Table Speech

“Rise of China and the Japan-U.S.-China Relationships”

May 11, 2011

Dean and Professor,
Faculty of Law, Keio University
Mr. Ryosei Kokubun

 First of all, let me share with you the quick response made by the Chinese government to the East Japan Great Earthquake. Many neighboring countries immediately dispatched their disaster relief teams, including the 15 members from China. President Hu Jintao paid an exceptionally prompt visit to the Japanese Embassy in China. Since the “strategic, reciprocal relation” formed between Japan and China in October 2006, during former Prime Minister Abe’s visit to China, both countries ceased to bring up historical issue. In May 2008, President Hu visited Japan and met the Emperor. Two days after his return to China, the Sichuan Earthquake hit the country. Japan sent the disaster relief team and their dedicated service evoked pro-Japanese sympathy across China.

1. Verification of the Rise of China
 The Chinese government aims at “maintaining the current communist system” through “economic growth.” Economic growth, in the past, was achievable by depending on foreign capital or making domestic investments on fixed assets.
 Time has come for China, whose 12th Five-Year-Plan (2011-2015) forecasts 7% economic growth, to draw future policy measures. Today, foreign affiliated corporations play a significant role in the Chinese economy, accounting for over 60% of its export and over 30% of its corporate tax. In such circumstances, China has no option but to seek ways to survive in the international community.

 We observed, however, the Chinese government took an opposite direction. As the Chinese GDP became the 2nd largest in the world last year, China started to engage in heated debate with neighboring countries over its territorial waters or even raised a loud voice against the U.S. China has kept a low profile towards Japan so far, yet they started to be more self-assertive. Two factors explain this change: first, China became more confident with their economic position, and second, China experienced the power transfer from Mr. Jiang Zemin to Mr. Hu Jintao, and now to Mr. Xi Jinping. Diplomatic issues are closely related to their internal political affairs.

 The current political structure is quite well-balanced, based upon the State Council group members and the senior military officers, while the Communist Youth League, the Crown Prince Party as well as the Shanghai Clique are becoming influential. The appointment of Mr. Xi Jinping to the Vice Chairman of the Central Military Commission last October is observed to be a sign of power transfer. China now strives to keep the power balance between Mr. Hu Jintao and Mr. Xi Jinping, while it publicly recognizes the importance of “living in harmony with the international community.”

 In China today, business and politics are completely separated. In the world of business, everything is conducted behind closed doors, without any inheritance tax, nor proper mechanism of progressive tax system or individual income tax. Social unrest is caused by an increasingly uneven distribution of wealth. The Chinese authority must take strong measures to establish a sound market economy that secures a more equitable distribution of profits and greater transparency, so that its people will come to enjoy equal opportunities.

 China is often misunderstood to have a centralized system, yet it rather takes a federal style. Previously 30% of the financial resources were allocated to the national government while the remaining 70% went to the local governments. Today, the ratio is fifty-fifty. Yet, most policies emphasize on local development. The greatest question today is “how to sustain sound economic growth in the future?”

 Investments had been the driving force that propelled growth so far, first overseas direct investments, followed by fixed asset investments by national capital. Local governments were encouraged to make investments. As a result, it triggered the economic bubble. China also has earned excessive foreign currency by export, which caused imbalanced valuation of the RMB.

 Consumption is the key to future economic growth. Sound and stable future perspective will expand domestic demand. The 12th Five-Year Plan focused not only on expanding domestic demand, but also on controlling the media and police.

2. Japan-U.S.-China Relationships
 U.S. diplomacy is based on the principle that disturbance in China will have adverse affect on the world economy. U.S. and European countries are becoming increasingly dependent on the Chinese economy, thus human-rights dialogues have become a dead letter. Nations around the world are afraid of the collapse of the Chinese regime, thus they have come to support the Chinese Communist Party.

 In reality, various frictions do exist between U.S. and China. Yet, they both try to deepen dialogues, overlooking some inscrutable differences between them. U.S. understands it cannot reconstruct its economy nor solve the issues over terrorism and North Korea without the involvement of China.

 Now, what role can Japan play in the possible “G2 era led by the U.S. and China”? Japan must realize its waning influence in the U.S.-China relationship. The Japanese are the most diligent people, and its technology is exceptional. If the world recognizes it, they will start to utilize it.

 Japan must also learn a lesson from the U.S.-China relationship, because diplomacy is not a question of like or dislike but to seek ways for both to survive. Now Japan should pursue omnidirectional diplomacy with nations around the world, while seeking ways for closer involvement with China’s expanding economy for its own development. We are now at a historical turning point to reconstruct Japan after the East Japan Great Earthquake.