Japan & China in East Asian Integration

Japan & China in East Asian Integration

Author:      Lim Hua Sing

ISBN:          978-981-230-744-6

Publisher: Institute for Southeast Asian Studies

Year:          2008



Reviewed by Dr Alfred Gerstl, lecturer for International Security Studies at Macquarie University, Sydney, and editor-in-chief of the Austrian Journal of South-East Asian Studies (ASEAS)

Japan has since the 1970s been a key promoter of regional cooperation in East Asia, in particular in Southeast Asia. As the anti-Japanese sentiments in East Asia, due to Tokyo’s militarism and expansionism in the 1930s and 1940s, were still strong at this time, trade and economic relations triggered the normalization process. The political relations deepened only in the late 1970s, symbolized by Prime Minister Suzuki’s trip to Southeast Asia in January 1981. Since the end of the Cold War, China has evolved into the third key actor, in addition to Japan and the Association of Southeast Asian Nations (ASEAN), in promoting multilateralism.

While Beijing’s economic rise has dramatically increased since the early 1990s, Tokyo struggles economically since its “bubble economy” collapsed in 1991. Illustrative is that China rather than Japan provided both economic and political leadership to mitigate the Asian Financial Crisis in 1997. The main institution created to deal with the crisis, ASEAN plus three, interlinks the ASEAN countries with China, Japan and South Korea. Due to the successful financial collaboration, ASEAN plus three has since then developed into a broad economic, political and even security collaboration mechanism. However, both Tokyo and Beijing remain suspicious over each others’ motives for deepening regional cooperation. Japan is especially worried that Beijing’s economic rise could translate into a regional hegemony of the Middle Kingdom.

In “Japan & China in East Asian Integration”, Lim Hua Sing, Professor at the Graduate school of Asia-Pacific Studies at Waseda University in Tokyo, provides an interesting overview over the development of Japan’s and, to a lesser extent, China’s economic and political engagement with East Asia. He is a critical observer and analyst who suggests interesting policy-recommendations for the Japanese politicians.

The focus of “Japan & China in East Asian Integration” rests on the economic relations and institutions that facilitate regional collaboration, such as ASEAN and the Asia-Pacific Economic Co-operation (APEC). It consists of 19 chapters, written between the early 1990s and 2008. In each edition, more chapters have been added. Unfortunately, the earlier analyses have not been updated, thus the reader sometimes find a reference to “current” events that are not current at all. To incorporate more recent literature would have made the analyses even more insightful.

The major criticism on “Japan & China in East Asian Integration” is that, due to this structure and earlier chapters not updated, the analysis lacks coherence. Yet, even though in particular the newspaper articles are outdated, it is interesting to review the predictions the author made 15 years ago in regard to China’s and Japan’s economic development. The last chapters are more recent, though, they consist of either brief policy papers or newspaper articles rather than in-depth analyses. Nevertheless, the author therein clearly points out the crucial political and economic choices both Japan and ASEAN face in dealing with each other and China. Thus he provides interesting food for thought.

The strongest assessment in this book is how Japan’s bilateral and multilateral economic engagement in Southeast Asia has developed since the 1960s (Chapters 1–12). In the late 1970s, Tokyo started to politically address the fears of its economic dominance in Southeast Asia. Crucial milestones were the Fukuda Doctrine in 1977 and the then prime minister Suzuki’s tour through Southeast Asia in 1981. The analysis shows a clear pattern: Japan’s engagement has always been driven by foreign and notably economic policy interests. Particularly important has been the motive to secure the access to raw materials, as Japan’s economy relies in many areas up to 100% on foreign resources. Thereby the Straits of Malacca has been since the early 1970s regarded as an “economic life-line” for Japan. Till today, the majority of Tokyo’s imports and exports to the Middle East, Africa and Europe are transported via this shipping lane.

Tokyo’s second motive for strengthening economic collaboration with Southeast Asia was to secure export markets for Japanese products. Thirdly, in particular, after the appreciation of the Yen in the 1980s, Japanese companies shifted labour-intensive industries to Southeast Asia in order to benefit from more competitive exchange rates and cheap labour costs. They also benefited from the General Scheme of Preferences (GSP) which the US applied to ASEAN countries but, since 1989, not the Newly Industrialized Economies in East Asia anymore.

Apart from the investments and technology transfer of the Japanese transnational companies, Tokyo’s Official Development Aid (ODA) has been instrumental in promoting transnational collaboration and improving Japan’s image in Southeast Asia. The author gives a sound analysis of the key areas of the ODA, e.g. grant aid, technical assistance and loans for infrastructure development (Chapter 9).

Still very insightful are Lim’s earlier assessments of Japanese FDI to Singapore and Malaysia (Chapters 1–4). In both countries Japanese investment, technology and know how have contributed prominently to economic development. In the world open city-state with thousands of Asian and Western multi-national companies, though, the Japanese-style management has proven less competitive. Singaporean workers prefer the government controlled or Western companies, as they offer higher salaries and better career prospects. Lim sees a clear need for the Japanese firms to both internationalize and localize (“internationalocalization”) to stay competitive.

In the last part of his book, Lim argues that China poses a special strategic challenge for ASEAN. Already during the Cold War, the institution was divided whether it should deepen its relations with Beijing. Jakarta and Singapore, for instance, did only agree to diplomatic relations with Beijing in 1991. Due to China’s economic reform policies, the relations with ASEAN improved dramatically, notably since the mid-1990s, when China strengthened its multilateral credentials. Lim Hua Sing’s assessment, written in 2001, is thus still correct: “The change triggered mixed reactions of hope and anxiety because ASEAN thought it could open up opportunities and present problems at the same time” (p. 300). Crucial for the promotion of a more favourable view of Beijing were also the ethnic Chinese minorities in Southeast Asia – approximately 25 million people of whom many have traditionally close trade and family relations with China.

Japan had in the early 1980s been “enthusiastic” (p. 123) too about China’s economic modernization because it offered Japanese companies a huge new market. Today, it has also mixed feelings in regard to Beijing’s rise. Tokyo’s relations with ASEAN, on the other hand, have suffered due to Tokyo’s economic problems and trade restrictions. For instance, China made more trade concession in order to create a free trade area with ASEAN than Japan. Lim’s long-term analysis of Japan’s economic relations with ASEAN also highlights that in the last years, the economies have become more complementary. Trade competition, especially on the Western markets, has of course also increased over the years.

The already mentioned Asian Financial Crisis and the positive role Beijing played in resolving it, further diminished Japan’s political influence in East Asia. However, even if “the most important thing is for ASEAN economies to develop and advance by strengthening their economic ties with China” (p. 301), there remain concrete problems. Singaporean companies, for instance, struggled with their investments in Chinese special economic zones. And both the higher and less developed ASEAN economies face increasingly tough competition from the fast developing China.

The future of East Asian regionalism remains unpredictable, as Lim Hua Sing, concedes in the foreword to the latest edition. This is due to the new complex, but also overlapping institutional structure in East Asia. Since the end of the Cold War, ASEAN has actively promoted multilateral cooperation in East Asia. Analysing APEC (Chapter 14), Lim points out the reasons for ASEAN’s “certain distance” to APEC. The main explanation is ASEAN’s fear that APEC would become to dominant, thus marginalizing ASEAN. Consequently, the Southeast Asian institution is careful that the US, Japan or Australia will not dominate APEC. Apart from regional free trade agreements, there are already dozens of bilateral agreements in the region.

The ASEAN plus three mechanism has proven successful and been enlarged in the form of the East Asian Summit to encompass Australia, New Zealand and India. Yet, there is still strategic need to engage the US institutionally closer. The signing of the Treaty of Amity and Cooperation by the new Obama Administration removed a crucial obstacle for closer relations with ASEAN and East Asia in general. Yet, in particular China remains sceptical of a closer regional alignment with Washington and New Delhi, as it fears a containment strategy of these two strategic rivals. In other words, there remain many question marks in regard to the future of regionalism in East Asia. However, in order to remain a relevant player in East Asia who is able to shape the economic and political relations in the region: “Japan urgently needs to improve its Asian relations” (p. 333).