China in Transition

On the Second Anniversary of the China in Transition Column - Bridging the perception gap between Japan and China

Chi Hung KWAN
Consulting Fellow, RIETI

This "China in Transition" column was recently able to celebrate its second anniversary. I have striven to dispel the distrust between Japan and China by directly explaining to Japanese readers the reality of the Chinese economy and the economic relationship between the two countries. I feel that my opinions have been able to make some contribution toward this objective.

Around this time two years ago, comments blaming China as the cause of the Japanese economic slump were rampant in the Japanese media. As if to fan the flames of the sentiments that China was a threat, one major Japanese newspaper was filled for days on end with articles focusing on the hopelessness of the Japanese economy and its firms compared with the strength of the Chinese economy and its companies. In an effort to do away with such emotionally charged arguments, I have been making policy proposals through this column based on cool-headed analysis of the bilateral economic relationship. While the themes I have taken up are wide-ranging - from China's rise and the hollowing-out of Japanese industry, to China-induced deflation and the appreciation of the yuan - what they all have in common is the conviction that China's advance is desirable not just for its 1.3 billion people but also for the Japanese. Based on the results of an empirical study that Japan and China are in a complementary, rather than competitive, relationship, I have stuck to the position that the two countries should strive to set up a win-win formula through the formation of a division of labor in line with their respective comparative advantages.

Perhaps because this position has finally begun to be understood, in Japan we are beginning to see more attention placed on China's position as the "world's market" with its entry into the World Trade Organization and not just as the "world's factory" that competes with Japan. Many Japanese firms now view China's advancement as a business opportunity, and are boosting earnings by expanding their business activities in China via such means as trade and direct investment. Helped also by the fact that domestic economic recovery is becoming more distinct, the fear that China is a threat is finally ebbing. Looking back on the past two years, it is hard to say to what extent this column was able to influence public opinion, but it is at least clear that it had more foresight than the media.

Soon after the debut of the China in Transition column in Japanese, the same contents translated into Chinese and English were also published online. The Chinese version, in particular, is being widely read, and I receive words of encouragement from researchers in China who say they have been enlightened by the column and desire its continuance. At the same time, articles that have appeared in the China in Transition column, mainly those pertaining to the relationship between Japan and China, have come to be reprinted frequently in Chinese newspapers and magazines. It was an unexpected gain for me to find that the column, which was initially aimed to give Japanese readers as objective a view as possible of the realities in China, had a resonance in China as well. Plans are currently under way to publish the Chinese language versions of the column in book form to help bridge the perception gap between Japan and China.

I came to the Research Institute of Economy, Trade and Industry from the private sector think-tank Nomura Research Institute on a three-year secondment in April 2001, and those three years will be over in March, 2004. While I am making efforts to continue the China in Transition column so that it can see its third anniversary, there are still many hurdles that need to be overcome. In the first place China in Transition is a public good, in the sense that it can be accessed by anyone free of charge. Fortunately, RIETI is publicly funded so that we can put public interests ahead of profits. In order to continue this column, I will need the understanding and financial assistance of relevant parties on the supply front as well as continued support from my readers on the demand side. For such reasons, I humbly ask for your continued patronage.

September 22, 2003

September 22, 2003