The first round of the China-Japan High-Level Economic Talks will take place in Beijing tomorrow, signaling the "Sino-Japanese relationship of mutual benefit based on their common strategic interests" is gaining depth.

 

In October 2006, then Japanese Prime Minister Shinzo Abe made an "ice-breaking" trip to China, followed by Chinese Premier Wen Jiabao's "ice-thawing" visit to Japan in April this year, as strategic dialogue between the two nations was resumed and "constructing a relationship of mutual benefit based on common strategic interests" became a consensus between them. The China-Japan High-Level Economic Talks mechanism, as a spin-off of the revived bilateral strategic dialogue, will provide the institutional premise for the two countries to coordinate policies as well as maintain and develop common interests.

 

The economic mutual-dependency between China and Japan has been deepening along with the deepening of globalization in the new century. The integration of industries centered on the traditional manufacturing industry is spreading into logistics, circulation, financial and information industries. The structure of Sino-Japanese trade led by "goods trade" is gradually expanding toward "services trade" and driving forward capital flow and technology exchanges between the nations and the development of securities trading.

 

The process of "services trade" usually takes place with cross-border movement of personnel, technology, capital and physical entities of economic organizations. For example, as sales of Japanese-made automobiles grow in scale, the after-sales services such as auto repair and technological support must move into the Chinese market in matching strength to offer localized services. Another example can be found in such services as logistics, circulation, banking and finance, where market opening has been gaining depth since the transitional period after China joined the World Trade Organization (WTO) expired. Foreign banks can now open their own branches in China to offer various services in multiple currencies. Particularly noteworthy is that, as foreign banks are now allowed to do renminbi business in China, the number of Japanese bank branches is growing. Meanwhile, technology exchanges and emersion are flourishing as well, as the movement of Japanese enterprises' operations to China gains scale and speed and China's import of complete plants expands.

 

The development of such high-end services trade inevitably requires that the two countries' relevant policies and legal systems allow interconnection and integration with each other in nature. However, universal rules over investment and competition and services trade agreement under the WTO framework are still taking shape as we speak, leaving government agreement between the two countries the only authoritative contract on market regulation and negotiated rules. To facilitate the formulation of such a mechanism, it is particularly important to have strategic dialogue and policy coordination between the two countries.

 

Also, as the tide of globalization and regionalization continues to surge ahead, non-traditional threats such as shortages of energy and other natural resources, environment damage, crime, natural disasters and the spread of infectious and communal diseases are on the rise. The impact of these non-traditional threats have been felt beyond national borders and directly threatening the social stability of neighboring countries and even the surrounding region. To deal with these non-traditional threats, a country or ethnic group simply cannot pull it off on its own and close cooperation by neighboring countries are therefore a must for them to set rules and regulations to resist and neutralize their common threats and protect their common interests.

 

Since the normalization of China-Japan diplomatic relations in 1972, despite the signing of an "investment protection agreement" between the two nations to provide a safety net for Japanese enterprises directly investing and operating in China, the two countries have yet to work out a complete statutory system and institutional safeguard for free movement of personnel, protection of technology and intellectual property rights and the establishment of financial institutions to conduct daily operations and securities trading.

 

It is now an urgent task for both governments to agree on a standard for mutual access to advance two-way investment and economic fusion through policy coordination under strategic dialogue between the two governments.

 

Regrettably, the Koizumi administration did not cherish the five-year grace period China had after joining the WTO, nor did it take this historic opportunity to gear up strategic dialogue and conduct positive policy coordination with China, but rendered the China-Japan ties barely alive by making the historical mistake of repeatedly paying homage to the Yasukuni Shrine (which honors executed Japanese Class-A war criminals among others killed during World War II).

 

Because China and Japan could not conduct productive policy coordination to facilitate negotiations over a China-Japan investment agreement, an intellectual property rights protection agreement, an agreement on free movement of technicians and on "joint prevention and control of environmental pollution and access to (each other's) environmental protection market" as well as access to financial and IT service markets, the development of China-Japan economic ties lagged behind the pace of globalization. This sorry situation was the main reason why China's trade kept a fast pace while Japan's share of the China trade shrank relatively speaking.

 

The first round of the "high-level economic talks" between China and Japan will not only help bring bilateral economic relations up to date but also give the Sino-Japanese strategic relationship of mutual benefit real substance. This is what our time requires and, moreover, the culmination of the two countries' efforts to fulfill their regional responsibility and maintain regional stability and common prosperity. It can be seen as an institutional safeguard for the two nations to produce interconnected and fusible policies and a statutory system both sides can trust.

 

As for the participants of the talks, the Japanese side will be represented by the minister of economy, trade and industry, the minister of agriculture, forestry and fisheries and the minister of internal affairs and communications; while the host country will be represented by key members of the policymaking process such as the minister of commerce, who is in charge of foreign trade and investment, and minister of the National Development and Reform Commission, who oversees economic reform and development and industrial structure and layout. Also, both sides will feature senior officials involved in decision making for financial administration and foreign exchange policies, with their colleagues in foreign affairs acting as organizational coordinators.

 

It is not difficult to see in the lineups the "China-Japan High-Level Economic Talks" boasts the significance of an "all-round economic diplomacy" maneuver.

 

China and Japan still have many issues to settle between them and it is unrealistic to expect one round of talks will solve all of them. Nevertheless, whether the two sides reach consensus on any specific issue or not, the talks will serve as a starting block of historical significance for the development of bilateral relations in economic and judicial affairs.

 

The author is a researcher with China Institute of Contemporary International Relation

 

(China Daily November 30, 2007)