Magazine article Foreign Affairs

Mutual Assured Production: Why Trade Will Limit Conflict between China and Japan

Magazine article Foreign Affairs

Mutual Assured Production: Why Trade Will Limit Conflict between China and Japan

Article excerpt

During the Cold War, the United States and the Soviet Union carefully avoided triggering a nuclear war because of the assumption of "mutual assured destruction": each knew that any such conflict would mean the obliteration of both countries. Today, even though tensions between China and Japan are rising, an economic version of mutual deterrence is preserving the uneasy status quo between the two sides.

Last fall, as the countries escalated their quarrel over an island chain that Japan has controlled for more than a century, many Chinese citizens boycotted Japanese products and took to the streets in anti-Japanese riots. This commotion, at times encouraged by the Chinese government, led the Japanese government to fear that Beijing might exploit Japan's reliance on China as an export market to squeeze Tokyo into making territorial concessions. Throughout the crisis, Japan has doubted that China would ever try to forcibly seize the islands-barren rocks known in Chinese as the Diaoyu Islands and in Japanese as the Senkaku Islands-if only because the United States has made it clear that it would come to Japan's defense. Japanese security experts, however, have suggested that China might try other methods of intimidation, including a prolonged economic boycott.

But these fears have not materialized, for one simple reason: China needs to buy Japanese products as much as Japan needs to sell them. Many of the high-tech products assembled in and exported from China, often on behalf of American and European firms, use advanced Japanese-made parts. China could not boycott Japan, let alone precipitate an actual conflict, without stymieing the export-fueled economic miracle that underpins Communist Party rule.

For the moment, the combination of economic interdependence and Washington's commitment to Japan's defense will likely keep the peace. Still, an accidental clash of armed ships around the islands could lead to an unintended conflict. That is why defense officials from both countries have met with an eye to reducing that particular risk. With no resolution in sight, those who fear an escalation can nonetheless take solace in the fact that China and Japan stand to gain far more from trading than from fighting.


Although China first claimed the Diaoyu/ Senkaku Islands in 1971, it never did much to pursue its claim until recently. On the contrary, in the interests of improving economic and political ties, Chinese Premier Zhou Enlai and Japanese Prime Minister Kakuei Tanaka agreed in 1972 to shelve the issue indefinitely. Beijing even stopped Chinese nationalist activists from trying to land on the islands and prevented articles that asserted China's claim to them from appearing in the Chinese press. In the last few years, however, China has reversed course and started to back up its claims with actions. In 2010, for example, a Chinese fishing boat rammed a Japanese coast guard ship in the waters around the islands. When the coast guard personnel arrested the fishing boat's captain, Beijing declared that Japan had no jurisdiction in "Chinese territory" and cut offsupplies to Japan of vital rare-earth minerals until he was released.

It took until July 2012 for the issue to explode. That month, then Japanese Prime Minister Yoshihiko Noda announced that his government intended to buy some of the islets from their private Japanese owner. Noda's aim was to prevent them from being sold to the right-wing governor of Tokyo, who had revealed plans for the islands that would certainly have provoked China. But Beijing told Noda that it would see even the government's purchase as an unacceptable change in the status quo. The Noda administration ignored warnings from both Beijing and the U.S. State Department and deluded itself that China would acquiesce to the purchase.

Then came the riots and the boycotts. For several weeks in August and September, Chinese protesters caused a ruckus, damaging Japanese-made cars, vandalizing stores selling Japanese products, and setting a Panasonic factory on fire. …

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