Transcript Fred Taylor -- Sino-Japanese Economic Issues

Sino-Japanese Economic Issues:
Interdependence on a Deeper Level
Fred Taylor
Hypothesis
Liberal International Relations Theory says:
Economic Interdependence
Security Cooperation
My Research Question:
Will Interdependencies Lead to Diplomatic Cooperation?
Step 1:
Economic Interdependence
Increase Cost of Conflict
Increased Empathy
Step 2:
Increased Empathy
Diplomatic Cooperation
Security Cooperation
Outline
• Economic Trends
– Bilateral Trade
– FDI
• South and SEA Rivalry
– Financial Integration
• Foreign Exchange
• Energy and Ecological
Interdependence
• Prospects in 2027
• Conclusions (So What?)
Wen-Abe Summit: 11-13 April 2007
– Linkages to Security and Diplomatic Policy
Sino-Japanese Trade Statistics
• China by the numbers
–
–
–
–
–
• Japan by the numbers
GDP: $2.512 Trillion
Trade Total: 1.75 Trillion
%GDP Total: 69%
%GDP w/ Japan: 8%
%GDP w/ U.S.: 10%
• U.S. Stats show larger %
– Flows w/ Japan: -$24B
– Flows w/ U.S.: $232.6B
• Import: Raw Materials
• Export: Manufactured Goods
–
–
–
–
GDP: $4.365 Trillion
Trade Total: $1.02 Trillion
%GDP Total: 23%
%GDP w/ China: 4.7%
• With Hong Kong included
– %GDP w/ U.S.: 4.1%
– Flows w/ China: $26B
– Flows w/ U.S.: $88.4B
• Import: Food, Airplanes
• Export: Cars, Car Parts
Bottom line: China is highly dependent on world trade
Japan also net-importer for food, fuel
Direction of Trade
China
Top 5
Imports
Exports
Japan
Top 5
Imports
Exports
182.0
Total
($ B)
272.3
U.S.
58.9
123.3
Total
($ B)
182.2
EU
90.3
Hong
Kong
U.S.
107.4
155.4
262.8
China
73.6
99.8
173.4
59.2
203.5
262.7
Korea 22.5
42.9
65.4
Japan
115.8
91.8
207.6
ROC
16.6
40.0
56.6
71.3
160.8
Thai
land
14.3
20.6
34.9
ASEAN 89.5
China Monthly Statistics: 2006
Japan Statistic Bureau (MOF): 2005
Take Away: Increased trade also increases trade friction
Foreign Direct Investment (FDI)
• China’s FDI Total: $53B
• FDI from Japan: $28.2B
• Investment Frictions
– Foreign Invested Enterprises
account for %58 of exports
• “Economic Colonialism”
– Japanese “hollowing out”
• Suzuki Motorcycles
– Emotion trumps Economics
• Mori Building in Shanghai
• Maglev vs. Bullet Train
• Sino-Japanese Competition for SEA Influence
• Chinese Foreign Exchange Investment Bank
– Build Domestic Economy, Less Dependent on FDI
Financial Integration (w/ U.S. Market)
• Foreign Exchange reserves
– China: $1.30 Trillion
– Japan: $.895 Trillion
•
Economist Intelligence Unit
CRS Report RL32165 (’06)
• Integration After 1997 Asian Financial Crisis
– Asian Monetary Fund (AMF)
– Chiang Mai Initiative
• “Dollar Zone”
Bottom line: U.S. economic
integration doesn’t directly
correspond to Sino-Japanese
integration
Energy Interdependence
• Nuclear Capacity
– Japan: 55 plants
– China: 4 plants
• Energy Efficiency
– Japan: 37%
– China: 9%
• Japan’s Options
–
–
–
–
–
Nuclear
Energy Conservation
Renewable Energy
East China Sea
Siberia-Pacific Pipeline
• China’s Options
–
–
–
–
–
Coal
Hydro electric
Central Asian Pipeline
East China Sea
Siberia-Pacific Pipeline
Ecological Interdependence
Asian dust brings hazy skies to western U.S.
USA Today 04/18/2001
AP/NASA/Goddard Space Flight
Center
Pollution over China Blows out
to Sea
October 22, 2004
NASA/Goddard Space Flight Center
Official Developmental Assistance
• Japan ODA to China: $30B
• Japan voted to stop low-interest loans in 2008
• Grant-Aid will continue beyond 2008
International
Nuclear
Safety
Center,
March, 1999
Sino-Japanese Relations in 2027
• Goldman Sachs BRIC Report 2050
– Models based on: labor, capital stock, and TFP
– Continued growth based on:
•
•
•
•
Macro-Economic Stability
Openness to Trade and Investment
Efficient Institutions
Enhanced Education Levels
• Japan’s Challenges
– Graying and Shrinking Population
– Debt (150% of GDP), Economic Reforms Needed
• China’s Challenges
– Environment, Corruption, Social Safety Net
MP: China’s prospects for growth better than Japan’s
So What?
• Conclusion: Economic and Ecological
Interdependence Will Remain Strong for the Next
Two Decades, but So What?
– Economic Linkages to Security are Weak
• Regime survival and “lost child” more important than $$
– Economic Linkages to Politics are Arbitrary
• Can sometimes “buy” good will, sometimes not
• Not a guarantee for “peace” in the region, but
rather an incentive to maintain economic stability
– If China perceives she is winning the “great game,”
then she will likely preserve future good relations
with Japan and the U.S.
Conclusion
Liberal International Relations Theory says:
Economic Interdependence
Security Cooperation
My Research Question:
Will Interdependencies Lead to Diplomatic Cooperation?
Complex Interdependencies May Positively
Affect Diplomatic Cooperation Sometimes
Step 1:
Economic Interdependence
Increase Cost of Conflict
Increased Empathy
Step 2:
Increased Empathy
Diplomatic Cooperation
Security Cooperation
Questions?
Wen-Abe Summit: 11-13 April 2007