Japan’s Role in US-China Relations

The end of the chaotic US election has meant an opportunity to reevaluate US-China relations under the new American administration. However, it will be difficult for the two superpowers to change course. Relations between China and the United States have become more confrontational since 2018, particularly in trade and the high-tech industries. On top of those external issues, there are now signs of a recession in China, with massive amounts of bad debt and a slump in private industry.

The spread of the COVID-19 pandemic within China at the end of 2019 worsened its economic stagnation, and with it the China-based flow of goods into the global economy came to an almost total stop. Then, from April 2020, two new developments took the forefront and added to the troubled outlook for both US-China relations and the world economy. The first was the global spread of the COVID-19 pandemic, with the United States being particularly hard hit.

As of April 2020, around 3 million people worldwide were infected with the coronavirus, and 200,000 had died. The United States accounted for around a third of the total infections. The pandemic did not stop spreading, of course, and as of the end of December last year, global infection numbers reached almost 80 million, and 1.7 million had lost their lives. The United States had 18 million infected, with a rate of around 200,000 new cases a day, and cumulative deaths also reached 330,000, showing a terrible rate of increase. It is also growing clear that even once the United States gets the pandemic under control, it will take time to get its economy back on track.

China Quick to Restart Economy

The second shift in the situation was China passing its infection peak from the end of May, allowing it to restart economic activity and begin offering support to other nations still fighting the pandemic.

China was slow in its initial response to the virus from December 2019 to January 2020, and this accelerated the spread both within China and internationally. However, after that initial delay the administration picked up the pace dramatically, successfully building a COVID-19 hospital in Wuhan within two weeks. In March Beijing officially announced it had taken control of the situation. While the United States was focusing on domestic issues from March into April, China was restarting its economy and also beginning to offer international pandemic support. It has even gone so far as to advertise the “Chinese model” as an effective way to control COVID-19 spread.

This was clearly a strategic consideration on the part of China, which began to use the situation as an opportunity to expand global influence. As it took control of the domestic infection rate, China began restarting its economy in key areas and the government gave clear and firm instructions to the high-tech production zone from Shenzhen to Guangzhou to revive depressed activity.

According to the January–March 2020 economic statistics, China’s gross domestic product fell for the first time, to –6.8% year-on-year. However, from April to June, activity recovered to prepandemic levels, and from July to September the economy expanded by 4.9% year-on-year. Government investments in infrastructure were effective in leading that growth. On June 8, the World Bank announced that based on China’s activity, the country’s economy was predicted to grow by 1% in 2020, and by 6.9% in 2021.

The stall in the first half of 2020 has given way to clear recovery. Compared to the rest of the world, particularly the West, China is the only clear winner in this situation. The problem remains, though, that all of those countries that had been customers for China’s goods are now at an economic standstill due to COVID-19, so demand for their exports has plummeted.

A New Development Model of Dual Circulation

China has long been aware of that, naturally. At a March 27, 2020, meeting of the Chinese Communist Party Politburo, General Secretary Xi Jinping repeatedly stressed the need to expand domestic demand. That demand, as reflected by the personal consumption index, was on a downward trend of 8.3% year on year up to March, but slowed to a 7.5% decrease from April. This would indicate that the government is revising its past policy of promoting economic growth by expanding exports.

Then, at the May 14 Politburo meeting, Premier Xi announced the construction of a new model of economic development that prioritizes maximizing domestic demand as a way to support both international and domestic economic development. He explained that expanded internal circulation will support international growth, and vice versa, in a system called “dual circulation.”

Dual circulation is based, first of all, on expanding consumption and domestic demand mainly through increased domestic general circulation. A second focus is on strengthening and expanding the international supply chain to overcome stagnation in 5G base station and semiconductor production, and on using the digital yuan in trade settlement with increased focus on internationalizing the yuan. And third, China is restructuring its growth strategy through international exchange by promoting exports, attracting foreign capital, and securing valuable staff.

Thus, China has demonstrated a clear growth strategy for the post-COVID-19 world. The United States, in the meantime, has finally settled the chaos surrounding its presidential election, launching a new administration in January 2021 under the leadership of President Joe Biden. Even with that fresh start, though, there is no denying that the United States is still suffering from the pandemic, and has fallen far behind China in restarting its economy.

Harsh Attention from the World

Even with the United States at a disadvantage, it is still premature to say that the world is transitioning from the Pax Americana to the Pax Sinica. America has begun to feel threatened by all the many challenges China presents, and in addition to beginning to decouple its high-tech industry from China, has significantly increased its defense budget for fiscal year 2021 to $740.5 billion. China’s defense budget for the same period is just over $178.1 billion, so the difference is still significant. In December 2020, the American Federal Reserve Board revised its initial September growth forecast for 2021 to 4.2%, predicting an earlier recovery in a show of confidence in the underlying strength of the US economy.

One other thing that must be understood is China’s real and unresolvable disadvantage in global opinion. The COVID-19 pandemic started in China, and spread globally through the massive movement of China’s goods and people. Many nations, even those European nations like Italy, Spain, Britain, or France who actively signed on to China’s Belt and Road initiative, now probably view China with distrust. Regardless of how much support China offers now, once these nations have the pandemic under control they will surely view any economic recovery dependent upon China with strong suspicion. That will likely put the brakes on further adoption of Chinese high tech, as has already happened with Huawei.

A World Without a Leader

In an ideal world, the two superpowers would be working together to deal with the world’s problems, but reality is clearly different, as both nations continue to treat each other with distrust and criticism. There is some hope that President Biden will set off a new period in US-China relations, but even now conflict over the World Health Organization continues.

In the early stages of the pandemic, WHO Director-General Tedros Ghebreyesus repeatedly made statements that seemed conciliatory toward China. President Donald Trump took particular offense to that, and he withdrew the United States from the WHO as a result. Tedros in turn lashed back at the United States, and the international order was rocked by the disorder. Now, more recently, relations between the WHO and China have been strained by a survey team visiting to China.

Taken as a whole, with the pandemic raging in Africa and the Middle East and increased political unrest in the West, it appears the whole world is headed toward general disorder. The American political scientist Ian Bremmer has predicted that in the coming generations the world will enter a “G-zero” age, when none of the industrialized nations will be able to offer leadership to the world, but I would argue that the current situation reveals it has already happened.

Prolonged Conflict Over Hegemony

In December of 2008, when the world was still reeling from the global economic crisis, then member of the Politburo Standing Committee of the Chinese Community Party Li Changchung said in a speech that “Communication capacity determines influence. In the modern age, whichever nation’s communication methods are most advanced, whichever nation’s communication capacity is strongest, it is that nation whose culture and core values are able to spread far and wide, and that nation that has the most power to influence the world.” Since that time, China and the United States have been engaged in all-out information war though cyberattacks and espionage. The United States has also expressed concern over the Made in China 2025 plan, which is intended to turn the nation into a high-tech superpower, and has taken direct action against tech companies Huawei and Tencent. An April 12, 2020, report in the Asahi Shimbun noted that the information war has grown more heated with the COVID-19 pandemic, stating that as of the end of 2019 American intelligence had already obtained extensive information on the virus.

There is no doubt that the world economy will remain sluggish for some time. Countries everywhere need more support than ever, but if the helping hand comes from the same old China, then even the most desperate may hesitate to accept. On the other hand, the world cannot depend solely on the United States for help in restarting the economy.

One particular obstacle is that many shipments of materials and parts from China have been halted due to the pandemic. Japan’s manufacturing industry, for example, is primarily focused on completed goods, and its future is inconceivable without China. Japan has also been heavily dependent on the tourism industry, but the loss of visitors from China has dealt a huge blow to that sector.

It is possible that the United States and China will be able to reestablish some degree of cooperation. No matter what happens, these two countries account for roughly 40% of the world’s gross domestic product, and they serve as each other’s greatest markets. However, there is no chance they will “jointly build a new model of major country relationship” as Xi Jinping called for in 2013.

China will likely continue to challenge the United States’ hegemony. Speaking at the seventieth anniversary of China’s entry into the Korean War in October 2020, Xi offered a strong, if indirect, criticism of the United States, saying that the Chinese stand strong against intimidation and extreme pressure.

The American political scientist Graham Allison has characterized the United States’ relationship with China as Thucydides’s trap, and argues that United States will strive to preserve its position as a world leader in the face of Chinese challenges. The conflict will grow beyond the economy to encompass military security, and even the very nature of what a political system must be. If you forgive an easy prediction, this conflict will continue for at least 20 or 30 years.

Japan’s Role as an Essential Nation

While the two great powers struggle over hegemony, what position should Japan take? With the situation in constant flux, the country will need to continue reading and adapting to change, so it is impossible to say there is one simple solution. To approach one, though, the following points must be understood.

First, the issue is not which side to take, but to accept that if the conflict grows serious enough that use of force becomes unavoidable, then the entire world will suffer. With the current state of the world, rocked by natural disasters and climate change, and a global pandemic shaking international society, this is perhaps the greatest period of crisis in human history. Both China and the United States must be aware of this, and even as they stand in opposition they will likely maintain restraint.

Second, although the United States and China are competing to hold dominant economic, military, cultural, and ideological positions, both nations are capable of cooperating if they deem it necessary. They have done so in the war on international terrorism, as well as on environmental issues like air pollution. There is always a level of suspicion on both sides even when they do, but they have not yet risen to the level of a new cold war.

With those points in mind, Japan should work to prevent that new cold war, help build a new philosophy of international cooperation, and work to create a new peaceful coexistence for the Asia-Pacific region with the involvement of both the United States and China. Faced with an increasingly serious and intractable Sino-American standoff, Japan must, above all, put its own safety and security first. That will result in tension between reality and the ideals described above. However, without firm goals and the will to see them through, Japan—totally at the whims of the two superpowers—will lose its place in the international order. Japan must furthermore work to ensure that no conflict between the United States and China will grow to become an existential threat to either side.

Japan’s first goal must be to have at least enough power to remain independent. With that done, Japan must strive to become a country needed by the international community, and its partners in particular. Japan is still tied to the United States for defense, but that is exactly why it must be ready to prepare the financial, technical, and human assets it needs to achieve its own independence. On the other hand, in our relations with China, we must increase our ability to meet technological needs for economic and social development ourselves.

Japan will continue to be a needed source for high-tech intermediate goods, medical technology, and support technology for aging societies. Middle-power nations, like those in Southeast Asia, also expect Japan to continue supplying technology and assets for financial growth, and to offer leadership in gathering such middle powers together to create a new order for financial development and local peace and prosperity. Japan should be prepared for quicker deployment of middle power with concrete measures as needed. If we can face these points with sincerity and achieve a reasonable level of success, we will not be caught in the middle, but will be able to actually improve our standing.

(Originally published in Japanese. Banner photo: China’s Xi Jinping speaking with other world leaders at the fifteenth G20 Summit, held online on November 22, 2020. © Xinhua/Kyōdō News Images.)