To be an American business person in China during the recent dramatic fallout of Sino-Japan relations over disputed island sovereignty in the East China Sea offered a thought provoking opportunity for the U.S. This falling-out between neighbors took place just as China and Japan were about to celebrate 40 years of rising commercial cooperation. The Taiwan factor also enters into the mix of this complicated issue which has broad economic and political implications.
What have we learned from our history lessons in this region? Elementary solution: partnership. America can lead the conflict resolution as a humble peacemaker through trade and commerce dialogue. This can be done while advancing level playing field desires of American businesses to compete in these bourgeoning markets if we are keenly sensitive to the diverse cultural mentalities and deep-rooted historical sentiment amongst the nations involved in the conflict.From my recent meetings with Chinese and Japanese government officials and business leaders, the clash over the islands China claims to be their Diaoyu Islands and Japan claims to be their Senkaku Islands, calls America to lead honorably and promote “peace partners through commerce.” We can be a trusted advisor and fair partner to all concerned while also understanding China’s painful history with its neighbor.
Tensions remain in the media, government and business community about Japan’s decision to buy from a private Japanese family the controversial islands historically considered China’s territory. That action led to angry Chinese protests. On our fast speed train ride from Shanghai to Beijing the chatter was the same as in the boardrooms. Chinese reminisced about Nanjing, still deeply upset with Japan and vehemently demonstrating their erstwhile disdain.
New generation Japanese with hurt feelings combined with distressed Chinese recalling the past, resulted in enormous tourism and trade coming to a grinding halt. People quickly returned to their respective countries and Japanese car orders by Chinese buyers were cancelled and factories closed in China, costing jobs and fueling emotions in both countries. According to reports in China Daily bi-lateral trade and therefore jobs are hugely impacted by the territorial dispute since China is Japan’s largest trade partner and Japan is China’s second largest source of foreign direct investment.
In Shenyang, on September 18 at 9:18 am, horns honked across the city as a reminder of the date in history in 1931 when China had another major conflict with Japan. Chinese passionately compared this “memorial day” to the September 11 attack on America. It will be an intense exercise in diplomacy to help resolve the island dispute amicably. Elementary solution: partnership. Share the work and resources of the island, make commerce, and preserve jobs and peace. Ironically, in 1870s and 1880s the largest island Uotsuri-jima/Diaoyu Dao was then called Hoa-pin-su 和平屿, “Peace Island”. Perhaps this dispute offers a call to action of all parties to consider making a “peace talks” site one purpose of this place. “Peace partners through commerce” discussions could be led by the U.S.A.
The American government could invite private sector experts in “conflict resolution.” The highest ranked methods in this field come from Pepperdine University in California. Call upon their expertise to assist in working out a partnership resolution that suits all parties involved. This diplomatic leadership is especially critical when doing business amongst all concerned nations is in the commercial interest of the governments, companies and millions of workers.
Lao Tzu an ancient Chinese philosopher taught, “If there is to be peace amongst nations; there must be peace between neighbors and… peace begins in the heart.” That means there must be sincere desire for a peaceful resolution. Heartfelt desire for harmonious action comes from people getting to know and trust each other which is why travel and tourism is so vital to the world. Tourism and trade is essential for the well-being of nations, economically and cooperatively. America has not yet recovered from the effects of September 11, 2001. America must invest like China has invested in tourism development with a focused plan. American leadership at the highest level of government must work with private sector leaders in partnership.
For many years I had the pleasure to serve as special advisor to Dr. Sen, head of the Urasenke Foundation in Kyoto which teaches chado the art of the tea ceremony. This ancient tradition advances hospitality and friendship. From a medieval practice to its modern form, the principles specified are wa (peace), kei (respect), sei (purity), jaku (tranquility). Mother Teresa, role model champion of peace and hospitality, simply taught: “Peace begins with a smile.”
Interesting to note, international airports in China have “smile-meters” for travelers to score the friendliness of immigration officers. Adopting such welcoming practices in foreign policy is a good lesson for all to advance commerce and create jobs. Both of these ancient nations must safeguard the hospitable ways of the past and from them innovate new approaches of securing sincere collaboration for the future in a world of increasing competition for diminishing resources.
The hospitality industry, notably travel and tourism, is a job creation engine and a goodwill vehicle for resolving conflicts by people to people interaction. A relevant example, in 1972 the doors opened between China and America when President Nixon traveled to Beijing for the first time and made a point to reach out and shake the hands of China’s Premier Zhou En Lai who in turn touched President Nixon’s heart when he arranged for the PRC Military Band to play “America the Beautiful.” The closing lyrics of this inspirational song sums up America’s leadership role in the world, “God shed His grace on thee, and crown thy good with brotherhood from sea to shining sea.”
Newspapers send mixed signals on China-Japan relations as the East China Sea row rumbles on.
People’s Daily publishes a fifth commentary on the dispute, saying Japan “must bear the dire consequences for its perfidious act”. The commentary is promoted as the front-page top story on its website.
Another commentary warns Japanese media not to “violate journalism ethics”, saying it called last week’s sailing of a Chinese navy flotilla 49km (30 miles) south of Japan’s Yonaguni island “military intimidation”. A front-page commentary in the paper’s Overseas Edition says Japan “must get used to the Chinese navy’s sea training”.
Shanghai Morning Post and others report Uichiro Niwa, Japan’s ambassador to China, said it would be hard for relations between the two countries to return to normal in the near future, because Chinese youth “are told of the idea that Japan is a thief”.
Meanwhile, papers including Beijing News and Guangzhou’s Southern Metropolis Daily report 64 crew members of a Chinese cargo that ship caught fire near Okinawa were saved, but not all the reports make it clear that it was Japan’s coast guard who saved them.
The papers also report a cruise ship with 1,500 tourists on board arrived in Yatsushiro port in Japan’s Kyushu region on Saturday, saying it was the biggest Chinese tour group to visit Japan since Japan’s purchase of some of the disputed islands.
Hong Kong’s Ming Pao Daily News says the move has angered many netizens in China, some of whom are calling the tourists “traitors”. But academics told the paper the tour signals the possible alleviation of tension ahead of the 8 November Communist Party national congress.
The Global Times’ bilingual editorial says: “People have the right to express their dissatisfaction by not travelling to Japan. They are also allowed to put their personal interests above the national interest. The fact that the government is not intervening should be viewed as progress.”
Also on Monday, China Daily and People’s Daily report Vice-Premier Li Keqiang has urged more tax reforms and structural tax cuts to boost industrial upgrading and the transformation of the economic growth pattern, at a meeting on Thursday.
Hong Kong’s Sing Tao Daily says state media have been publishing more reports ahead of the party congress on Mr Li’s participation in economic policy-making, in an apparent move to boost the premier-designate’s image as a bold man who knows the economy.
Ming Pao Daily News and Sing Tao Daily also report 86-year-old former president Jiang Zemin has written to congratulate his high school on its 110th anniversary. The reports say the reports in state media are to demonstrate his influence ahead of the congress.
People’s Daily Overseas Edition says Lin Join-sane, Taiwan’s new top negotiator with China, “has scored good marks” during his first visit to China last week.
Mr Lin succeeded Chiang Pin-kung in September. He has never visited mainland China before, said the report.
Southern Metropolis Daily says the local legislature in Guangzhou city has proposed a draft law that would make it mandatory for adults to help underage people escape when natural disasters or accidents happen.
The proposal came after a high school teacher ran away before attending to his students when the 2008 Sichuan Earthquake happened, said the report.
Japan Trade Suffers Amid China Dispute
TOKYO—New trade data from Japan show that the territorial dispute with China over a small group of islands is hitting the economy and threatening to worsen a global economic softening.
Since the spat over the sovereignty of East China Sea islets flared up in early September, trade between the world’s second- and third-largest economies has shown signs of weakening, stoking worries at the International Monetary Fund that a global slowdown could be more severe than anticipated.
Data released Monday by Japan’s Finance Ministry showed Japanese exports of goods to China down 14.1% from a year earlier in September to ¥953.8 billion ($11.97 billion), the biggest decline since January (when they fell 20.2%) and worse than a 9.9% drop in August that had been attributed to China’s overall slowdown. Among the biggest falls was a 44.5% decline in exports of automobiles. The overall balance of trade with China for the month came to a ¥329.5 billion deficit.
With China being Japan’s largest export market, those figures bolstered expectations that the Bank of Japan will further loosen monetary policy to save a faltering economic recovery. Later Monday, the central bank cut its views on the economic state of eight of Japan’s nine regions, while BOJ Gov. Masaaki Shirakawa renewed his promise to “proceed with monetary easing in a continuous manner.”
Fallout from the spat has weighed heaviest on Japanese brands highly visible to consumers—for everything from lipstick to cars.
Japanese auto makers saw some of their showrooms and vehicles in China vandalized in the initial spasm of violence, and as sales dried up they slashed production. Sales at Honda Motor Co., 7267.TO +1.08% Nissan Motor Co.7201.TO -0.71% and Toyota Motor Corp. 7203.TO +0.32% all dropped by more than a third—and all three have scaled back production accordingly.
Other brands with an obvious Japanese connection have also suffered. Shiseido Co.,4911.TO +0.50% Japan’s largest cosmetics maker, says several hundred shops out of its 5,000-plus network of outlets in China have suspended sales. Chinese sales account for more than 10% of total revenue at the Tokyo-based company, which has had a presence in China for 31 years.
Less obvious targets are so-called intermediate goods, such as machine tools and subcomponents, which are needed to run China’s factories and feed a global supply chain.
In the figures, general machinery exports fell 29.1%. “Japanese companies may have held off on sending capital products to China for their Chinese operations,” said Yoshimasa Maruyama, a senior economist at trading firm Itochu Corp.8001.TO -1.95%
“The deteriorating relationships with China could prove to be a major blow to the Japanese economy,” said Ryutaro Kono, chief economist at BNP Paribas BNP.FR +1.67% . “If this problem continues into early next year…an economic recession would be unavoidable” in Japan, he said.
The sagging trade with China has partly caused Japan to log a ¥558.6 billion overall trade deficit last month, the first shortfall for the month of September since the 1979 global oil crisis. Japan will likely feel more impact of the islets spat from October, a prospect adding to expectations that its economy will contract for two consecutive quarters through December.
“The negative impact on China-bound exports due to deterioration in Japan-China relations has not yet been fully reflected in September, and would likely surface from October onward,” said Takeshi Yamaguchi, an economist at Morgan Stanley MUFG Securities.
Complicating Japan’s woes is that on-year growth in China’s economic output fell to 7.4% in July-September, the weakest since the beginning of 2009.
About two-thirds of Japan’s exports to China are for Chinese customers, with the rest being re-exported to other nations such as the U.S., said Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute.
“China is no longer just a manufacturing center” for Japanese manufacturers, Mr. Nagahama said.
Japan’s export-reliant growth model has already been under considerable stress since March 2011. A major earthquake and tsunami that hit Japan’s northeast in that month sparked a nuclear-reactor crisis and set off sustained rises in foreign energy imports, which resulted in the nation’s first annual trade deficit in three decades.
The worsening economic ties put Japanese Prime Minister Yoshihiko Noda in a difficult position. Steps to help restore relations with China could be unpopular with the electorate ahead of elections expected by early next year. At the same time, a hard-line stance could risk a deeper domestic downturn that could threaten his policy agenda, including a planned sales-tax increase. If the economy weakens, he will be under pressure to hold off on the tax increase, worsening Japan’s already large debt burden.
Japan’s economy could take a bigger hit from the soured relationship with China than in 2005, analysts say, the last time the two countries had a major feud. Although the Chinese in that year had large demonstrations to protest issues including what they called the whitewashing of wartime history by Japanese textbooks, exports to China nonetheless climbed 10.5%.
Reduced bilateral trade should hurt Japan more than it does China, analysts say. China buys 20% of Japan’s total exports; Japan purchases less than 10% of China’s.
But both the Chinese and Japanese economies—together accounting for a little less than a fifth of the world’s economic output—would suffer at a time when the IMF is warning of a potential global recession. IMF Managing Director Christine Lagarde has recently urged the two to “harmoniously and expeditiously” resolve their differences.