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2016.12.16

Proposal to create win-win relationship between Japan and China through support for "One Belt One Road"―Proposals on stability in the East China Sea and economic revitalization in Northeast China―

An article published in JBpress on November 24, 2016

  • Kiyoyuki SEGUCHI
  • Research Director
    Kiyoyuki SEGUCHI
  • [Expertise]
    Chinese Economy and Relations among Japan/China and the United States

Make 2017 a new era of Japan-China relations


A full four years will soon have passed since the Shinzo Abe administration was formed in December 2012. Although relations with the U.S. were deteriorating over historical perceptions in 2013, his administration later made a correction, and Prime Minister Abe delivered his first speech as Japanese prime minister at a joint session of the U.S. Congress in 2015.

In addition, his administration achieved great results in both security and the economy including the enhancement of defense cooperation based on the new guidelines on Japan-U.S. defense cooperation, and cooperation over establishment of the TPP (Trans-Pacific Strategic Economic Partnership Agreement), where the Japan-U.S. relations that have been established are considered to be in the best state ever.

From last year to this year, Japan-South Korea relations also made a rapid improvement thanks partly to the backing of the U.S., and Japan-Russia relations are reaching a major milestone over the Northern Territories dispute.

As seen above, the Abe administration has continuously realized outstanding results in diplomacy over the last four years. If the resolution of concerns over Japan-Russia relations is in sight in December, the next major diplomatic issue will be the improvement of Japan-China relations.

Japan-China relations have always had concerns since the mid-1990s. Especially after the Senkaku Islands issue occurred in September 2012, the relations were trapped in the worst state ever. These worsened relations between Japan and China cast a cloud over public sentiment, where most Japanese felt antipathy toward China. This is greatly accounted for by the influence of the media which fans the anti-China/anti-Japan sentiments of the citizens.

Considering the important role that both Japan and China should play in the global economy, such poor relations should not be continued forever.

According to the World Economic Outlook of the IMF (International Monetary Fund), the scale of GDP (gross domestic product) across the entire Asian region, where three countries in East Asia, Japan, China and South Korea, take the lead, has started to largely surpass the respective economic scales of North America and Europe since around 2010, and has supported the global economy.

It is estimated that the sum of the GDPs of Japan, China and South Korea will exceed that of the U.S. in 2020.

Totally unexpected events have occurred in succession, including this year's Brexit and next year's inauguration of the Donald Trump administration in the U.S., making the global economy become more uncertain. Under such circumstances, it is believed that the role that Japan, China and South Korea should assume will get increasingly bigger.

The responsibilities of both Japan and China are especially heavy. If, after next year, when it is assumed that the global economy will be more and more chaotic, relations between the two countries have greatly improved enough to realize a new era of Japan-China relations through closer ties in their economic relationship, that will obviously provide enormous support for the global economy.



Support for One Belt One Road initiative by Japan and South Korea


As a specific measure to enhance the relations between Japan, China and South Korea, I would like to make a proposal to both Japan and South Korea to support China's One Belt One Road initiative.

As its important policy, a crucial key is for Japan to become a member of the Asian Infrastructure Investment Bank (AIIB), or to substantively support it if not becoming an official member.

Renowned diplomacy/security experts in both the U.S. and China have pointed out that, if this is realized, China's attitude toward Japan in relation to the East China Sea is likely to be greatly changed.

According to a Chinese expert, the Xi Jinping administration has positioned One Belt One Road initiative as the most important measure in their foreign policy, and places a great emphasis on its materialization.

As the situation stands now, however, the land route (Belt) does not pay financially due to the high risk of terrorism in Central Asia. Meanwhile, the sea route (Road) is also difficult to be utilized since the South China Sea and East China Sea issues are currently in a tangle.

However, experts in the U.S. and China believe that, if both Japan and South Korea support One Belt One Road initiative, China is likely to change their behavior in the waters around the Senkaku Islands in a more conciliatory direction to promote that support.

In a related development, it has also been reported that the relations between China and the Philippines have been improved after President Rodrigo Duterte visited China in October, and interference with Filipino fishing boats by Chinese public vessels has now disappeared in the South China Sea.

In parallel, Malaysia and Vietnam seek improved relations with China, and the South China Sea issue is gradually being relieved on the basis of bilateral negotiations between the countries concerned.

It is believed that, if both Japan and South Korea express their support for One Belt One Road initiative, the Xi Jinping administration will welcome this enormously, and is likely to move toward improving the tense situation in the East China Sea in order to open up the Maritime Silk Road (One Road).



Proposal on economic revitalization in Northeast China


As specific measures to support One Belt One Road initiative, I would like to make a proposal to both Japan and China to make efforts to improve the long-term stagnation of the regional economies of the Northeast (Liaoning, Jilin and Heilongjiang Provinces) as they are an annoyance for the Chinese government, as well as to participate in or cooperate with the AIIB.

Looking around the whole economy of China in recent years, major cities take the lead on the Eastern coast, and in the Central and Western areas, where consumption and investment maintain stability.

In the Northeast area, on the other hand, the industrial structure is biased toward heavy industry, which suffers from overcapacity, and there are too many inefficient state-owned enterprises where the economic situation is poor. Although the Chinese government has taken various measures regarding the economic structure of this area, none of the measures were effective, and serious economic stagnation continues to persist.

If the serious economic structure problem in this area is solved, the balance of the whole economy of China will improve, which will allow confidence in the Xi Jinping administration to further increase.

Therefore, I am going to propose the following three measures to realize economic revitalization in this area with the major goal of transforming the Northeast into a healthy base model in the Asia-Pacific region, in cooperation with the both Japanese and Chinese governments.

(1) Designate hybrid vehicles manufactured in the Northeast as environmental protection vehicles.

My first proposal is to designate hybrid vehicles manufactured in the Northeast as environmental protection vehicles.

In January 2014, the Mayor of Beijing City made a statement that, if Beijing's severe air pollution is not solved by 2017, he would "cut off his own head" (= approaching the issue at the risk of his position), which created quite a buzz. Although 2017 is fast approaching, the level of air pollution in Beijing remains serious, and the Mayor is still in office.

Chinese citizens as well as residents of Beijing are deeply dissatisfied with the tepid approach to environmental issues by the government. Especially parents of young children harbor strong resentment as they are too concerned about the negative impact of air pollution to take their children outside to play however much they want to.

Under such circumstances, the Chinese government aspires to promote electric vehicles as an environmental measure in urban areas. Although this can be an effective way to improve the environment, the ratio of electric vehicles is considered to stay at approximately 20% for the time being even if they grow popular at a good rate. This is not enough to improve the air pollution in major cities since the remaining 80% are still all gasoline-powered vehicles.

If hybrid vehicles, which are currently not designated as environmental protection vehicles, are designated as environmental protection vehicles, the amount of exhaust gas from gasoline-powered vehicles will be significantly reduced. The environmental improvement effects of hybrid vehicles are strikingly obvious just by looking at the clean air in Tokyo and Osaka in Japan.

However, since the manufacturing technology of hybrid vehicles is highly advanced, and only Japanese manufacturers can produce them at the moment, the implementation of preferential treatment by designating them as environmental protection vehicles would give only Japanese enterprises an advantage.

Although it is obvious that this is an effective way to improve the environment, even advanced Western countries have not taken measures to designate hybrid vehicles as environmental protection vehicles because they want to protect their domestic industry. However, the environmental issues in China are currently trapped in a serious situation, where they have no time to be concerned about such protection.

Designating hybrid vehicles as environmental protection vehicles on the premise of producing them in Northeast China, as an environmental cooperation project between Japan and China, enables both environmental issues and economic issues in the Northeast to be improved at the same time.

The sales of vehicles in the Chinese domestic market reached about 25 million cars last year. Supposing that 4% of these sales were hybrid vehicles, the number would be a million. If a million automobiles are produced in the Northeast each year, Japanese parts manufacturers and material manufacturers related to automobiles will advance into the Northeast, which will generate hundreds of thousands of jobs.

Most of the excellent human resources from the Northeast leave their home area after graduating from university and work in various different areas throughout the country because there are not any good jobs in the Northeast.

If they can work for leading Japanese companies in their hometown, however, a number of people from the Northeast will come back to their area of origin even if the wage level is a little lower than in Beijing and Shanghai, which is the common view of most experts.

I have heard that when a Japanese bank recently opened a new branch in the Northeast and recruited workers, quite a lot of people who were from the Northeast and worked in different areas around the country applied for a job. This fact confirms that excellent human resources can be easily attracted.

Additionally, the Northeast is close to North China, which has the severest levels of air pollution, and also has relatively convenient transportation links to cities with large levels of consumption such as Beijing and Tianjin, which provides a geographical advantage.

In the Northeast, where the lowest temperatures drop to minus 20 to minus 30 degrees in the winter, a normal gasoline-powered vehicle does not start easily.

However, a hybrid vehicle starts electrically, a big advantage as there is no need to worry that the engine might become sluggish. Therefore, the need for hybrid vehicles must be much greater in the Northeast than in other areas.

(2) Promote a food-safety project with a focus on Changchun City

My second proposal is to promote a food-safety project with a focus on Changchun City.

In addition to air pollution, Chinese citizens are also concerned about food safety. In China, the safety of agricultural products and processed food is not adequately secured, and many Chinese worry about this every day. Especially households with a child have a bigger worry again about this issue.

As a joint project between the United Nations and the Chinese government, a food-safety project started this year, which is aiming for a state where Chinese citizens can eat food without worry anywhere in China. Changchun City, Jilin Province, Northeast China, which has little concern over soil pollution, was designated as its core base.

The basic concept is to standardize all processes in agricultural production, food processing, logistics and sales, to allow only manufacturers that meet food safety standards to participate, and to visualize all of their processes.

The United Nations plans to utilize this project to improve food safety in developing countries all over the world by making use of its methods if it becomes successful in China.

In fact, it is expected that Japanese companies will play a central role in it.

China already has most of the technologies needed to realize food safety. However, even though Chinese companies have these technologies, they have also created a sense of distrust that they do not use them properly.

The project aims to establish a system where Japanese brand power reassures Chinese citizens through collaboration between top Japanese enterprises and Chinese enterprises. More than ten top Japanese enterprises have already expressed their interest, and the move is expected to shift into full swing after next year.

Cooperation between Japan and China is intended to be realized across quite a wide variety of fields including land improvement, water quality improvement, fertilizers, agricultural production, plant factory, food processing, logistics, warehousing, packing/packaging, sales of food, sales of beverages, as well as food and beverage services.

If this project gets on the right track, the Northeast will become a healthy base model for China, then for the Asia-Pacific region, and eventually for the whole world, and those Japanese enterprises involved are expected to expand their investment in the Northeast.

The powerful promotion of this project, and support for the establishment of a smooth partnership between Japanese enterprises and their Chinese counterparts by both the Japanese and Chinese governments will enable a number of Japanese enterprises to take part in this project without having to worry about achieving great results.

(3) Raise the environmental standards in the Northeast to the same level as Japan

My third proposal is to raise the environmental standards in relation to factory smoke/drainage, exhaust gas from automobiles and domestic drainage in the Northeast to the same level as Japan.

When promoting the above-mentioned food-safety project, if the environment for air and water in the Northeast is no good, nobody can eat their food without worrying.

For that reason, stricter environmental standards need to be implemented in the Northeast compared to other areas of China. For example, if meeting Japanese environmental standards by 2020 is made obligatory, all factories in the Northeast will be required to be equipped with cutting-edge flue gas treatment facilities, and automobiles will need to clear Japanese emission controls to run in the Northeast.

In that way, considerable environment-related demand would be generated, Japanese companies in the environment-related industries would advance into the Northeast, and most automobiles that run in the Northeast would be hybrid vehicles.

Implementing the three measures described above would considerably stimulate the economy of the Northeast, and also transform the area into a healthy base model with fine environmental protection at the same level as Japan which every Chinese person envies. At the same time, these measures are expected to significantly work on environmental improvements in North China which currently has the country's most severe level of air pollution.

The realization of the above-mentioned achievements as a Japan-China cooperation project would strengthen the bond of trust between Japan and China.

I strongly expect to accomplish the establishment of a win-win relationship between Japan and China through support for One Belt One Road initiative as a cooperation project between Japan and China.



(This article was translated from the Japanese transcript of Mr. Seguchi's column published by JBpress on November 24, 2016.)

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