Japan and China: Cooperation, Competition and Conflict

Article excerpt

Japan and China: Cooperation, Competition and Conflict. Edited by Hanns Gunther Hilpert and Rene Haak. Hampshire and New York: Palgrave Macmillan, 2002. Pp. 233.

This book is a collection of ten essays on economic relations between Japan and China. The main theme is whether these relations will be cooperative or conflictive. The topics discussed are numerous, ranging from trade to overseas Chinese role. I will introduce and review critically each chapter and then give a general comment at the end.

In the introduction, one line of explanation is problematic. On page 2, it is stated that the past 2,000 years of Sino-Japanese relations have sometimes been harmonious and mutually beneficial, and antagonistic and conflictive at other times. Those who know Japanese history find this line very strange since the first Japanese mission to China was not sent until the year 600 A.D.

Chapter 1 is a general overview of economic relations by Kwan. According to his analysis, the rise of China created a "hollowing out" of Japanese domestic industries and escalating trade friction between the two countries. The bilateral economic relations, however, can be complementary rather than competitive, whereas ASEAN and China relations remain competitive. This statement is backed up by his calculation of correlation coefficients of each country's specialization indices. The Standard International Trade Classification (SITC) breakdown is too big to believe in this statement, since in some cases complementarities may occur in more detailed classifications of goods. Within the machinery and transportation equipment sector, for example, complementarities are equally important.

Hilpert's treatise on trade in Chapter 2 tries to bridge the discrepancies between statistical data given by Japan and China. Including Hong Kong trade, narrows the gaps. This exercise has been carried out by adjusting the IMF Direction of Trade data. He calculates trade intensity using the revised data and observes that it has been increasing. The conclusion that Sino-Japanese trade interdependence is increasing, implying cooperation, is difficult to accept.

Nakagane, who is a well-known China expert, writes Chapter 3. Although his descriptive analysis is informative and pertinent, his regression analysis on Japanese foreign direct investment (FDI) to China is not entirely persuasive. With sixteen annual data points and FDI environmental changes during this period, one cannot believe in the fits as the author claims. In order to assess the future relationships, Nakagane argues that both sides have complained from time to time. While Japanese firms have complained about insufficient infrastructure, the Chinese side has shown dissatisfaction with Japanese FDI. Nakagane concludes that this situation will probably lead to a very delicate relationship in the future.

In Chapter 4, Bhattasali and Kawai provide an evaluation of China's entry to the World Trade Organization (WTO) using a Computable General Equilibrium (CGE) model. They focus on the likely developments in agriculture, manufacturing, and services, as well as those in the aggregate economy, and conclude that the short to medium-term impacts will be significant while the long-term impacts will be minor. The conclusion turns out not to be surprising. Lots of simulation exercises have been carried out without the model specifications. It might be too much to ask for them to include the results of other chapters in their simulations, but the book surely would become more integrated if this step were taken.

In Chapter 5, Taube discusses Japan's role in China's industrialization from a general viewpoint. …