Sharing the China Market
LEWIS, DAVID
JAPAN AND THE WEST Sharing the China ^N^srlcct by davd lewis In the series of private talks President Carter will hold with Japanese Prime Minister Masayoshi Ohira prior to attending the Economic...
...Secretary of the Treasury W. Michael Blumenthal's early March visit to Peking, and warned that China and America might be colluding to trim Japan's share of the Chinese market...
...Tokyo's worries about American moves have combined with three recent developments to spur the change in its China-is-ours attitude...
...Now that recognition was a fact, the Japanese's worst fears seemed to have come true...
...Almost daily, the newspapers reported a new, biggest-ever deal with China...
...followed suit, Japan thought it had the Chinese market sewed up...
...Indeed, during this period events seemed to prove that the resource-short, export-geared Japanese were right to have increasingly high hopes for their Chinese economic connection...
...In addition, Taiwan sold mostly foodstuffs, while China shipped primarily minerals and oil...
...Quite the contrary, he says...
...Following the December announcement, the economic magazine Daiyamondo—not noted for level-headedness but widely read—said Rockefeller was one of the driving forces behind Carter's decision...
...But whether this concern has any foundation is debatable...
...JAPAN AND THE WEST Sharing the China ^N^srlcct by davd lewis In the series of private talks President Carter will hold with Japanese Prime Minister Masayoshi Ohira prior to attending the Economic Summit meeting of Western industrialized nations in Tokyo (June 28-29), a main item on the agenda is certain to be a continuation of the conversations begun in Washington last month on the trade imbalance, long a source of friction between the world's two largest economies...
...When Carter met with European heads of state in Gaud-eloupe, for example, the Japanese press labelled the sessions "A Japanless Summit...
...Nor has their confidence been strengthened by the long domestic recession that dates back to the so-called oil shock engineered by opec in 1973...
...recognitionof China...
...Specifically, there is a deep-rooted assumption that should the day ever come when Japanese and American businesses meet face to face in a struggle, the U.S...
...When the bomb fell, Japan already had $3.7 billion in contracts set for completion by the end of 1980...
...will come out on top...
...In fact, he notes, the South Korean market currently provides the Japanese with opportunities that China won't be able to match for"10, 15, perhaps 20 years...
...This inferiority complex makes it difficult for many Japanese to accept that their homeland is an economic superpower...
...Hence, there is a widespread notion that Japan's edge in the China market is due solely to its early recognition of Peking...
...For months prior to the U.S...
...The significance of this cannot be underestimated, since Japan is almost wholly dependent on foreign energy and is attempting to diversify its sources...
...closing with the dash of unlabeled com-mentry that is typical of the Japanese press, the piece insisted the "government and public must band together" to achieve this goal...
...Speculation on Peking's motives has ranged from dwindling foreign currency reserves, through the suggestion that the action is intended to win concessions in future Japan-China trade talks, to the interpretation advanced by the Asahi Shimbun: The paper pointed to U.S...
...The paper's lead economic article declared that building up competiDavtd Lewis, a new NL contributor, was until recently the economics news editor of Japan's Asahi Evening News...
...Among Japanese businessmen the sense of resentment was even greater...
...By last October, Deputy Prime Minister Deng Xiaoping was in Japan to exchange with then Prime Minister Ta-keo Fukuda the instruments of ratification for the hard-won Japan-China Treaty of Peace and Friendship...
...Second, China has not proved itself the most reliable of trading partners...
...Gary Saxonhouse, a specialist on the Japanese economy at the University of Michigan, points out, first of all, that "the economic goodies China has to offer just aren't that great...
...Nevertheless, economic realities alone cannot explain why the Japanese were so alarmed by U.S...
...tive power in the Chinese market was now one of Japan's chief priorities...
...MITI officials, it has been reported, believed the project would go exclusively to America firms if Tokyo did not intervene...
...Between 1972, when the government recognized Peking, and the end of 1978, when the U.S...
...Toshio Komoto, head of the powerful Ministry of International Trade and Industry (MITI), also went to Peking and reached an "agreement in principle" on vastly expanding Sino-Japanese trade...
...Tokyo was not always so eager for accommodation on this matter...
...and the People's Republic had agreed to normalize relations...
...Also, Japan's technology is better suited to Chinese conditions than comparable American technology...
...It appeared that everyone—except the noisy Rightists and the pro-Moscow Japan Communist Party—loved him...
...In a fit of paranoia, the magazine complimented American multinationals for "brilliantly staging U.S.-Chinese normalization...
...On the side, he gave the performance Americans would soon get to know so well?visiting auto plants, praising the technology and baiting Moscow...
...But a more important reason for the change of attitude has been the fear that if Japan does not act, with the normalization of relations the U.S.-based multinationals will...
...Japan did $2.5 billion worth of export trade with Taiwan in 1977, against $1.9 billion with the mainland...
...This is talk of a different order altogether from the South China Sea oil project...
...On March 24, 1979, the People's Republic stunned Japanese business circles by announcing that it was putting on hold pending review all plant contracts signed since the beginning of 1979 with Japanese firms...
...Anxious to placate the USSR, Japan has emphasized its willingness to keep taking about joint Siberian development...
...And if Ohira can convince Carter and the Europeans of the value of such a joint approach, it could well lead to a new phase in the free world's relations with China...
...Finally, the Japanese are worried that Western nations might be moving toward Nihonbanare—a parting of the ways with Japan...
...Although Tokyo has long urged greater use of Chinese crude, until recently Japanese oil firms had been resistant and sometimes downright hostile: Early in 1978 they bluntly told the government they were not eager to take on any more low grade crude from the People's Republic...
...He therefore concludes that even without the slight competitive advantage Japan had before U.S.-Chinese normalization, more projects are likely to goto Japan than to America...
...normalization, they had watched with mounting anxiety as their American counterparts trekked to Peking...
...Since Japan achieved its economic miracle from a starting point somewhere similar to China's, Japanese experience may be particularly relevant to Chinese needs...
...All this has led to a movement to soft-pedal dealing with Peking and to work instead on formulating some kind of guidelines with the United States and Europe on credit terms and other aspects of trade with the People's Republic...
...Future cultural exchanges were arranged, too...
...The bankers —who had been generally unsuccessful in gaining entrance to China on favorable terms—were particularly alarmed when David Rockefeller convened a Chase Manhattan stockholder's meeting in Asia for the first time, and then sent Chase president Willard Butcher on to Peking...
...In 1977 Japan imported $1.5 billion in goods from China against $1.2 billion from Taiwan, and the rate of increase for the former was double that of the latter...
...Their reluctance has dissolved within the last few months, in part because of the realization that oil is about all China has to pay for its huge four-level modernization program...
...Last but certainly not least, Japan is in northeast Asia...
...Moscow objects, in particular, to the inclusion in that document of an antihegemony clause that Tokyo insists is nonspecific, but both the USSR and the People's Republic insist refers to the Soviet Union...
...Moreover, Tokyo still has close economic ties with Taipei, the severing of formal ties in 1972 notwithstanding...
...The import statistics tell a different story, though, particularly when one looks at the items involved, and make Tokyo's apprehensions more understandable...
...Saxonhouse points out that there is little foundation to this belief...
...And the growth in exports to the mainland compared to Taiwan was barely perceptible?276 million and $273 million, respectively...
...In a brief, formal statement, Carter informed him that the U.S...
...Thus, on January 1 Japan's largest oil company, ldemitsu Sekiyu, announced it would build a major refinery in northern Kyushu specifically to process Chinese crude...
...Yet a seemingly less urgent topic—the necessity of a cooperative approach to trade with China—may in the decades ahead prove of greater economic and political significance...
...Other quarters, however, greeted the news with less equanimity...
...Psychological factors must be taken into account as well...
...some of the biggest of these were directly affected by the review decision...
...Japanese businessmen are concerned, of course, that they will lose a good deal by having to compete with Americans in the China market...
...Ohira, in an equally brief response, congratulated the American President and added: "I hope it will contribute to peace in Asia...
...Then, on Saturday, December 16, the hotline rang in the office of Prime Minister Ohira, who only eight days earlier had unseated Fukuda as head of Japan's ruling Liberal Democratic Party...
...First, the Soviet Union has been making loud noises about the signing of the Japan-China Treaty of Peace and Friendship...
...Citing the Carter Administration's haste, the authoritative Asahi Shimbun editorialized: "it is . . . surmised there was prodding from American businessmen, whose envy grew as they watched the development of Japan's and Western Europe's economic exchanges with China...
...Later in the month, the Ministry of International Trade and Industry, in concert with the Agency of Natural Resources and Energy and the Japan Petroleum Development Corporation, proposed to Peking that offshore exploration in the South China Sea near Macao be carried out as a joint venture of China, Japan and the U.S...
Vol. 62 • June 1979 • No. 12
