Possible types of economic sanctions against Japan

Potential economic sanctions against Japan could be for the import or export of goods and services, entry of capital, external financing and external direct investment. Taking into account China and Japan's relative strengths and weaknesses, economic sanctions against Japan could start in the following areas:

Import of goods: Generally speaking, the higher a final consumer nation's import volume is, the greater this nation's potential influence on exporting nations. Companies and governments of exporting nations often have to accept the rules of importing nations, even legal sanctions, to maintain access to essential markets in importing nations. As China is a top importer of Japanese products, resisting the inflow of Japanese goods would be one way to damage Japan's economy.

Export of goods: There is little we can do in this aspect because the substitutability of the goods we export to Japan is high. Restricting China's exports to Japan is equal to giving the market to other foreign competitors. Strategic resources such as rare earth materials are the most suitable goods that can be restricted to export to Japan.

Trade in services: The most eligible breakthrough is reducing tourism in Japan, which would likely be a great shock to the Japanese tourism industry.

Foreign direct investment: Under the same conditions, Chinese companies could prefer to choose non-Japanese partners. However, unless the tensions between China and Japan intensify further, the government should not declare extra entry restrictions on Japanese capital.

The control of economic sanctions against Japan

There' no doubt that China should adhere to a peaceful diplomatic policy. However, in order to protect China's rights and interests, we must be prepared to struggle. Economic sanctions are much milder than the real guns and bullets of war.

Even so, China still needs to remember clearly that regardless of its economic development level, its political, economic and military resources are limited and it shouldn't waste them. China should explore how to use the economic sanctions properly, with the full consideration of the following principles:

Firstly, we must determine the ultimate goal of the sanctions and which steps we should take. A second consideration is how to prevent potentially hostile countries from allying to contain China. Thirdly, since the implementation of sanctions against Japan might lead to actions from other countries, we need to ensure that the United States doesn't directly intervene in the dispute. Fourthly, we should ensure that our moderate use of economic sanctions to deter our opponents won't have much impact on the international economic order and ensure that most of our trading partners are still willing to trade with China. And fifthly, we must ensure our economic sanctions minimize interference at home. At present, most of products we imported from Japan have few alternative sources. As a result China's boycotts from this part of imported Japanese goods would contribute to losses in our own industries.

In all, both patriotic enthusiasm and reasoning are indispensable in pursuing an effective strategy. While safeguarding our national sovereignty, we also need to exercise a sense of propriety in order to avoid results that run counter to our intended objectives.

The author is a researcher with the Chinese Academy of International Trade and Economic Cooperation.

(The article was first published in Chinese and translated by An Wei.)

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