Japan to help finance China’s Belt and Road projects – Emphasis on bilateral cooperation in energy, logistics

12-10 Miaoqiang Blog

Summary:

According to a report of Nikkei Asian Review, the Japanese government is considering to provide financial supports to private-sector partnerships within China’s Belt and Road Initiative. Those supports include loans through government-backed financial institutions promoting cooperation among two countries’ private companies working on initiatives in third-party nations.

Those financial assistances will focus on the “green” sectors, industrial modernization and logistics industries. Projects that develop green energy such as solar and wind will be ideal candidates for financial banking, as well as joint programs aiming at developing technologies that eliminates carbon emissions at coal-burning power plants. The modernization of industrial park and power grid may entail large-scale infrastructure projects managed jointly by Chinese and Japanese private companies. The rail lines connecting China and Europe will also benefit Japanese corporations with factories in China.

In 2018, people in Japan and China will witness the 40th anniversary of the singed peace and friendship treaty. Tokyo will seek to further bilateral relations by prompting economic cooperation in diverse areas. This move is also expected to contribute on reciprocal state visits by Japanese Prime Minister Shinzo Abe and Chines President Xi Jinping.

But some officials in Abe’s government have raised doubts about the murky development support from Chinese government and Chinese potential military application of future accomplishment.

Tracking back to a speech in Tokyo on June 5th, Japanese Prime Minister Shinzo Abe declared that ‘Japan is ready to extend cooperation’ with China’s Belt and Road Initiative (BRI), representing a dramatic shift in Japanese policy. Some experts said that the uncertainty of US President Donald Trump’s policy and China’s increasing importance in North Korea issue made Japan realized that it is important to build a stable relationship with China.

However, there are still some challenges for cooperation between China and Japan. First, Abe’s offer to cooperate with BRI is merely tentative. From Japan’s perspective, its engagement will depend on whether the cooperation procedure will be transparent and fair. Second, it is unclear whether economic cooperation can translate into cooperation on bilateral and regional security issues such as maritime and territorial disputes.Third and finally, negative anti-Japanese and anti-Chinese sentiments still play powerful roles in both societies. Despite these challenges, Abe’s positive attitude toward the Belt and Road Initiative represents a turning point in the China–Japan relationship. It could even be the first sign showing uncertainty of U.S. role in Asia.

 

Japan to help finance China’s Belt and Road projects – Emphasis on bilateral cooperation in energy, logistics

TOKYO — The Japanese government intends to financially support private-sector partnerships within China’s Belt and Road Initiative in a nod to improving ties.

Japan will provide backing, such as loans through government-backed financial institutions, to promote cooperation among Japanese and Chinese private companies working on initiatives in third-party nations.

The assistance will focus on the “green” sector, industrial modernization and logistics, according to guidelines put together by the Cabinet Secretariat, the Foreign Ministry and others. Government officials will explain the guideline to the business community.

Projects developing solar, wind and other alternative energy sources are among the envisioned candidates for financial backing, as well as joint efforts to develop technology that eliminates carbon emissions at coal-burning power plants.

The modernization of industrial parks and power grids may entail large-scale infrastructure projects managed jointly by Chinese and Japanese private companies.

Logistics channels between China and Europe are also seen as a promising area for cooperation. The rail lines connecting the two regions will be outfitted with a digital customs clearance system and other innovations that will benefit Japanese corporations with factories in China.

Next year marks the 40th anniversary of Japan and China signing a peace and friendship treaty. Tokyo will seek to advance bilateral relations, with the guidelines forming the core of the economic cooperation package. This move is also expected to serve as a springboard for reciprocal state visits by Japanese Prime Minister Shinzo Abe and President Xi Jinping of China.

But some in Abe’s government have voiced concerns, particularly with the murkiness of Chinese development support, and the potential for the fruits of those efforts being repurposed for military applications.

Japan opens the way to cooperation on China’s Belt and Road Initiative

The China–Japan relationship is the most important relationship in Asia. It also has a troubled history.

The two countries are divided by differences over Japanese colonialism and wartime aggression, unresolved maritime and territorial disputes in the East China Sea, China’s unwillingness to grant Japan a more ‘normal’ strategic role, and Japanese anxiety about the future of Chinese power in the region.

In our lead piece this week, Yoichi Funabashi and Harry Dempsey suggest that we may be witnessing a game change in the China–Japan relationship.

In a speech in Tokyo on 5 June, Japanese Prime Minister Shinzo Abe declared that ‘Japan is ready to extend cooperation’ with China’s Belt and Road Initiative (BRI). This represents a dramatic shift in Japanese policy. Since 2014, Japan — along with the United States — has steadfastly opposed signing up to new Chinese international economic organisations like the Asian Infrastructure Investment Bank (AIIB) or endorsing the BRI. Japan has viewed these initiatives as a challenge to its own leadership of the Asian Development Bank and to the US-led international economic order more generally, and has criticised the AIIB for its governance processes and lack of transparency.

But in May, the Abe government made the decision to send Toshihiro Nikai, Secretary-General of Japan’s Liberal Democratic Party, to the Belt and Forum in Beijing, a decision that was lauded by the Chinese government. In comments made during his meeting with Nikai, Chinese President Xi Jinping welcomed Japan’s endorsement of the initiative, explaining that ‘The Belt and Road Initiative can be a new platform and an “experimental field” for China and Japan to achieve mutually beneficial cooperation and common development’.

Then, on 5 June, Abe delivered an important speech in which he outlined his ‘dream’ for Asia’s future. He argued that the world stood at a crossroads: in one direction was a closed, protectionist and declining economic order, in the other was a ‘free, open, and fair economic zone’ in which ‘high-quality rules’ could link the Pacific and Eurasia. Abe argued that instruments like the Trans-Pacific Partnership (TPP), the Regional Comprehensive Economic Partnership (RCEP), and the Japan–European Union Free Trade Agreement could be used to build this free, open, fair and high-quality economic order.

But Abe did not stop there. Instead, he honed in on the significance of the BRI not only for China, but also for strengthening Asia’s role as a global economic hub connecting East and West. As Abe argued, ‘This year marked the first time that the city of Yiwu, China and the United Kingdom were connected by a freight train, which crossed the English Channel. The “One Belt, One Road” initiative holds the potential to connect East and West as well as the diverse regions found in between’.

Funabashi and Dempsey suggest that US President Donald Trump has helped to motivate this shift in Japanese policy in two ways. First, since Trump’s election, the US–China relationship has ‘struck upon a kind of high risk, fragile reframing, mainly because Trump is prioritising a solution to the problem of North Korea through Beijing’. Yet Tokyo is well aware that long-term management of the Korean peninsula cannot be solved only by the US and China. Instead, it will require a high degree of coordination between Tokyo and Beijing, and thus an improvement in the bilateral relationship.

Second, and more importantly, Trump’s policies and behaviour to date signify deep uncertainty about the future US role in Asia, and US security and economic commitments in the region. Funabashi and Dempsey explain that ‘Tokyo has begun serious contemplation of a clean-slate foreign policy absent US primacy. In the case of a recalibration like this, no relationship would be more important to stabilise than that with China’.

It is far too soon to tell whether Tokyo will continue to contemplate, or act upon, a ‘clean-slate foreign policy’. But a Japan that envisages the absence of US primacy in Asia would represent the most significant strategic shift in the region since the end of the Cold War.

Funabashi and Dempsey make clear that there are important challenges still facing the China–Japan relationship.

First, Abe’s offer to cooperate with BRI remains ‘tentative, informal and critical’. Japan’s engagement will depend on whether the infrastructure funded through BRI is ‘open to use by all’, is procured through transparent and fair processes, is economically viable, and causes no harm to debtor nation’s finances. It also remains to be seen whether the economic visions being pursued by Tokyo and Beijing will be mutually compatible.

Second, while Sino–Japanese cooperation on economic matters is an important starting point, it is unclear whether economic cooperation can translate into cooperation over a host of pressing bilateral and regional security tensions. Japan’s security posture is premised upon US primacy in Asia, and it is this that explains so much of China’s discomfort with Japan’s military modernisation. The two countries face unresolved maritime and territorial disputes in the East China Sea, and Japan remains profoundly concerned about China’s behaviour in the South China Sea. And the nature of the US–China deal over North Korea will have profound implications for Japan. As Funabashi and Dempsey argue, ‘On one hand, a breakdown would raise the possibility of military conflict that would hugely complicate China and Japan relations. On the other hand, success would likely see Japanese and South Korean concerns bypassed’.

Third and finally, government or business-to-business cooperation through the BRI is unlikely to transform the overwhelmingly negative anti-Japanese and anti-Chinese sentiment that plays a powerful role in both societies. Funabashi and Dempsey argue that ‘meaningful reconciliation’ between China and Japan requires ‘a long term process of strategic alignment and compromise, not just sudden realpolitik play without grassroots groundwork’.

Despite these significant challenges, Abe’s decision to contemplate engagement with the Belt and Road Initiative represents a turning point in the China–Japan relationship. It may be the first sign that uncertainty over the US role in Asia is prompting fundamental strategic reassessments in the region.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Amy King, Liam Gammon, Jillian Mowbray-Tsutsumi and Ben Hillman, and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

Source: Nikkei Asia Review, Editor in Nikkei, December 6, 2017. Photo: Damir Sagolj from Reuters.

Source: East Asia Forum, Editors in East Asia Forum, July 10th, 2017.