Japanese, Chinese Leaders Eye Deeper Cooperation on Trade, Infrastructure
The leaders of China and Japan endorsed a series of deals last week, with Japanese Prime Minister Shinzo Abe visiting Beijing for landmark, high-level discussions on trade and infrastructure cooperation with Chinese President Xi Jinping and Premier Li Keqiang.
The event was being watched closely for an indication of how the two Asian economic giants will approach the next steps in their bilateral relationship, given recent tensions over territorial issues and other matters. While meeting with Abe on Friday, Xi stressed the value of "sound and stable development of China-Japan relations” that can create “fundamental benefits for people of the two nations, which is widely hoped by this region and the international community," according to comments reported by the South China Morning Post.
Leaders from both sides also noted the challenges of the current trading landscape, particularly the growing use of unilateral trade measures by major economies, and lent their backing to cooperative approaches to boost trade and defuse tensions.
Abe and Li also lent their support to ramping up talks on a trilateral trade accord with South Korea, as well as the Regional Comprehensive Economic Partnership (RCEP), which includes Japan, China, and South Korea, as well as Australia, India, New Zealand, and the 10 countries of the Association of Southeast Asian Nations (ASEAN). RCEP participants are hoping to finalise a package of deliverables from the process by year’s end. (See Bridges Weekly, 13 September 2018)
Fostering economic ties
On 26 October, during the premiers’ meeting, Abe said that the two countries, going forward, should focus on strengthening their partnership and building improved ties, moving “from competition to collaboration.” The sentiment was echoed by Li, who called for reaching “win-win outcomes by stably developing our ties in the long term. Especially regarding our economic and trade cooperation, we earnestly want to lift it to a new phase.”
Later that day Abe and Xi participated in an inaugural, bilateral event devoted to third-party market cooperation, where companies signed off on several dozen accords, whose overall commercial value is estimated at over US$18 billion. They encompass a broad range of areas, from currency swaps to rescue operations, along with various energy projects.
Li also said that China is “also willing to strengthen financial cooperation through currency swaps, to provide support to enterprises from both sides,” in a bid to make it easier for Japanese companies to make greater inroads into the Chinese market.
A currency swap arrangement, which allows the exchange of local currencies between the two central banks for up to US$30 billion, is now in place and will last for three years. According to a statement from the Bank of Japan, this agreement will prop up business activity in both countries, and “with the strengthening of economic and financial linkages between Japan and China, Japanese financial institutions have been expanding their Renminbi-based businesses.”
Infrastructure cooperation in the spotlight
The two countries have agreed to create a “new framework” to facilitate cooperation between them when looking to back infrastructure projects abroad. Furthermore, various infrastructure deals announced last week are expected to facilitate the China-led Belt and Road Initiative (BRI), which aims to set up a vast, cross-continental network of infrastructure projects that proponents say would transform regional connectivity.
Additionally, Chinese officials have said that it welcomes Japanese participation in the BRI, should it choose. “Japan has also expressed its readiness to actively participate in the BRI. We are now actively conducting third-market cooperation. We are looking for more proactive cooperation in this regard,” Chinese Foreign Ministry spokesperson Hua Chunying told reporters last week, according to the Financial Express.
The BRI has been underway for approximately five years, with Xi terming it an essential component of China’s efforts to advance economic development, facilitate trade, and deepen ties with other countries. The BRI currently envisions linking well over 60 countries, according to the World Bank, which together have significant economic heft and include well over half of the global population.
ICTSD reporting; “China invites Japan along belt and road as Shinzo Abe makes landmark trip to Beijing,” SOUTH CHINA MORNING POST, 25 October 2018; “Japan, China vow to promote new economic cooperation amid trade war,” KYODO, 27 October 2018; “China, Japan Push for Free Trade as Both Grapple With Trump Demands,” WALL STREET JOURNAL, 26 October 2018; “Factbox: Belt and Road Initiative in five years,” XINHUA, 26 August 2018; “China, Japan pledge new economic collaboration as Abe backs Belt and Road Initiative,” FINANCIAL EXPRESS, 26 October 2018; “China-Japan sign three-year FX swap deal to strengthen financial stability, business activity,” REUTERS, 26 October 2018; “Japan, China to cooperate in third-country infrastructure projects,” MAINICHI, 26 October 2018.