China Japan relations and the East Asia region

China - Japan relations and the East Asia region
China in 2010 displaced Japan to become the second biggest economy in the world. Both
countries are the first and second largest economies in the Asia region and both also are part of
the world factory, centred in China, that it is Asia, especially East Asia.
Both nations have a long historical relationship but complicated by issues that have to do with
Japan invasion of China in the first half of the XX century and now the growing assertiveness of
China in the region. Both are the engines of growth in the East Asa region. Japan used to be the
largest but now China is becoming it. China is already the biggest trade partner of most
countries in the region and its investment is increasing, even if still is behind Japan in this field.
So, a stable relationship between China and Japan is a condition for the continuous growth of
the East Asia region. In this article a review of China Japan relation will be done. First trade
relationship between China and Japan will be seen, then investment, then exchange of people,
then economic aid, and last the political relations mong them will be assessed. A conclusion will
follow.
I. Introduction
In the last 3 decades the Japan have experienced a low economic growth rate. Since 1990 after
the burst of the “bubble economy” the country has experienced low GDP annual growth rates,
in what Japanese call “lost decades”. Meanwhile China has experienced high growth rates of its
GDP, since the reform and open policy implemented at the end of the 1970s, but from the
second half of the last decade its pace of growth has diminished. See Graphic 1.
Graphic 1: China and Japan Real GDP growth, annual percentage change
Source: IMF DATAMAPPER https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/CHN/JAP/JPN
But Japan is already a matured, industrialized economy, with a GDP per capita of over 40
thousand dollars, and China is still considered a developing economy with a GDP per capita of
just 10 thousand dollars.
According to statistics from the latest Global Economic Prospects published by the World Bank
on January 11, 2022, the COVID-10 pandemics hit very hard Japan in 2020 and its recovery has
been slow, while China managed to grow and last year 2021 specially achieved a very strong
growth rate. See Table 1.
Table 1:

Source: World Bank: Global Economic Prospects January 2022
II. Trade in goods
As it is seen in Table 2, China is the biggest market for Japanese goods, accounting for 22.0%
of total in the year 2020, and the second biggest was United States with 18.5% of total.
Table 2: List of major markets for Japanese
exports
Unit : US Dollar thousand
Importers
Exported
value in 2016
Exported
value in 2017
Exported
value in 2018
Exported
value in 2019
Exported
value in 2020
World 645,589,410 698,021,623 738,164,252 705,842,013 640,953,137
China 113,946,189 132,760,341 144,046,136 134,719,884 141,322,302
UnitedStates of America 130,718,068 135,071,360 140,656,292 140,468,605 118,723,609
Korea, Republic of 46,282,336 53,276,519 52,479,456 46,282,733 44,658,431
Taipei, Chinese 39,337,034 40,638,392 42,391,676 43,013,040 44,403,796
HongKong, China 33,658,590 35,433,758 34,721,568 33,632,061 31,993,214
Thailand 27,425,959 29,427,452 32,272,971 30,195,432 25,514,386

Singapore 19,862,199 22,652,218 23,409,813 20,173,990 17,694,529
Germany 17,670,716 18,943,142 20,890,775 20,233,415 17,592,633
Viet Nam 13,003,579 15,051,393 16,434,251 16,488,929 17,109,773
Malaysia 12,151,739 12,761,396 13,940,724 13,295,572 12,588,499
Source: International Trade Centre: Trade Map
As it is seen in Table 3, China is the biggest source of imports for Japan, accounting for 25.8%
of total in the year 2020, and the second was United States with only 11.3% of total.
Table 3: List of mains sources of Japanese imports
Exporters
Imported value
in 2016
Imported value
in 2017
Imported value
in 2018
Imported value
in 2019
Imported value
in 2020
World 608,071,912 672,100,069 749,092,205 720,964,445 634,678,167
China 156,848,668 164,587,366 173,814,744 169,236,468 163,760,523
Australia 30,490,161 38,919,119 45,733,812 45,461,975 35,654,301
Taipei, Chinese 23,001,238 25,391,415 27,134,971 26,860,116 26,762,797
Thailand 20,177,296 22,738,475 25,086,988 25,362,817 23,764,572
Viet Nam 16,268,510 18,538,148 21,144,681 22,476,790 22,042,028
Germany 22,064,107 23,424,849 25,989,329 24,936,102 21,221,139
Saudi Arabia 19,607,267 27,773,705 33,814,637 27,665,618 18,452,565
UnitedArabEmirates 17,331,269 20,764,354 27,609,974 26,196,772 16,391,766
Regarding export markets for China, the United Sates is the biggest destination for its goods
with 17.5% of total and in second place is Hong Kong with 10.5%. Japan is in third place with
5.5% of the total. See Table 4.
Table 4: List of major markets for Chinese
exports
Importers
Exported value
in 2016
Exported value
in 2017
Exported value
in 2018
Exported value
in 2019
Exported value
in 2020
World 2,118,980,582 2,271,796,142 2,494,230,195 2,498,569,866 2,590,607,686
HongKong, China 292,214,997 280,975,081 302,960,301 279,616,724 272,658,016
Japan 129,450,377 137,368,622 147,235,099 143,223,969 142,641,690
Viet Nam 61,585,175 72,117,144 84,015,799 98,004,333 113,813,694
Germany 65,768,897 71,224,289 77,908,711 79,706,091 86,823,917
Netherlands 57,746,634 67,325,060 73,124,185 73,945,370 79,010,191
UnitedKingdom 56,261,404 57,039,880 56,987,896 62,275,959 72,605,125
India 58,920,648 67,925,121 76,880,637 74,924,285 66,726,981
Taipei, Chinese 40,400,323 43,934,720 48,656,780 55,079,733 60,141,641

For China, the biggest source of its imports is Taiwan (Taipei, Chinese), with 9.7% of the total,
and the second is Japan with 8.5% in 2020. See Table 5.
Table 5: List of mains source of Chinese imports
Exporters
Imported value
in 2016
Imported value
in 2017
Imported value
in 2018
Imported value
in 2019
Imported value
in 2020
World 1,588,695,867 1,840,957,060 2,134,987,265 2,068,950,255 2,055,590,612
Taipei, Chinese 139,715,214 154,796,770 177,345,362 172,800,947 200,664,323
Japan 145,771,152 165,494,647 180,401,786 171,523,312 174,867,747
China 128,794,412 132,604,645 146,381,812 129,525,387 125,277,787
Australia 70,233,044 94,632,692 105,083,923 119,608,314 114,836,642
Germany 86,118,708 96,932,837 106,257,241 105,037,212 105,261,229
Brazil 45,603,468 58,476,878 77,141,726 79,203,569 84,083,784
Viet Nam 37,216,721 50,374,166 64,087,360 64,078,465 78,474,632
Malaysia 49,118,293 53,961,162 63,321,954 71,629,893 74,733,134
As it is seen China and Japan are both important trade partners of each other. In fact, for China,
Japan is an important source of capital and intermediate goods necessary to assemble goods,
many of which are exported to the world. For Japan,China is even more important, as it is its
largest export destination and its biggest source of imports. Both countries are part of the global
supply chains that has made possible to the East Asia region to become the factory of the world.
Both are members also of the Regional Comprehensive Economic Partnership, RCEP, the
biggest economic integration group in the world that came into force in January 1, 2022. Thanks
to this, trade and investment relations between both countries will increase. But there are some
problems in the horizon.
Due to the ongoing economic competition between China and the United States, there is a trend
toward “decoupling” among them. US want to be less reliant on China and want its allies to do
that also. Japan itself sees depending too much in China as something not good. That is why
some measures are being implemented to avoid that, and of one of them is for example an
“economic security bill” that is being promoted by the government and that could make buying
parts and components from China more difficult1
.
III. Investment
Regarding Foreign Direct Investment, FDI, Japan is one of the biggest, if not the biggest,
foreign investor in China. In 2020 it invested there 10.7 billion dollars in China, from a total of
around 152.3 billion dollars Japan invested abroad that year. China was the largest destination
for Japan investment in Asia, and the sixth largest in the world, after United Sates in first place,
followed by Luxemburg, Switzerland, Netherlands, and Australia. See Table 6.
1 See Asia Nikkei: “Corporate Japan fears economic security bill´simpacton China trade”, January 16,
2022 https://asia.nikkei.com/Spotlight/Comment/Corporate-Japan-fears-economic-security-bill-s-
impact-on-China-trade

Table 6: FDI flow (Based on Balance of Payments, net), by Country and Region, Historical Data
(Japan outward FDI)
Source: JETRO:Japanese Trade and Investment Statistics, Japan's Outward and Inward Foreign Direct
Investment https://www.jetro.go.jp/en/reports/statistics
By FDI stock, from 1996 to 2020 Japan has invested a total of 143.4 billion dollars in China,
and it was the fourth largest destination for Japan, after United States in first place, United
Kingdom, and Netherlands. In that period Japan invested abroad a total of 1.9 trillion dollars2
.
According to statistics from IMF, based on figures reported by China, at the end of 2020 Japan
has invested there a total of 193.3 billion dollars, this amount being the third largest investment
from abroad for China, after Hong Kong in first place and Virgin Islands in second, from a total
received by China of 3.2 trillion dollars3
. See also table 7.
Table 7: FDI received by China, as of end of 2020
2 See JETRO: Japanese Trade and Investment Statistics, Japan's Outward and Inward Foreign Direct
Investment: FDI stock (Based on International Investment Position, net) 1996-2020,Outward
3 See IMF Coordinated DirectInvestment Survey: Direct Investment Position (Inward and Outward),
Table 1: Inward Direct Investment position,as of end of 2020,Reporting Economy: China PR: Mainland
https://data.imf.org/regular.aspx?key=61227424

Source: See IMF Coordinated DirectInvestmentSurvey: DirectInvestment Position(Inwardand Outward)
Japan traditionally has received, compared to other industrialized economies, little FDI, but in
the last years this have been increasing. In 2020 China was the second largest investor from
Asia, with 1.3 billion dollars, from a world total of 62.7 billion dollars received by Japan that
year. See Table 8.
Table 8: FDI flow (Based on Balance of Payments, net), by Country and Region, Historical Data
(Japan inward FDI)
Continuation ………
Source: JETRO:Japanese Trade and Investment Statistics, Japan's Outward and Inward Foreign Direct
Investment https://www.jetro.go.jp/en/reports/statistics

IV. Economic aid from Japan to China
Japan has given a significant amount of economic aid to China but in October 2018 Prime
Minister Shinzo Abe in a visit to China announced the end of this4
.
Japan economic aid to China began in 1979 and until the first decade of the XXI century China
received large amounts of Japanese official development assistance,ODA. In severalyears it
was the main beneficiary of Japan´s ODA and even in the year 2005 China was the second
largest recipient, with around 1 billion dollars that year5
. Also, Japan was the main donor to
China even until some years ago. Up to the year 2009 Japan gave to China a total of 20.9 billion
dollars in ODA6
. This includes government loans, grant aid, and technical assistance.
V. Exchange ofpeople
China become the biggest source of foreign tourists to Japan in the last years. In 2019, before
the Covid-19 pandemics halted tourism, around 9.6 million Chinese visited Japan, a big increase
from the 1.4 million Chinese that visited Japan in 20107
. See Graphic 2.
Graphic 2:
Source: JTB TourismResearch & Consulting Co.
The total of foreigners that visited Japan in 2019 was 31.9 million, so Chinese represented
around 30% of the total8
.
4 Japan´s MOFA: White Paper on Development Cooperation 2019
https://www.mofa.go.jp/policy/oda/page_000017.html
5 See Carlos Aquino:“Relaciones Económicas China-Japón:Los dos gigantes de Asia cada vez mas
integrados”in Pensamiento Critico No. 14,Magazine of the Instituto de Investigaciones Económicas,San
Marcos National University,december 2010, pages 9-25
https://revistasinvestigacion.unmsm.edu.pe/index.php/econo/article/view/9090/7921
6 See document in Japanese languageof the Ministry of Foreign Affairs,Table5, page 5
https://www.mofa.go.jp/mofaj/gaiko/oda/shiryo/kuni/10_databook/pdfs/01-04.pdf
7 See JTB Tourism Research & Consulting Co.: Japan-bound statistics
https://www.tourism.jp/en/tourism-database/stats/inbound/

Japan is one of the most popular destinations for China tourists, but in the case of Japanese
going abroad, China is not the most popular destination, and in fact every year less Japanese
are going to China nowadays. In 2018 only 2.69 million went there and it is a downward
trend, with the maximum number achieved in 2010 when 3.73 million went there9
. See
Graphic 3 also.
Graphic 3:
Source: Statista
In another subject, Chinese students are the largest number of foreign students in Japan. As
of May 2019, of the total number of 312,214 foreign students in Japan, 39.9% or 124,436
were from China10
. See Table 9.
Table 9: Number of internationals students in Japan, by nationality, as of May 1, 2019
8 See Nippon.com: “New record for international visitorsfor Japan”January 27,2020
https://www.nippon.com/en/japan-data/h00631/new-record-for-international-visitors-to-
japan.html#:~:text=The%20Japan%20Tourism%20Agency%20announced,increase%20of%202.2%25%20
from%202018.
9 See Statista: “Number of Japanesetravelers to China from 2009 to 2018”
https://www.statista.com/statistics/786613/number-japanese-travelers-to-
china/#:~:text=In%202018%2C%20the%20number%20of,2010%2C%20with%20about%203.7%20million.
10 JASSO, Japan Student Service Organizaton:“Result of an annual survey of international students in
Japan 2019”, April 2020,page 4 https://www.studyinjapan.go.jp/en/_mt/2020/08/date2019z_e.pdf

Source:JASSO, Japan Student Service Organizaton
Japan was the third most popular place for Chinese students to go. According to the South
China Morning Post “Of the 703,500 Chinese nationals studying abroad in 2019, 20 per
cent or 140,786 were in Australia, 24.5 per cent were in the US, and 17.6 per cent were in
Japan, according to figures from China’s education ministry, the Japan Student Services
Organisation, and Australia’s federalgovernment”11
.
But there are moves to limit the access of Chinese students to Japanese Universities, to
prevent them accessing “sensitive” science and technology subjects12
. This is in line with
the growing scrutiny that Chinese students and scholars are having in US universities and
research centres.
On the other hand, not many Japanese students go to China. In fact,nowadays not many
Japanese go abroad for studies. According to a survey, in 2019 around 77,953 Japanese
went abroad for study, most of them to the United States,19,405 students, but only 818
went to China. China was the 10th
largest destination for Japanese students abroad that
year13
.
11 See South China MorningPost: “As Japan and Australia guard tech research, could China fears affect
competitiveness?” 15 January,2022 https://www.scmp.com/week-
asia/politics/article/3163304/australia-and-japan-universities-guard-tech-research-could-china
12 See South China MorningPost: “As Japan and Australia guard tech research, could China fears affect
competitiveness?” 15 January,2022 https://www.scmp.com/week-
asia/politics/article/3163304/australia-and-japan-universities-guard-tech-research-could-china
13 See felca.org: Japan Association of Overseas Studies, JAOS 2021 Survey on the number of Japanese
studyingabroad,12 June 2021: https://www.felca.org/jaos-2021-survey-on-the-number-of-japanese-
studying-abroad/

At the end of June 2020 there were 2,885,904 foreigners in Japan, and the largest number is
from China, 786,830 persons, that included 119,302 students and 278,950 long-term
residents. Chinese represented around 27.3% of the total of foreigners living in Japan14
.
Finally, Chinese and Japanese do not have a favourable opinion of each other. According to
a recent publication “In 2021 some 71% of Japanese said China posed a “threat”, up from
63% in 2020. Likewise, 66% of Chinese had negative views of Japan, up from 53%”15
.
VI. Political relations
China and Japan have a long historic relationship and Japan at the beginning learned many
things from China, from the writing system and the form of government to the planning of
cities. But Japan become the first country in Asia to industrialize and invaded China in the
1930s. This created a spirit of animosity in China toward Japan that continues up to now.
But when China began its reform and open policy at the end of the 1970s Japan was in a sense a
model to follow by China and contributed with economic aid and its companies have invested a
lot of money in China and transferred technology16
.
After the Second World War China and Japan relations began in 1972 and this year marks the
50th anniversary of that.
Relations have had it ups and downs since 1972. One recent problem is the issue of the Senkaku
islands, a territory occupied by Japan, but that China claims as its own territory, and call it
Diaoyu islands. Another is the growing assertiveness of China in the South China Sea,a place
that China sees it mostly as its own, but this is disputed by not only Japan but other countries in
the region.
The current Japanese Prime Minister, Fumio Kishida, is said to know more about China than
other Japanese leaders because he was Foreign Ministry before, from 2012 to 201717
. He had to
deal with the aftermath of the nationalization by the Japanese government of the Senkaku
islands, that arose a strong China response.
High level political meetings have not been common in the last years. Japan latest state visit to
China was by Prime Minister Abe in October 2018, and President Xi Jinping was supposed to
visit Japan in the first month of 2020, but this was not made possible with the outbreak of
Covid-19 pandemics.
Japan is a member of the Quad and a leading advocate of the Indo Pacific vision. China sees it
as an instrument to contain it. Japan is an ally of the United States. Another element that irritates
China is the position that Japan has adopted respected to Taiwan, when in severalsummit last
year with its partners in United States,European Union, and Australia, for example, have
mentioned in the joint communiques the “importance of peace and stability across the Taiwan
Strait and “encouraged the peacefulresolution of cross-Straits issues”18
.
14 See Immigration Services Agency of Japan: “Statistics on foreign residents in Japan”end of June
2020https://www.isa.go.jp/en/policies/statistics/toukei_ichiran_touroku.html
15 See The Economist: “How Japan see China”,January 1st, 2022,edition
https://www.economist.com/asia/2022/01/01/how-japan-sees-china
16 See Ezra Vogel: “China and Japan -FacingHistory”,The Belknap Press of Harvard University Press,
2019
17 See Japan Times: “How Kishida´spolitical journey has shaped his viewon China”, January 3, 2022
https://www.japantimes.co.jp/news/2022/01/03/national/politics-diplomacy/kishida-background-
china-views/
18 See East Asian Forum: “The Taiwan factor in US–Japan alliancerelations”

US and Japan relationship have become stronger in the last years. Just less than two weeks ago,
there was the two plus two meeting of foreign and defence ministers (an online meeting). In the
meeting both countries reaffirmed their compromise of a strong alliance and devised means to
counter what they described as “growing challenge to challenge unilaterally and coercively the
status quo”, and for strengthen Japan Self-Defense Forces´posture on its southwestern islands.
They even mentioned again their common posture in Taiwan19
.
VII. Conclusions
Relations between China and Japan are very strong in terms of trade and investment, and both
are the main economies in the East Asia region. The recent entrance into effect of RCEP will
foster that relationship.
Japan is a strong ally of the US and if relations between US and China deteriorate, this could
affect China Japan relations. The growing assertiveness of China in the region, commensurate
with its growing economic presence,has made Japan and other countries wary of China. Many
will prefer the continuous presence of US in the region to balance China presence. It is because
China is by far the biggest economy in the region. China GDP size is around four times of
Japan, the second largest, and China population is more than the population combined of the
rest of the region´s population.
There are severalchallenges in the East Asia region that would require China and Japan to work
together. These are,for example, a North Korea regime bent on increasing its military
capabilities and posing a danger the whole region, also the climate change that will affect
seriously the region with environment contamination and rising sea levels.
The East Asia region after the Second World War saw a strong presence of United States,that
guaranteed a Pax Americana, and a growing market for goods produced in the region. But Japan
and the region must deal with a growing China presence. The way this will be managed will
decide the future of the region, its peace and stability, and its continuous presence as the factory
of the world.
January 19, 2022
6 September 2021 https://www.eastasiaforum.org/2021/09/06/the-taiwan-factor-in-us-japan-alliance-
relations/
19 See Asia Nikkei: “US, Japan to develop counter-hypersonic capabilities:2-plus-2”,January 7, 2022
https://asia.nikkei.com/Politics/International-relations/Indo-Pacific/U.S.-Japan-to-develop-counter-
hypersonic-capabilities-2-plus-2

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