment from Japanese sources (Chiang, 2019), bolstering China’s economy in the absence of US income sources.

Another way in which China is dependent on Japan is its reliance on Japanese expertise for its foreign infrastructure projects, particularly those pertaining to high-speed rail. To fulfil its domestic high-speed rail projects, China has relied on the transfer of Japanese locomotive technology to Chinese companies. For example, the transfer of Mistibushi’s MT205 traction motor to CSR Zhuzhou Electric (Shimbun, 2017). This dependency on Japanese expertise indicates that China stands to benefit greatly from direct Japanese input in their plans for joint-infrastructure projects, creating a vested interest in sustained cooperation.

Meanwhile, Japan’s dependency on China can be found in its domestic financial planning. In the face of stagnant economic growth rates Japan has sought to diversify its economic portfolio, undertaking endeavours such as encouraging immigration to bolster its work force, monetary easing and promoting new areas of growth (McBride and Xu, 2019). One of these growth areas is Japan’s tourism sector, for which a target was set of 20 million visitors per year by 2020 (Chiang, 2019). During the détente Chinese tourism to Japan has grown exponentially. The number of Chinese visitors per year increased from 2.41 million in 2014 to 7.4 million in 2017 and in 2018 Chinese nationals accounted for 35% of all tourist spending in Japan (Chiang, 2019). This upward trend in Chinese tourists during the détente led the Japanese government to double its target to 40 million visitors per year by 2020 (Ibid.). This indicates that Japan’s tourism sector is becoming increasingly dependent on China, meaning that the mitigation of economic stagnation is, at least in part, dependent on Sino-Japanese cooperation.

A Pessimistic Rebuttal

In response to the optimistic case for sustained cooperation, there is a convincing pessimistic rebuttal. This rebuttal argues that the changing external context of Sino-Japanese relations will undermine any interdependence forming from economic cooperation. Writing early in the détente, Nikkei (2018) predicted that the ‘uncertain international environment’ which drove China and Japan together is not guaranteed. This claim is proving correct, with US President-Elect Biden planning to reaffirm US alliances in the region and re-engage China economically (Bisley, 2020). If this transition away from antagonistic US policy comes to fruition, it will remove the original drivers for Sino-Japanese cooperation whilst also undermining interdependence.

In regard to China, an end to the US-China trade war would lessen Chinese dependence on Japan as a source of income for investment and trade revenue. Although it is possible that China could maintain Japan as its primary source for these revenue streams, China’s dependency on Japan is undermined merely by the existence of a viable alternative income source. US investment in China totalled $116.2 billion in 2019 despite the US-China trade war, indicating a potentially significant cash windfall should China refocus its economic engagement towards the USA post-trade war (Rudden, 2020). With China’s economic structural constraints unlikely to dissipate in the near future, the boost in income that comes with shifting away from economic engagement with Japan and towards the USA may form a necessary part of Chinese policy to maintain growth.

At the same time, reassurances from the USA as to its military support would lessen Japan’s dependence on economic cooperation. Japan could maintain its economic cooperation with China while also benefiting from US security guarantees. However, as with Chinese dependence on Japanese investment and trade income, it is the existence of an alternative source of security that undermines Japan’s dependence on economic cooperation as a means to mitigate any future China threat.

Japan increased its defence budget by 2.7% in 2018 in response to concerns about China’s growing military strength (Chiang, 2019). This increase in defence spending during the détente suggests that Japan’s security concerns with regards to China are not being eased by economic engagement alone. If this is the case, renewed US security guarantees lessening Japan’s dependence on economic cooperation may see Japan try alternative means to address its insecurity with respect to China. The hypothetical development of a Japanese nuclear deterrence, for example, has been discussed in recent years (Yoshida, 2019; Fitzpatrick, 2019).

Compounding the threat to Sino-Japanese cooperation arising from the changing external context is the recent change in Japan’s leadership. It is understood that familiarity between national leaders works to dispel uncertainty, leading to greater opportunity for cooperation and peaceful coexistence (Booth and Wheeler, 2007). Shinzo Abe, Japan’s prime minister from 2012-2020, was eager to maintain the détente as an example of a diplomatic success story of his premiership (Hurst, 2018). Certainly, Abe and Chinese president Xi Jinping had committed to working together to ease tensions. This improved relationship saw Abe make the first visit to China by a Japanese prime minister since before the 2012 East China Sea dispute strained diplomatic relations (Rachman, 2020; Kyodo, 2019).

Having only just commenced his premiership, Abe’s successor Yushihide Suga does not have the benefit of the familiarity that Abe could rely upon at the outset of the détente. Meanwhile, Suga plans to continue Abe’s more contentious policies, such as Article 9 reform, which has proven unpopular in China (Rich, Inoue and Dooley, 2020). Suga has also been making controversial decisions in his initial months, such as appointing Nobou Kishi, a known supporter of Taiwan, as Defence Minister (Kobara, 2020). The implicit suggestion of Japan taking a stance over Taiwanese sovereignty could spark tensions with China in the future. This is because of China’s disputed claim on the island of Taiwan and its strict diplomatic condition that other countries do not recognise Taiwan as an independent state (Ibid.). Accordingly, Japan’s change in leadership represents the removal of a stabilising variable in favour of cooperation alongside the imminent shift in the external context which first led to the détente.

Refuting the optimistic case’s claim that China and Japan desire a shared rules-based order is the continuation of self-interested regional competition. Despite collaboration in establishing a regional economic order, both countries appear to be pursuing their own interests in competition for regional influence, rather than working to establish new governance structures. Evidence for this comes from China and Japan’s joint undertaking of the $6.9 billion Thai railway project, where Japan withdrew in favour of working on India’s high-speed railway (Wijaya and Osaki, 2019).

The choice to work on India’s railway rather than Thailand’s in collaboration with China can be linked to Japan’s pursuit of a closer relationship with India as a counterbalance to China’s regional influence. Japan and India share territorial concerns, having overlapping territorial claims with China in the East China Sea and Himalayas respectively, and have been collaborating to secure strategic sea lanes in competition with China (Chand and Garcia, 2017; BBC News, 2020b). This shows that, despite cooperating to establish a regional economic order, self-interest and competition also exist in Sino-Japanese relations as a barrier to expanding regional economic order into socio-political order. This also indicates a lack of substance in Sino-Japanese macroeconomic cooperation, and the failure of the new joint-infrastructure committee in mitigating Sino-Japanese competition.

The final argument in this pessimistic rebuttal of the optimistic case for sustained Sino-Japanese cooperation is rooted on the failings of Hot Economics, Cold Politics. At first glance this seems a pragmatic approach to foreign policy, allowing for cooperation alongside contention. However, this approach has been attempted and failed multiple times before by China and Japan. The result of these attempts is a routine cycle of cooperation followed by increased competition as unaddressed political issues re-emerge and trigger tension (Brito, 2019). This is a well-observed phenomenon in contemporary Sino-Japanese relations. The last cooperative phase appears to have occurred in the 1990s before China became increasingly critical of the US-Japan alliance and Japan began to seriously consider remilitarisation (He, 2013; Manning, 2015).

China and Japan have introduced measures during the current détente to manage the political issues in their relationship, conferring hope that the détente could break the cycle of cooperation and tensions. One such mechanism is the launch of maritime and aerial communications system to avoid hostilities arising from the territorial dispute in the East China Sea (Hurst, 2018). However, similar efforts were made in past periods of economic cooperation and resulted in failure. For example, in the late 1990s/early 2000s China and Japan agreed to manage fishing rights in the East China Sea only for the issue to re-emerge in 2010 with mass-protests and the deployment of naval vessels to the disputed region (Zou, 2003; Lee, 2011). Past failures to manage political tensions during periods of economic cooperation provide precedent that the mechanisms being put in place during the current détente will also fail.

Efforts to manage rather than address underlying political issues within the parameters of economic cooperation leave these issues to resurface once the drivers of cooperation change. Given the above prediction that Biden will reverse the Trump administration’s antagonistic foreign-economic policies, the re-emergence of underlying political issues may be imminent. Some unaddressed political issues, namely competition for regional influence, are already evident. Consequentially, it appears that the détente has failed to break the cycle of cooperation and tensions arising from the concept of Hot Politics, Cold Economics. This makes sustained Sino-Japanese cooperation very unlikely.

Conclusion

Considering the evidence, it is difficult to be optimistic that the Sino-Japanese détente will establish sustained cooperation between China and Japan. Rather, it is logical to be pessimistic and conclude that, eventually, Sino-Japanese relations will return to tensions and hostility. This is driven by the changing external context of Sino-Japanese relations. The removal of one of the major factors in the creation of the détente will weaken China and Japan’s dependence on economic cooperation with one another. At the same time, Japan’s recent change in leadership has weakened familiarity between the two countries, removing it as a stabilising variable for cooperation. Japan’s new prime minister is also continuing contentious policies and making controversial decisions of his own which could spark tensions with China.

China and Japan are cooperating in the establishment of a regional economic order in the Regional Comprehensive Economic Partnership. However, simultaneous Sino-Japanese competition for regional influence poses a barrier for the expansion of any rules-based economic order to the socio-political sphere, while also undermining joint macroeconomic ventures. Finally, the underlying political issues in Sino-Japanese relations, left unaddressed by the détente, are likely to re-emerge as economic cooperation wanes. This is historically precedented, with the détente seemingly having failed to lead China and Japan away from routine cycles of economic cooperation followed by political tensions.

Over the next few years, the détente’s failure to establish sustained cooperation will be a topic of research among scholars of Sino-Japanese relations. This research could offer insights into the role of the USA in China and Japan’s relationship, or on the limitations of economics alone as a driver of improving relations. Most importantly, the study of the détente could provide a learning experience for the practitioners of Sino-Japanese relations. In doing so it can serve as the basis of a new case for optimism in the future.

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