After Japan’s miraculous post-war economic recovery, it became the
undisputed titan of Asia and currently sits at the pinnacle of world
economies, second only to the United States.
Even though China is down at fourth in the world rankings, its growth is
off the charts since its first boom in the eighties, and it continues
to roll on like a freight train. In the last couple of decades Japan has
not kept up with its noisy neighbour’s double–digit growth figures,
only managing 2 percent in 2007 compared to China’s 12 percent.
Many analysts now believe China should really be higher up in the
economy rankings, if certain important indicators were given more
precedence.
The rivalry of the two ancient and dominant Asian cultures has led to many conflicts in political and economic arenas.
A good example is the significant need and competition for energy
imports. Although China has a fair amount of coal resources, both
countries depend almost entirely on imports for energy, mostly oil and
gas, to fuel their rampant economies.
The energy war has produced periods of raised tensions and, in turn,
maritime border and island disputes in the East China Sea, an area where
there are known to be oil and gas reserves yet to be tapped.
Despite this, economic partnership between the old enemies has gotten
much closer in the last decade. With the two nations accounting for
nearly 80% of economic activity in East Asia, it makes sense to work
together.
Bilateral trade between Japan and China reached a huge $240 billion in
2007, a figure which means China has overtaken the United States as
Japan’s biggest trading partner. China has, since 2004, become the
number one market for Japanese exports and the trend is only increasing.
Mutual investment is also on the rise, although still heavily slanted
towards Japanese firms investing in China. Money is beginning to move
the other way more recently.
Analysts say the relationship is extremely beneficial to both sides and
can improve. Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management
said in a phone interview, “China is always looking for new investment
and technology to boost its already motoring economy, Japan is a good
fit for that. Meanwhile, Japan will always want a growing and nearby
market for its exports. It’s a wonder the two nations haven’t forged
closer links before.”
