Cold Politics, Hot Economy and the Way in Which We View the Sino-Japanese Economy


The term “cold politics and a hot economy” has appeared in the media, including the newspapers, as an expression describing the recent Sino-Japanese relationship. It means that the relationship is cold in terms of politics, but hot with regard to the economy; however, the expression “cold politics and a cool economy” is used in news reports in China these days to sound a warning about the influence of “cold politics” on the economy.

Looking at the volume of trade between Japan and China in 2004, Chinese statistics indicate that it was 167.9 billion dollars (an increase of 25.7% on the previous year), while Japanese statistics quote an increase of 26.9% on the previous year to the record high of 168.0 billion dollars (on the basis of yen-based figures from the Japanese Ministry of Finance converted to dollars by the Japan External Trade Organization (JETRO)). Moreover, according to figures released by China’s Ministry of Commerce, direct investment in China by Japanese companies has reached 5.45 billion dollars on an actual basis, an increase of 7.9% on the previous year. Looking at the numbers alone, it seems that Sino-Japanese economic relations have developed and expanded at a ferocious pace. It is true that it is anticipated that, if Hong Kong is included, China will overtake the US to become Japan’s biggest trade partner in 2004, with mainland China becoming Japan’s largest trading partner in its own right in 2005.

On the other hand, Japan, China’s biggest trade partner until now, has dropped into third place, having been overtaken by the EU and the US; China’s volume of trade with the EU and the US has undergone a big boost, far exceeding the volume of trade between Japan and China. In other words, it shows that in economic terms, while China’s presence has increased for Japan, Japanfs importance as far as China is concerned has, on the contrary, declined. According to preliminary figures released by China’s Ministry of Commerce, total trade in China in 2004 increased 35.7% on the previous year to 1.1547 trillion dollars, overtaking Japan to take third place in the world after the US and Germany. In addition to the fact that China, which has grown as “the world’s factory”, has experienced an increase in its export products, including household electrical goods, an increase in the value of its imports due to a steep rise in the prices of raw materials on international markets is one factor that led to this substantial rise in the volume of trade. This fact must have been a shock for Japan, which has built up an exalted status internationally as an economic superpower.

The same circumstances that apply to trade can also be said to apply to investment in China. The amount of investment in China by foreign companies in 2004 on an actual basis increased 13.3% on the previous year to 60.6 billion dollars; by country of origin, the top investor was Hong Kong and Macau with 19.5 billion dollars, up 7.9% on the previous year, followed by the British Virgin Islands, which was up 16.5% on the previous year to 6.7 billion dollars, and the ROK, up 39.2 % on the previous year to 6.2 billion dollars. Japan, which was in third place last year, has been overtaken by the ROK and fallen into fourth place. With the exception of Hong Kong and Macau, which hold a dominant share, the situation is that the rate of increase of other countries has largely surpassed that of Japan.

I cannot help but feel that the influence of “cold politics” is behind this situation in which Japan cannot quite keep up with the remarkable pace of economic growth and the improvement in the international economic status of China. Although we should face up to the aforementioned objective data as a reality and despite the fact that it is important to demonstrate our willingness to take China’s point of view seriously, we should not swallow absolutely everything that they say. Moreover, it would be unwise to ignore what the Chinese side thinks and one-sidedly repeat the Japanese position. Thus, the importance of strengthening Japan’s basic position is about to be acknowledged. In doing so, well-balanced judgments with Japan as their axis could be able to be made.

In China, the economic structure has been largely shifting from a socialist planned economy to a market economy, as seen in the rise of private companies, and economic exchange between Japan and China in the private sector has been becoming more intense than ever. Looking at the trends of the times, it seems natural to be beset by the illusion that the time has come to think that “politics” can be neatly pigeonholed as politics and “economics” is purely economics; however, “China” is still China. If we look at the Sino-Japanese economy from the perspective of “cold politics and a hot economy” as though “politics” and “economics” were entirely separate matters, we could overlook a big problem. “Cool politics and a hot economy” merely demonstrates a temporary phenomenon. Through constant, steady assessment of “the changing China” and “the unchanging China” and by focusing on a specific problem, such as the Sino-Japanese economy, by grasping the overall picture from a broader perspective, areas that have not been visible or have been overlooked may emerge.

[Translated by ERINA]