China Is Using Its New Economic Weight To Outmaneuver Japan

New York Times | December 6, 2002 | James Brooke

[Stand Watch Listen]

TOKYO, Dec. 5 Backed by an economy four times the size of China's, Japan still doles out foreign aid to its enormous and thriving neighbor. But to judge by China's recent slights and snubs of Japan, a visitor might think that China is already the economic power of Asia.

One day, China slapped emergency tariffs on steel imports from Japan. The next day, Nippon Steel Corporation obligingly announced a $1 billion joint venture with China's largest steel maker to build a state-of-the-art rolled-sheet steel factory in China.

When Lee Teng-hui, a former president of Taiwan, applied for a visa to visit Japan, where he studied in college, Japan's Foreign Ministry denied the request, citing a desire to avoid provoking Chinese "rancor."

In the same week, China showed little concern for Japanese rancor when it expelled a Japanese defense attache and a Japanese human rights worker.

"It shows a lack of confidence on the Japanese side, and strong confidence on the China side," said C. H. Kwan, an economist here.

Japan, rich and with an aging population, increasingly appears intimidated by China, which is striving and bursting with youth. China's leadership recently set an ambitious goal of quadrupling its $1 trillion economy in 20 years. Japan's goals are much more modest: ending deflation and bringing bad bank loans under control by 2005.

With one-tenth of China's population, Japan more and more acts as if it has already reverted to its historical place in Asia: a nation on the periphery of the Chinese empire.

Early in November, at an Asian regional meeting in Phnom Penh, Cambodia, the largest buzz surrounded Prime Minister Zhu Rongji of China, who signed the outlines of a China-based regional free-trade pact, which is set to begin by 2010, and then posed for a "family photo" with leaders of 10 Southeast Asian countries.

Japan's prime minister, Junichiro Koizumi, countered with his own offer of a free-trade pact, but was caught off balance when China offered to create a similar pact for China, South Korea and Japan.

Mr. Koizumi, knowing that Japan's conservative Parliament is years from accepting such trade liberalization, dismissed the proposal, saying, "We should take a medium- to long-term view of the matter."

Japan's Nikkei Weekly, a leading economic magazine, reported from Phnom Penh of Japanese "shock" at China's free-trade proposal, writing: "Japan wants to ensure its economic leadership, while feeling increasingly threatened by China, which is aggressively expanding its economic power in the region."

Also in Phnom Penh, the Chinese moved to ease tensions over the Spratly Islands, a far-flung group of islets claimed in parts by Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam. The six countries signed an agreement pledging to exercise "self-restraint" and to avoid activities that would "complicate or escalate" the territorial dispute.

This agreement to disagree contrasted with Japan's open disagreement with Russia over four islands north of Japan, part of the Kurile Island chain, that were occupied by the Soviet Union just after World War II.

Japan claims the islands and has refused to sign a peace treaty with Russia until they are returned. President Vladimir V. Putin of Russia has shown no inclination to concede territory.

[joesnuffy]

rots of ruck

[formosaplastics]

The global economy is like a horserace, and global investors, including Japanese and American, increasingly know which horse -- China or Japan -- they want to bet on over the next 50 years.