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Analysis

Global role for China, Japan will grow

by Adam Cotter

Global role for China, Japan will grow

 

Xi Jinping and Shinzo Abe, the Chinese and Japanese leaders, have reinforced their positions in the last few months , providing a solid platform for enhancing bilateral co-operation including in economic and monetary affairs. From these positions of strength, the Chinese president and Japanese prime minister can look in 2018 towards ironing out divergences, not least over territorial claims and differing interpretations of history, which remain impediments to the ambition of realising the ‘Asian century’.

Although relations remain tinged with frost, much has improved in the six years since Abe and Xi assumed power in 2012 amid rising tensions over the disputed Senkaku/Diaoyu islands in the East China Sea. China is Japan’s largest trading partner, while Japan is China’s second-largest. Japan, benefiting from China’s outbound tourism boom, has welcomed around 5m Chinese visitors in 2017, more than from any other country.

As US President Donald Trump continues to advocate unilateralist policies and a protectionist approach to global trade, the international role played by Asia’s two largest economies appears likely to increase. Developments in North Korea will demand both countries’ involvement.

Japan risks being left behind as an increasingly confident China seeks a bigger say in the global economic and security order. Xi is urging further regional economic integration and greater co-operation on trade and investment. Aside from the Beijing-led Regional Comprehensive Economic Partnership, he is proposing further talks on a free trade agreement between China, Japan and South Korea.

Trump’s withdrawal of the US from the 12-nation Trans-Pacific Partnership trade agreement – which does not include China – was a setback for Abe. However, talks on a new iteration of the deal following November’s Asia-Pacific Economic Co-operation summit in Vietnam are promising – even though Canada may be absent. At the same time, Xi has seen almost 70 countries sign up to his signature Belt and Road infrastructure initiative. Although it would be politically difficult, Japan’s greater involvement in the Belt and Road would be hugely beneficial for the region.

China’s rise has engendered much speculation about the international role of the renminbi. Its inclusion in the special drawing right, the International Monetary Fund’s composite currency unit, has met much fanfare. Japan has sporadically attempted to internationalise the yen. The future currency system for Asia remains an open question. China and Japan may jointly work towards an answer more quickly than many think.

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