China and Japan Ink Major Agreements as Historic Hostility Gives Way to Win-Win Cooperation

A positive breakthrough 

While China and Japan formally established diplomatic relations in 1972, subsequent relations were often marred by lingering historic hostility. This week however saw a culmination of a lengthy and manifold reconciliation process that has resulted in multiple agreements signed between the public sectors and business sectors of both major economic powers.

The meeting between Chinese President Xi Jinping and Japanese Prime Minister Shinzō Abe was the first of its kind to be held on Chinese soil in nearly seven years, yet in a world where the unilateral economic pursuits of the United States is putting uniformly negative pressures on multiple Asian economies, the leadership in Tokyo decided that this was the correct time to embrace a spirit of openness with China.

Among the deals reached during Abe’s visit to China were the following: 

–A currency swap agreement worth 200 billion Renminbi or 3.4 trillion Yen (or $30 billion USD)

–An agreement to set up a Renminbi clearance bank in Japan

–An agreement to boost cooperation in the securities market particularly in respect of exchange-trade funds (ETFs)

–An agreement to work cooperatively in the new free trading zone in eastern Thailand

–An agreement to accelerate discussions on implementing the pan-Asian Regional Comprehensive Economic Partnership (RCEP)

–An agreement to engage in cooperation towards the establishment of a large free trading zone in north east Asia that would see China, Japan and Korea integrated into a common trading area

–An agreement to work together to ensure the success of the present Korean peace process 

–An agreement to harmonise customs regulations thus streamlining the flow of material commence between the two nations

–52 separate agreements to work on joint infrastructural, development and investment projects involving a total of 1,400 companies from both nations

–Agreements to cooperate further across multiple fields including scientific innovation, the banking sector, health and pharmaceuticals and human connectivity 

What brought this about? 

Projections regarding the strongest global economic powers by the middle of the 20th century uniformly point to China eclipsing the United States to becoming the world’s largest economy in terms of overall GDP. Already, China has moved ahead of the United States in terms of purchasing power parity (PPP). Yet Japan is expected to slip to the position of the world’s eighth largest economy by 2050 where today Japan is ranked three in terms of overall GDP.

The realisation that unless Japan reforms its long term economic outlook and model, its economic fortunes in the world will decline, has been a clear motivating factor for this week’s summit in China. Japan’s closed economic model while productive in terms of manufacturing has nevertheless seen Japan’s economic outlook stagnate in terms of over all growth. Likewise, as the US Dollar becomes more volatile due to the tariff and sanctions heavy trading policies of the United States, Japan is clearly looking towards a future where gradually the Chinese currency will replace that of the US as the world’s major trading and reserve currency. This itself explains why the stability of China’s monetary policy was a clear motivating factor for the currency swap agreement.

In this sense, notoriously stubborn Japanese economic planners are embracing a realistic win-win approach in order to strengthen japan’s own economic prospects in an age where China’s continual rise is inevitable. Finally, as Japan has been subject to unfavourable trading policies from the US at the same time as China, it is only natural that two major Asian production powerhouses join forces in order to pool mutual interests in the global marketplace.

Who will benefit? 

By engaging in freer trade and working together on joint projects in north east Asia and beyond, China and Japan will be able to mutually profit on a win-win model based on amalgamating the notable strengths of each power while also compensating for individual weaknesses through joint mechanisms. It has long been China’s goal to do away with the Cold War mentality of geo-economic competition and instead embrace a spirit of win-win cooperation which underscores China’s aims for the Belt and Road initiative in which Beijing would welcome Japan’s participation.

What challenges lie ahead? 

While China seeks to remove Cold War style barriers in the fields of trade, security cooperation and cultural exchange, this week’s historic meeting is not going to change the geopolitical alignment of Japan in the short term. However, while Japan works ever more closely with nations like India whose government continues to pursue policies of needless hostility towards its Chinese neighbour, the model of cooperation that was implicit in this week’s meeting serves as a future model of geopolitical reconciliation in the name of peace through prosperity that replaces mutual suspicion with mutual problem solving initiatives. In this sense, India should take note of what happened this week in Beijing and question its own unilateral approach to its Chinese neighbour.

What does America think?

While the central importance of good relations with the Chinese superpower underscores the re-thinking of old economic alignments throughout Asia, thus stimulating changes to the outlook of multiple nations including Bangladesh, The Philippines, Turkey, Russia, Thailand, Cambodia, Vietnam, Indonesia and Malaysia, Japan’s adopting of a pragmatic approach to more open economic relations with China is also motivated by the push factor implicit in American unilateralism.

The US could not have expected to sanction long time partners and so-called “rivals” simultaneously without being able to foresee that such an atmosphere would naturally lead to at least partial efforts towards cooperation among economies on the mutual receiving end of US unilateralism. This is especially true among nations that share a common geographical space and whose destinies are therefore naturally intertwined.

Thus, while the US had hoped to isolate China through the trade war, the fact that the US trade war has been waged against both “friend and rival” means that the US is actually forcing multiple nations to come together in an embrace of modern economic openness as a counterweight to Washington’s reactionary economic model.


Much work is left to be done in order to ensure a future of economic connectivity on a win-win model between China and Japan. Furthermore, even before future deals can be signed, it is essential that both sides show a sustained commitment to utilise the momentum of this week’s meeting in order to execute present agreements to their full effect.

While China and Japan still have disagreements over the proper way forward in certain areas, this week’s remarkable breakthrough demonstrates that in an age when the west is becoming increasingly sceptical and insular, Asian connectivity and cooperation drives on a win-win model can help to ensure future success throughout Asia while also providing a bedrock of fiscal and monetary stability at a time when previous hegemons are becoming less reliable both where developed and emerging markets are concerned. In this sense, today’s agreement was as important for China and Japan as it was for the emerging markets looking for clear leadership from Asia’s top economic powers.

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