As China braces for the full impact of U.S. President Donald Trump’s trade war, it’s seeking to learn from Japan’s economic battles with Washington during the Reagan years.
Chinese officials, businesspeople and academics have been pressing their Japanese counterparts to share experiences from the 1980s, when Tokyo found itself in Washington’s crosshairs as its huge trade surplus and increasing industrial might sparked alarm in America.
While there are differences between Japan’s ascent as a commercial power a generation ago and China’s emergence today as a potential superpower, Japan also has lessons for its neighbor in dealing with rising debt, asset-price bubbles and an aging population.
Chinese visitors at the Bank of Japan have repeatedly asked senior BOJ officials about the country’s experience in managing trade friction, according to a person familiar with the matter. Their advice has been to avoid one-on-one talks with the U.S. and keep away from numerical trade targets.
While the Trump administration has already got its way with one-on-one talks, China looks intent on not repeating Japan’s 1985 compromise on the yen. In a speech in Washington in August, Ambassador Cui Tiankai said China would not accept “another Plaza Accord,” the agreement the U.S. struck with Japan, West Germany, the U.K. and France to depreciate the dollar.
The deal, which was seen as a win for President Ronald Reagan’s administration, saw the yen surge, forcing the BOJ to funnel liquidity into the economy to offset the hit to exporters. One view has it that this burst of easy money contributed to the bubble in the property market that later wrought havoc on the economy.
Researchers from a government-affiliated think tank also visited Tokyo earlier this year, meeting Shigehiro Tanaka, the director-general for trade policy at the trade ministry, and talking with former officials, central bankers and academics on the trade war and the lessons of the past.
China has also been looking to Japan for guidance about what to do in a financial crisis. Former BOJ Deputy Gov. Hiroshi Nakaso told the Financial Times earlier this year that the Chinese were looking at how Japan handled the meltdown that followed the bursting of its stock and real estate bubble in the early 1990s.
They may get another opportunity to glean insights from their Tokyo counterparts this week, when Prime Minister Shinzo Abe heads to the Chinese capital to meet President Xi Jinping. Among his entourage will be trade chief Hiroshige Seko, Foreign Minister Taro Kono and business leaders including the chairman of business lobby Keidanren.
The echoes of the Reagan era even include one key official: Robert Lighthizer. Now Trump’s top trade negotiator, Lighthizer led talks aimed at reducing the trade deficit with Japan under Reagan as deputy U.S. trade representative.
He shares Trump’s belief that the U.S. trade deficit in manufactured goods, which has grown steadily since 1975, is a symptom of things having gone very wrong.
With so many changes over the last few decades, China will only be able to take lessons from Japan’s experience, rather than copying its playbook, noted Matthew Goodman, senior adviser for Asian economics at the Center for Strategic & International Studies in Washington.
But with the U.S. showing little sign of backing down on its demands to rebalance trade with China, every little bit of insight Beijing officials can get from their neighbor may help.