Why Japan And China Are Squaring Off

For years, optimists in China and Japan have argued that breakneck economic integration of the two Asian powers would trump festering historical enmities. After all, last year, China overtook the U.S. as Japan's biggest trading partner, and two-way trade clocked in at $211 billion. But the Sino-Japanese strategic rivalry is real, intense, and likely to turn more contentious in the months ahead.

That was underscored clearly on Apr. 9, when some 10,000 protesters in Beijing clashed with riot police and nearly stormed the Japanese Embassy. Protesters accused Tokyo of whitewashing wartime atrocities, such as the 1937 massacre of civilians at Nanjing, in new editions of school history books. The next day, demonstrators in the cities of Guangzhou and Shenzhen trashed Japanese storefronts and called for boycotts of goods ranging from Sony (SNE ) DVD players to Toyota (TM ) Corolla cars. Even Chinese Premier Wen Jiabao turned up the heat on Apr. 12 when, during a visit to India, he declared that Japan "needs to face up to history squarely."

What's behind the tension is far more than longtime differences over Japan's past aggressions. Japan and China are locked in a fierce contest for economic and diplomatic leadership in Asia. Unable to bolster Japan's economy much since he took office in 2001, Japanese Prime Minister Junichiro Koizumi has increasingly played the nationalist card to shore up support at home and project a more assertive Japan around the world. This has involved everything from controversial visits to the Yasukuni Shrine, where war criminals as well as war dead are commemorated, to proposed constitutional reforms that would allow Japan to take robust military action beyond its borders. The Chinese, feeling their economic and diplomatic influence on the rise, are doing their best to counter Tokyo. "They think enough is enough. And they probably believe they are in a decent position internationally to do this," says Eric Heginbotham, senior fellow for Asia Studies at New York's Council on Foreign Relations.

Fault Lines

With so much at stake economically, neither government wants the situation to spin out of control. Japan's Foreign Minister, Nobutaka Machimura, is expected to travel to Beijing soon for talks. Yet with emotions so high, it will be tough for Koizumi to meet Beijing halfway on textbook reform. Chinese President Hu Jintao & Co. also ran a risk by allowing the anti-Japanese protests -- the biggest China has seen since the U.S. accidentally bombed the Chinese Embassy in Belgrade in 1999. "The government probably didn't expect the protests to go [so] far," says Akio Shibata, a China expert and deputy director of the the Marubeni Research Institute in Tokyo.

Even if the protest over schoolbooks proves momentary, stress between the two countries will likely continue across a range of fault lines. Koizumi has already blasted Beijing for a submarine incursion into Japanese waters last November, and Japan plans to cut off any new yen development loans to China starting in 2008. Japan is also making preparations to start exploration in a potentially rich natural gas bed in the East China Sea that falls within disputed international waters with China -- unless Beijing gets real about settling the flap diplomatically.

One of the sorest points will be the debate over the U.N. Security Council. Japan, the U.N.'s second-biggest contributor, wants to be admitted to the Security Council as part of a major U.N. reform package now under discussion. China, one of the Council's veto-wielding permanent members, opposes expansion of the Security Council -- an opposition widely seen as a move to block Tokyo. To Japan's chagrin, even longtime ally Washington is waffling. The Bush Administration is insisting on a "broad consensus" at the U.N. before signing off. "It is not a slam dunk for Japan or any other country," says one senior Administration official.

The trouble for Koizumi is that all the long-term trends argue in favor of China taking a leadership role in Asia. China's gross domestic product is about one-third the size of Japan's $4.5 trillion GDP at current exchange rates. But China, with its double-digit growth, seems all but certain to overtake Japan toward the end of the next decade. China's $30 billion defense budget is growing at a 10%-plus pace and isn't that far off from Japan's current budget of $45 billion. None of this adds up to harmonious relations between Tokyo and Beijing. And much as it pains the Japanese to admit it, China will increasingly be calling the shots.

By Brian Bremner in Tokyo, with Dexter Roberts in Beijing and Stan Crock in Washington

Edited by Rose Brady

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