It was announced by both China and Japan on October 12 that Japanese Prime Minister Shinzo Abe will pay an official visit to China from October 25 to 27. Lu Kang, spokesperson for China’s Ministry of Foreign Affairs, said that high-level interactions and across-the-board exchanges between China and Japan have become more frequent recently. “We hope the two sides will leverage their complementary strengths, continuously expand cooperation in trade and investment, economy and finance, innovation, and high-tech fields, jointly explore third-party markets, uphold multilateralism and the free trade system, and safeguard an open world economy.”
The question on the lips of many observers is why China and Japan should jointly explore third-party markets and what is the significance and benefits of doing so?
First, the two countries both face surplus in certain areas of production, including capital and production capacity. After their economies reached a certain level of development, the massive domestic investment that once fueled their meteoric growth has drained away. Better management, advanced technologies, especially core technologies in major industrial sectors, and innovation are now the new drivers of economic growth. But how to dispose of their excess capital and production capacity? China and Japan have set their eyes on developing countries along the Belt and Road, which will broaden the room for and inject new life into their economic development. Thereby, their investment in third-party markets is the requirement of the two countries’ economic development after reaching the current stage.
Second, most countries along the Belt and Road are underdeveloped. Some of them are emerging industrial countries that are racing to catch up with their more developed neighbors and shake off poverty. Their economies are either taking off, or about to take off, so they are in dire need of capital and technology to build infrastructure and industries. This need will be met through cooperation with China and Japan. It’s estimated that every year Asian countries need US $800 billion for construction of infrastructure, while they can only afford US $100 billion.
On February 28, 2017, a report from the Asian Development Bank (ADB) disclosed that in the 13 years to 2030, emerging economies in Asia need to invest US $26 trillion in infrastructure, including transport networks and clean water facilities in order to reduce poverty and adapt to climate change.
China alone cannot fill this huge capital gap for infrastructure in Belt and Road countries. But by teaming up with Japan, the needs for capital and construction in these countries can be better met. China also welcomes South Korea, the U.S. and other countries to join in this venture. Many hands make light work. When more funds and technologies stream into developing countries along the Belt and Road, their economic foundation will grow stronger, allowing their economies to take off, and realize fast, sound, stable, and sustainable development.
Third, there is huge potential for cooperation between Chinese and Japanese businesses, who already enjoy strong complementarity. Japanese companies are known for their good management, meticulous planning in investment and high stop-loss ability. Chinese enterprises are weak in management, but are strong in strategic planning, following trends, and taking advantage of opportunities. Cooperation between them can bring both parties’ strengths into play while circumventing their deficiencies, so achieving win-win results. It is fair to say that Chinese and Japanese businesses are natural partners. With the former’s pioneering spirit, courage, and resolve to embrace market trends and the latter’s meticulous management and stop-loss experience, they make a perfect team, which can also bring considerable economic benefits to investors of each country over the long term.
Fourth, over the past several decades China and Japan have maintained good economic cooperation, but run-ins arise from time to time over political, security, historical, military, territorial, and maritime issues. They are yet to identify the general direction for improvement of bilateral ties, and the search has continued to date. Through economic cooperation in third-party markets, the two countries can improve their relations and find a new growth point for their economies. Though this cooperation cannot play a central role in ameliorating bilateral ties, it helps the two countries to have better mutual understanding, reinforces mutual trust, dissipates doubts, and expands the external space for development of their relations.
Fifth, at a time when China and the U.S. are involved in a tit-for-tat trade war that may lead to a standoff for some time, Abe’s visit to China and the expected cooperation between Japan and China in the Belt and Road is in some sense an expression of support for China without breaking ranks with the U.S. It is also a positive response to China’s Belt and Road policies in the face of some critical voices in the international community. China should seize this opportunity to rally support for its Belt and Road policies and create more favorable conditions for this initiative.
With their strong complementarity, cooperation between China and Japan on third-party markets will expand their own regional development, lift their development to a higher level, and boost economic stability and development in the regions concerned and the world as a whole.
ZHOU YONGSHENG is a professor with the Institute of International Relations, China Foreign Affairs University.