The private sector has a key role in the efforts to rebuild mutual trust between Japan and China as political disputes begin to affect economic relations, experts from the two countries said at a recent symposium in Tokyo.

The diplomatic standoff over the Senkaku Islands last year triggered massive anti-Japanese demonstrations in Chinese cities. And while bilateral ties have repeatedly been strained over political issues for many years, last year saw visible losses in economic relations — although it was also partly due to the slowing growth of the Chinese economy.

Speaking at the event organized by the Japan Business Federation (Keidanren), the China-Japan Friendship Association and the Keizai Koho Center on March 5, the scholars stressed the importance of more private-sector exchanges as the recent developments point to a widening gap in public sentiments between the two countries.

The experts also pointed out that much of Japan’s so-called private-sector exchanges with China so far may have failed to reach out to Chinese people at large, who only began to have a voice in society in recent years.

Trade between Japan and China reached $344.9 billion in 2011, 35 times more than in 1985, while direct investments from Japan hit $73.8 billion, 13 times higher than the figure in 1991, said Xu Mei, a senior economic research fellow with the Institute of Japan Studies at the Chinese Academy of Social Sciences (CASS).

As political relations soured after the Japanese government’s nationalization of the disputed Senkaku Islands in the South China Sea, triggering mass demonstrations and boycotts of Japanese products, Japanese exports to China declined by 10.4 percent in 2012, with the nation incurring a trade deficit of $44.2 billion with China, she said. A Japan Bank for International Cooperation survey pointed to a receding interest among Japanese companies in investing in China, while the number of Chinese tourists — on which Japan’s tourism and related industries have relied heavily in recent years — has sharply declined, she noted.

Still, no major Japanese company has emerged to withdraw capital from China, and China will continue to be both a production base and a market for Japanese firms for at least for the foreseeable future, Xu said. Stability of economic relations between the world’s second and third-largest economies will be regionally and globally important as economic concerns linger in the United States and Europe, she pointed out.

It’s been widely believed that Japan and China will go on with private-sector cooperation even when disputes emerge between the governments, and that belief has been the backbone of bilateral relations so far, said Kiichi Fujiwara, a professor of international politics at the University of Tokyo’s Graduate School for Law and Politics.

But what is happening behind the current crisis in Japan-China relations, he said, is a process where rising nationalism in some parts of both Japanese and Chinese societies are narrowing their respective governments’ policy options. Growing intolerance and aggressive positions toward each other are emerging not among policymakers but from parts of society, he noted.

That would mean that the current crisis will not be resolved merely by government efforts to mend the strained ties, but that the two countries face a severe challenge of building mutual trust between the two peoples, Fujiwara said.

The developments since last year show that Japan and China have not fundamentally achieved a postwar reconciliation even four decades after the normalization of diplomatic ties in 1972, said Liu Jie, a professor at Waseda University’s Faculty of Social Sciences.

Even as economic relations deepened over the past decades, surveys show that public sentiments in Japan and China toward each other have continued to worsen since the 1980s, Liu said. Differences over issues related to wartime history that surfaced in the 80s continue to haunt the relations, and while some common understanding has been reached among history experts from the two countries on those issues, it will take more time before that understanding can be shared by the public in each country, he said.

Liu said that in the first two decades after the 1972 normalization, both Tokyo and Beijing prioritized building friendly relations even by setting aside political and other differences. But after the Tiananmen Square incident in 1989 and as China subsequently went on a path of rapid economic development, the Japanese view toward China came to focus on those differences, and the Chinese view of Japan also became severe especially after Prime Minister Junichiro Koizumi’s repeated visits to Yasukuni Shrine in the first half of the 2000s, he said.

While the Japanese and Chinese governments in 2006 advocated building “mutually beneficial strategic relations,” they keep on groping for new ways to advance bilateral ties, which continue to be marred in recent years by recurring problems over the Senkakus, Liu noted. And as government relations remain as such, the meaning of private-sector exchanges for bilateral relations has come into focus today, he said.

Postwar interactions between the two countries up to 1972 were considered as “private-sector” exchanges because the two nations lacked formal diplomatic relations, but those were in fact exchanges between Japan’s private sector and the Chinese government because no “private” sector existed in China at that time, Liu said. Today, the real private sector does exist in China, and business as well as people-to-people exchanges are all the more important to promote mutual public understanding, he noted.

Akio Takahara, another professor at the University of Tokyo’s Graduate School for Law and Politics, said the dearth of real private-sector exchanges between Japan and China is evident from the lack of mutual public understanding on key issues that concern bilateral relations.

There exists a huge gap between Japanese people’s understanding and the Chinese people’s perception of many of those issues, Takahara said. For example, while many Chinese say they were angered by the Japanese government’s “provocative” move of nationalizing the Senkaku Islands last year, most Chinese people — even some Chinese experts — do not know that a Chinese nuclear-powered submarine was found entering Japanese waters near the Senkakus in 2004 and that a Chinese surveillance ship was spotted near the islands in 2008.

Large numbers of Chinese still seem to believe that Japan is a militaristic country that refuses to apologize for the wartime aggression, but the Chinese government knows that that is not true, Takahara said.

In 2007, then Chinese Premier Wen Jiabao, in his speech to the Diet during his visit to Tokyo, said China acknowledges that Japanese leaders have repeatedly apologized for the war of aggression against China, and Wen’s address was broadcast live on Chinese TV, Takahara said. However, no other Chinese leaders have followed up on such statements, and a single speech by the prime minister alone will not change the Chinese public’s perception of the issue, he pointed out.

When it comes to the question of mutual understanding, the Japanese face the challenge of how to convey relevant information and knowledge directly to the Chinese people, Takahara said, adding that the very same issue may arise on the part of the Chinese people because Japanese people at large have few opportunities to hear what the Chinese really think about relations with Japan.

“This is where we cannot rely solely on the government or the mass media, and have to depend a lot on private-sector exchanges,” he said.

One key area of private-sector exchanges will be the business-to-business interactions, and an increase in economic ties contributes to the development of political relations, Takahara said. However, it remains a question of how far expanded business relations can support the whole of bilateral ties when political relations become strained — as in the case of Japan and China since last year, he said.

Xu of the CASS said that problems in political relations limit the progress in economic ties. One of the reasons that Japan and China do not have a free trade agreement, she said, is the lack of mutual trust between political leaders of the two countries. On the other hand, deepening economic relations raises the possibility of a compromise when political and security problems arise because the two countries would have strong economic interest in keeping the bilateral relations stable, she said.

Waseda University’s Liu said that, ironically, mutual trust between Japan and China appeared to be stronger right after the normalization of ties in 1972, when economic relations were not so close. It was after economic ties deepened in the 1980s and 90s that public sentiments began to worsen toward each other and political disputes emerged between the two countries, he said.

Perhaps there is no linear relationship between deepening of economic ties and stability in political relations, said Fujiwara of the University of Tokyo, adding that Japan and China appear to have come to a point where strong economic ties alone will not stabilize their bilateral relationship.