The fundamental rivalry in the Asia-Pacific region between Japan and China will surely linger in 2018, as a thaw in bilateral relations is likely to be restricted to areas of mutual economic benefit.

With 2018 marking the 40th anniversary of the signing of a peace and friendship treaty between the two countries, Prime Minister Shinzo Abe and Chinese President Xi Jinping agreed in November, on the margins of a regional summit in Vietnam, to make a “new start” in bilateral relations.

Abe said 2018 could see the countries’ leaders swap visits for the first time in a decade.

There are clear economic benefits for both countries from a political thaw. Tapping into Chinese markets makes sense for the Abe administration’s pursuit of economic growth, while China can benefit from Japanese technology and the countries’ linked supply chains.

Both Abe and Xi now have sufficiently solid domestic support to pursue this while accepting the risks that deeper engagement may pose to their popularity due to thorny security and historical issues, said Stephen Nagy, a fellow at the Asia Pacific Foundation of Canada.

Earlier this month, Abe suggested Japan could cooperate with Xi’s giant One Belt, One Road cross-border infrastructure development project, even within the context of the “free and open Indo-Pacific” concept Tokyo has long been pushing.

Keidanren, Japan’s most powerful business lobby, then agreed at a bilateral business dialogue to seek cooperation with China in jointly developing infrastructure, including under Xi’s proposed framework.

While concerns remain in Japan about the megaproject’s quality and transparency standards, Nagy said, the government’s green light is crucial for Keidanren members, who are “very keen to get their fingers into it … but would prefer cooperation with the (Japanese) state to ensure their investments are secure.”

While the historical grievances that have long strained bilateral ties will remain, both governments have options to handle them sensitively in order to encourage the thaw.

Xi attended this year’s state memorial in Nanjing for victims of the 1937-38 massacre by Japanese troops, but he did not give a speech.

All of this is taking place against the backdrop of fundamental differences in security matters. Flashpoints include the uninhabited Senkaku Islands in the East China Sea — administered by Japan but claimed by Beijing as Diaoyu — and more broadly China’s militarization of outposts in the contested South China Sea.

China has regularly sent its ships around the Senkakus since the Japanese government purchased some of the islands from a private Japanese owner in 2012, bringing them under state control.

Sources close to bilateral ties say Tokyo and Beijing are in the end stages of decadelong negotiations on a hotline aimed at averting unintended clashes in the East China Sea or the airspace above, but still need to work out the details.

“We’re only one collision of coast guard vessels away from plunging into the abyss,” said Jeff Kingston, director of Asian Studies at Temple University Japan.

“Japanese participation in (U.S.) freedom of navigation exercises in the South China Sea has drawn criticism from China, so if those patrols are escalated, that could pose problems for a thaw in relations,” Kingston said.

And while the threat from North Korea’s development of nuclear and ballistic missiles has brought the international community together to an extent this year, further weapons testing by the North has the potential to push Japan and China apart in 2018, particularly depending on the U.S. response.

In his first national security strategy released last week, U.S. President Donald Trump pledged to boost cooperation with Japan, Australia and India, while labeling China a strategic competitor.

The pursuit of quadrilateral cooperation with Australia and India, which Abe proposed in an opinion piece in 2012, fundamentally puts Japan in the way of the expansion of Chinese influence in the Indo-Pacific region.

“Japan has a long-term vision of securing a leadership role in the region … if there is more progress in quadrilateral (talks) or if Japan pushes forward with the Asia-Africa Growth Corridor cooperation agreement with India, these variables will affect how China can realistically warm relations with Japan,” Nagy said.

For now, Abe has expressed his willingness to travel to China first for a summit, then inviting Xi to reciprocate soon after.

While each leader will be eager to present the thaw as the culmination of his own efforts, Abe will likely have to accept China calling the shots to a certain degree, Nagy said.

On Trump’s visit to China in November, “President Xi had to demonstrate that he was in a superior position, and the conditions will be similar with Abe, with the optics being that pressure from Xi has worked and Abe has come around to China’s position,” he said.

In any case, Foreign Ministry sources say planning for the key messages of these visits cannot get started until the success of a long-delayed trilateral summit in Japan involving Chinese Premier Li Keqiang and South Korean President Moon Jae-in.

They say that three-way meeting will set the tone for the year.

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