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Vol. VI, No. 51      Jan. 28 - Feb 3, 2007      Quezon City, Philippines











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China vs Japan: FTAs, Oil and Taiwan
Last of four parts

The growing competition for oil particularly in East Asia between China and Japan is dragging Taiwan leading to saber-rattling by both countries. The role of Taiwan in this equation adds heat into this growing rivalry that also has military implications.

By Bobby Tuazon

China and Japan account for nearly three-quarters of the region's economic activity and more than half of the region's military spending. Despite their deep economic ties and a doubling of their bilateral trade in the past five years, their relationship is increasingly strained, with dangerous implications for the United States and the world at large.[1]

China and Japan are locked in a rivalry over at least three flashpoints: Free Trade Agreements particularly in the region; oil energy; and over Taiwan.

Free Trade Agreement rivalry

China was the first country to have a free trade agreement (FTA) with the 10-member Association of Southeast Asian (ASEAN) bloc with both sides agreeing in 2002 to establish a free-trade area creating a market of 1.8 billion consumers and a projected economic activity totaling more than $2 trillion. At present, trade between China and ASEAN is growing at nearly 40 percent a year and is predicted to exceed $200 billion a year by 2008.[2]

There is a growing rhetoric among Southeast Asian leaders that China’s rise presents a historic economic opportunity rather than a security threat.[3]

Japan, on the other hand, is revving up its drive toward FTAs with trading partners, largely fueled by an intensifying rivalry with China. The competition in FTAs shows the two countries’ increasing economic rivalry in East Asia particularly in Southeast Asia – traditional trade markets and investment areas of Japan and the U.S.

Japan joined the FTA competition, concluding its first FTA, with Singapore, in 2002. It signed its second FTA, with Mexico, in 2004, and a third one, with Malaysia, in December 2005. Japan has also been negotiating FTAs with South Korea and Indonesia. It signed an FTA with the Philippines on Sept. 10, 2006.

In mid-February 2005, Japan and Vietnam held preparatory talks in Hanoi for formal FTA negotiations, which are expected to start as early as this summer.[4]

Oil and military deployments

China and Japan, major trading countries, are also big oil consumers (China is No. 2 in the world, after the U.S.) but are highly dependent on oil imports. Many contentious issues related to the search for oil confront China and Japan. Japan depends on imports for 99 percent of its oil and natural gas; coastal China is similarly bereft of energy resources.

Furthermore, both countries have lobbied hard for alternative routes for a pipeline from eastern Siberia’s oilfields to Pacific Rim nations. The Sino-Japan rivalry over energy resources shows signs of spreading to the Middle East.

With Japan importing almost all of its oil, and the GCC, the customs union comprised of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, accounts for more than 70% of Japanese oil imports. Japan plans to seek the inclusion in the proposed FTA a GCC pledge to preferentially supply crude oil to Japan, even in emergencies, like war.[5] The Uzbek deals follow CNPC`s acquisition of a 12-percent stake in PetroKazkhstan last year for $4.18 billion, thereby extending the Chinese energy group`s commitment to secure energy sources from central Asia.

Dependence on oil imports is driving Japan in competition over scarce energy resources with China with both energy-hungry countries locked in a simmering dispute over gas reserves in the East China Sea. The offshore oil and gas fields under the East China Sea are attractive "domestic" sources of energy for both Beijing and Tokyo -- and both have laid claim to them. China argues that the entire East China Sea continental shelf, extending eastward nearly all the way to Okinawa, is a "natural prolongation" of the Chinese mainland. Japan has declared its boundary to be a median line between its undisputed territory and China -- a line that runs roughly 100 miles west of the Okinawa Trough, which lies undersea just west of Okinawa and is where the richest petroleum deposits in the area are believed to be concentrated.[6]

In a muscular display of its rising military and economic might, China deployed a fleet of five warships September 2005 near a gas field in the East China Sea.[7]

Taiwan in the China-Japan equation: ‘A Matter of Life or Death’

The growing competition for oil particularly in East Asia between China and Japan is dragging Taiwan leading to saber-rattling by both countries. The role of Taiwan in this equation adds heat into this growing rivalry that also has military implications.

There are reasons why Taiwan represents a strategic determinant in Sino-Japanese relations. Taiwan is a critical gateway to Japan for Chinese blue-water naval advances from the south. Hence, the island represents a defensive imperative for Japan – one that China acknowledges in its own strategic calculations. According to Japan's Institute of International Affairs (JIIA), China's blue water navy has been sounding out access channels around Japan and on its Pacific coast – from the Sakhalin Islands in the north to the Ryuku Islands in the south, as far west as Taiwan and as far east as the Philippines. These access channels are of crucial importance should Chinese submarines seek to attack Japan in times of conflict.[8]

This "China threat" has recently been analyzed in a Japanese White Paper and was embedded into the U.S.-Japan Joint Security Agreement. Losing Taiwan could allow Chinese submarines into Japanese waters from the south, thus facilitating a naval encirclement of Japan from the South China Sea. Taiwan thus stands guard as a natural gateway to Japanese waters.[9]

Furthermore, Taiwan represents an important part of the American strategic security umbrella that includes Japan, South Korea, the Philippines and Australia – which Japan seeks to maintain against its big emerging neighbor. Obviously, China perceives this as hostile to its own strategic interests in Asia. Okinawa, just miles north of Taiwan, is a strategic American deployment point which Tokyo views as a crucial counter-balance to Beijing's encroachment on the Asian stage.[10]

It is for this reason that Tokyo has supported American arms sales to Taiwan (which also involves submarines and defense radar systems). Taiwan's (and Japan's) support for the American Theater Missile Defense (TMD) has further heightened Beijing's fear that it is being targeted. Clearly, Taiwan remains at the intersection of much of the geopolitical wrangling between China, Japan and the United States.[11]

But more importantly, Beijing links Taiwanese "separatists" with Japanese "military-rightists" in Tokyo. Beijing has consistently accused Taiwan President Lee Teng-hui of being an ally of Japanese rightists and forces in the military, whom the Chinese believe have never abandoned their dream of conquering the mainland.[12]

Meantime, the Bush administration, clearly more suspicious of China than its predecessor, has pushed Japan to take a more assertive stance. It has called for closer cooperation between the countries' militaries and defense industries and has encouraged conservative Japanese politicians who have long wanted to change the Self-Defense Forces into a full-fledged military and revise Japan's Constitution. 

But what has clearly changed Sino-Japanese ties lately was the joint U.S.-Japan declaration on February 19, 2005, the first fundamental revision to the 1966 U.S.-Japan Security Alliance. The declaration has been perceived as Tokyo's willingness to confront Beijing's rising might in the region, as well as a new-found Japanese assertiveness on the Asian and world stages. While underscoring Tokyo's alliance with Washington, it also highlights how Taiwan and cross-Straits relations have become a fundamental determinant in the increasing Sino-Japanese rivalry in the region.[13]

Lately, China has moved swiftly to warn Japan – and, obliquely, the U.S. - in unusually blunt terms that any interference with Beijing's designs over Taiwan would be dealt with forcefully.  

"I would like to say calmly to Japan, the Taiwan issue is a domestic affair and a matter of life or death to us," China's foreign minister, Li Zhaoxing, told his Japanese counterpart recently. "It is dangerous to touch China's matter of life or death."[14]


The November 2006 defeat of Bush’s Republican Party in the congressional polls was said to be a show of the American electorate’s disappointment over the incumbent president’s military setbacks in Iraq and was expected to open an assessment of U.S.’ aggressive unilateralist foreign policy. While any expected shift in U.S. foreign policy particularly for the Middle East remains to be seen, no such indication is seen in East Asia at this writing.

The point is, U.S. imperialism’s aggressive and belligerent foreign policy in East Asia is fueling more tensions particularly in the Korean Peninsula and North Korea’s defensive posture is drawing unfounded fears and even counter-threats not only from the U.S. but also Japan and members of the United Nations Security Council. Even as it continues to increase its military presence in this vast region through more military access agreements, war exercises and military aid for its vassal states, the U.S. is also seeking to put “counter terrorism” and “multilateral defense cooperation” on the main agenda of such regional formations as APEC and the ASEAN.

China, on the other hand, appears to be staying on the course of its market economy program through closer trade and financial ties with the United States while aggressively promoting similar arrangements with East Asian neighbors notably those belonging to the ASEAN. It appears to be succeeding as far as ASEAN is concerned probably as a way of easing tensions in South China Sea where six ASEAN member-countries have separate territorial claims in the Spratlys and Paracels that compete with Beijing’s irredentist claims. Developing vibrant trade and investment ties with countries in Southeast Asia would open prospects for China to use this new economic relationship particularly with the U.S.’ military allies as a means of scaling down their security commitments with the U.S. that include the military encirclement of China. While appearing to be moderate and economically cooperative with Southeast Asian countries, China is emerging to be at loggerheads with Japan in its drive to secure oil and natural gas reserves in East China Sea and other parts of the world.

But Beijing’s quest for market-driven economic modernization pursued with active trade relations with the U.S. is also driving it closer to cooperate with Washington’s aggressive foreign policy particularly in “counter terrorism” not only in the region but in other parts of the world as well. In the Korean Peninsula, China appears to serve U.S. objectives by its softening influence over Pyongyang but it is also using North Korea as a buffer against hostile U.S. military policy on China as indicated in the Pentagon’s encirclement strategy against that former socialist country as well as in the TMD. It would be interesting to see what lies ahead in the Korea Peninsula and China-North Korea relations.

The rise of China as a potential economic and military power in the region that would threaten U.S. hegemony in East Asia is being used by rightist or neo-conservative power circles in the U.S. to justify an aggressive military posture vis-à-vis Beijing. In the current situation, however, Washington is using carrots to engage China in active trade relations while using sticks diplomacy to prevent it from challenging U.S. military supremacy in East Asia. The so-called China threat animates the U.S. military posturing and, along with so-called threats of terrorism, is seen to justify prolonged American military hegemony in the region.

While there is no clear indication of an imminent hostile confrontation between the U.S. and China, the other flashpoints in East Asia – the Korean Peninsula and the Taiwan issue, for instance – remain potential cauldrons of conflict not only between Washington and Beijing. Bulatlat


[1] China and Japan's Simmering Rivalry, Kent E. Calder, Foreign Affairs, March/April 2006.

[2] South China Morning Post, Nov. 1, 2006. According to the Chinese Ministry of Commerce, trade with Southeast Asia jumped to $130 billion in 2005, from just $2 billion in 1980. Trade is projected to reach $200 billion in 2010. China’s investment in the region totaled $35 billion by end-2005. International Herald Tribune, Nov. 2, 2006.

[3] Chinese and Southeast Asian leaders at the China-ASEAN business and investment summit in Beijing late October 2006 spoke effusively of a relationship based on “mutual trust in politics and economic integration.” International Herald Tribune, Nov. 2, 2006.

[4]In late February, Japan and Chile, a gateway to Mercosur, held the first round of FTA negotiations in Tokyo.“China Rivalry Fuels Japan’s FTA drive,” Hisane Masaki, Peace Journalism-New Jersey, USA, February 16, 2006.

[5] Only days after Koizumi left the Middle East early this year, China National Petroleum Corp., China`s largest oil producer, said that together with Korea National Oil Corp., Malaysia`s Petronas, Lukoil of Russia, and local group Uzbekneftegaz, it had obtained a 20-percent stake in a joint oil and gas exploration project in Uzbekistan`s Aral Sea extending about 10,000 square kilometers that potentially has 8 trillion cubic feet of natural gas. “Oil and Gas Features,” Oil raises China, Japan rivalry, Shihoko Goto, UPI, Sept. 5, 2006, Monsters and Critics.com.

[6]“China and Japan's Simmering Rivalry,” Kent E. Calder, Foreign Affairs, March/April 2006.

[7] September 11, 2005, Japan's Rivalry With China Is Stirring a Crowded Sea, Norimitsu Onishi and Howard W. French… In turn, in a major readjustment of its defense policy late last year, Japan redeployed its forces away from northern Japan and the containment of Russia to Okinawa and the containment of China in the East China Sea. Japan's Defense Agency said China was a "concern" because of its nuclear and missile capabilities and the modernization of its navy and air force. Norimitsu Onishi..New York Times.

[8] “Taiwan's role in the Sino-Japanese rivalry,” Eric Teo, Jamestown Foundation, China Brief, April 29, 2005.

51The submarine incident in November 1994 simply compounded Japanese anxieties. Furthermore, Chinese academics from the China Institute of Contemporary International Relations (CICIR) in Beijing acknowledge in private this strategic calculation. 

[10] Chinese academics from CICIR and Beijing University's international relations research institutes, on the other hand, view America's arc of containment as a means to prevent or delay the latter's emergence as a great power.

[11]China Brief, April 1005.

[12] Another reason is, Taiwan's historical and cultural affinity with Japan is especially assuring and comforting to Tokyo, whereas Beijing sees a lack of Chinese nationalism and loyalty on the island, as well as dangerous links and collaboration between "Taiwanese separatists" and Japanese "rightists" in their joint hostility against China. Japan's historical and cultural affinities with Taiwan, the Japanese public's clear sympathy for the island, as well as its stance on human rights and democracy bolsters the first two strategic considerations. Japan took control of the island in 1895 and administered it until losing it after Word War II. Culturally, Japanese pop has always seduced young Taiwanese and an entire generation of Taiwanese elite and politicians, like former President Lee Teng-hui, were schooled in Japanese universities. In fact, Japan is commonly perceived in Taiwan as a benevolent occupying power, unlike in China or Korea. The mutual sympathy between the Japanese and Taiwanese is so great that should Taipei revert back to the Mainland, differences in the perception of Japan could surface as one of the thorniest issues. China Brief…

[13]“Taiwan's role in the Sino-Japanese rivalry,” Eric Teo, Jamestown Foundation, China Brief, February 29, 2005.

[14] China Brief, 2005.

Hegemony or Cooperation: Major Contradictions in East Asia Today*
First of four parts

U.S. and China: Harmony Today, Confrontation Tomorrow?
Second of four parts

The Korean Peninsula: U.S. Military Aggression and Pyongyang’s Response
Third of four parts



© 2007 Bulatlat  Alipato Publications

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