Publication: China Brief Volume: 2 Issue: 1

By Michael E. Marti

China opened the biding war in its long-term strategy to lure Japan away from its alliance with the United States, when it offered to include Japan, along with Korea, in its Five-Point China/ASEAN East Asian Cooperation Plan (a twenty-first century version of Japan’s twentieth century Greater East Asia Co-Prosperity Sphere). Proposed by Zhu Rongji at the Fifth ASEAN leaders meeting held this past November 5 and 6 in Bandar Seri Begawan, Brunei–which included Prime Minister Junichiro Koizumi of Japan and President Kim Dae-jong of Korea–the plan is centered on the ASEAN-China Free Trade Area (FTA) that China first proposed last year. The FTA, to be implemented over the next ten years, will have a combined market of 1.7 billion people with a gross domestic product of US$2 trillion and two-way trade of US$1.23 trillion. As such, it will boost the economies of its members by 1 percent and China’s by 0.3 percent per annum. China’s Five-Point Plan is designed to draw Japan, which has been reluctant to join because of domestic trade issues, into the FTA.

As proposed, the plan would set economic targets and development goals, create a framework for cooperation in regional trade and finance, work towards greater integration and common development of the region’s economies, promote coordinated, mutually complementary economies, carry on dialogues among various social groups and promote cooperation on security issues. As innocuous as all of this sounds, however, China’s ultimate goal is to create a yuan-based sphere of interest, dominated by its economic and military power. In short, China is intent on establishing itself as the regional hegemon, thereby ending U.S. preeminence in the Pacific.

By China’s calculation, the key to this strategy is Japan. China must sever the Japan-U.S. alliance and hobble Japan permanently. China is all too aware that an economically and militarily strong and self-assured Japan, linked to America and the Western alliances, is a threat to its ambitions.

As China sees it, Japan is vulnerable to manipulation on a number of fronts. Economically, Japan has been in a recession for almost a decade. Its large banks are holding non-performing loans, which, if written off, would cause the majority of them to collapse, as their equity disappeared. This would, undoubtedly, prolong Japan’s current recession, perhaps well into the next decade. Yet, Japan has been unwilling to take on the special interest groups, like agriculture and banking, that hinder market reform. Thus, China assumes that if Japan fails to re-ignite its economy and the world economy continues to slow, the domestic pressure on its leaders for a quick fix will make expanded trade with China, even in the context of a yuan-dominated FTA, seem very attractive. China has not forgotten that by not devaluing the yuan during the financial meltdown of 1997-1998, it was instrumental in shoring up the economy of Japan, as well as those of Korea and the ASEAN nations. It expects that once again these nations will look to China to open its markets to them in order to stimulate their stalled economies, thus permitting them to avoid the political hazards of reforming their economies. Indeed, China’s Five-Point Plan is designed to take advantage of just such eventualities, by providing a framework for “cooperation.”

In can also be expected that China will energetically try to foreclose any Japanese attempts to develop a military force commensurate with its economic capabilities. To that end, it will continue to emphasize Japan’s wartime past, stroking its sense of guilt and Asia’s mistrust. Despite Japan’s numerous formal expressions of apology, China continues to demand greater contrition. And Asia, in general, has continued to voice grave reservations about a remilitarized Japan. Japan itself has yet to come to terms with its past, as evidenced by the ongoing textbook controversy, and faces strong internal opposition to any rearmament plan. China believes that by linking Japan’s economy with its own, it will be in a position to forestall any effort by Japan to reinterpret Article 9 of its constitution to allow for a military buildup, by threatening to withhold trade privileges. Likewise, it hopes to be able to effect Japan’s ability to engage in collective self-defense and continued cooperation with the United States on such matters as TMD.

Until Japan comes to terms with what in Europe is already ancient history (that is, World War II), Japan will continue to be handicapped, subject to constant Chinese psychological blackmail, and prevented from pursuing an independent, self-interest-based foreign policy in Asian affairs, with or without close linkage to the U.S. Only a Japan with a reformed economy, a commensurate military force and a sense of self-worth and self-confidence will be able or willing to bear the burdens of an alliance with the U.S., to be the Great Britain of the Pacific, or to stand alone.

China has made the opening move in its game plan to lure Japan away from the West with the sweet refrain of “the China market” as the cure all for its economic woes. It is now up to Japan to determine whether it will succumb to the siren’s song, or chart its own course for the future.

Dr. Michael E. Marti is a senior research professor in the Center for the Study of Chinese Military Affairs at the National Defense University. The views expressed in this article are those of the author and do not reflect the official policy or position of the National Defense University, the Department of Defense or the U.S. government.