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How Japan benefited from friendly ties with China

S
ino-Japanese relations are often in the news for acrimony, but there’s much more to the story, and perhaps a lesson for Donald Trump.
1 month ago
George Koo
Photo from Shutterstock

Critics may note “what goes around comes around” about the blowback suffered by those whose actions have misfired. The late Chalmers Johnson devoted an entire book to criticizing U.S. foreign policy under the title Blowback.

However, once in a while, what comes around can be a good thing. One example, remarkably enough, involves China and Japan.

The story begins with a speech by Daisuke Kotegawa given at an international conference organized by the Schiller Institute and held in June 2016 in Berlin. Kotegawa was a retired career bureaucrat from Japan’s Ministry of Finance.

He noted that in recent years, tourists from China have begun pouring into Japan. When the cherry blossoms are in bloom, Chinese tourists fill the hotels to overflowing.

In 2015, 5 million visitors came to Japan, twice as many as just two years earlier. With the average spending of about US$3,000 per person, that was a $15 billion injection into Japan’s economy. “So thanks to those foreign tourists, our economy is now very good,” Kotegawa said.

He went on to say that he was part of the team that agreed to provide economic assistance to China in 1989, to the tune of more than $10 billion per year for six years in the form of loans at 0.5 percent interest. These loans were used to build airports in Beijing, Shanghai, and Guangzhou, along with ports, railroads, fertilizer factories, dams, and power plants. The telephone networks in Shanghai and Beijing were financed by these loans, as well as the subway system in the Chinese capital.

Thanks to the infrastructure put in place with Japan’s assistance, Chinese people got wealthy and, as Kotegawa-san observed, “Now we are actually getting the fruits in the form of huge numbers of Chinese tourists.”

This story has a couple of lessons for the administration of U.S. president Donald Trump. One is that a well-oiled economy needs a first-rate infrastructure.

The American Society of Civil Engineers just released its quadrennial “Infrastructure Report Card” on 16 sectors of America’s infrastructure such as roads, railroads, dams, drinking water, and so on. Most sectors earned a “D” rating, which means the infrastructure is “in poor to fair condition and mostly below standard, with many elements approaching the end of their service life.”

“A large portion of the system exhibits significant deterioration,” the ASCE reported. “Condition and capacity are of serious concern with strong risk of failure.”

Even though the bridge category earned a C+, one of the higher grades given by the ASCE in this report, 56,000 bridges are “structurally deficient” — in other words, catastrophes waiting to happen.

During his run for president, Trump campaigned on fixing infrastructure, and members of Congress have known for years that the nation’s infrastructure is old and worn. But Congress either lacked the intelligence to figure out where the funding could come from or lacked the courage to propose taxes that would pay for the improvements. Kicking the can down the road to the next election is what they do best.

According to the ASCE, it will take a couple of trillion dollars to bring America’s infrastructure up to snuff — mind you, not to Grade A state-of-the-art status, but at least to Grade B, enabling the U.S. economy to start humming again. But if Congress can’t come up with the funding, how will Trump deliver on his promise?

This is where China comes in. It has gone from being a recipient of soft loans and foreign assistance to becoming the world’s largest investor, partner, and builder of infrastructure projects. The Chinese have taken their Silk Road initiative around the world, and countries are eager to work with China because it has developed a reputation for producing quality results on schedule and at low cost — and with attractive financing terms.

All the Trump administration needs to do is be willing to take a different approach to bilateral relations with China, a new look based on what’s in the national interest of the U.S.

How will sailing naval fleets into the South China Sea benefit America’s national interest? How will launching a trade war with China benefit the U.S.? In other words, how will confrontation benefit the United States? Not much.

On the other hand, if Trump can invite Chinese companies to help build and finance infrastructure projects, that clearly would be in America’s interest. He could even stipulate that for every winning bid by a Chinese company, it would have to take on a joint-venture partner drawn from a list of local American construction outfits. Since it has been many years since U.S. companies have undertaken large infrastructure projects, these JV projects would help bring them up to speed again.

By making sure that what comes around benefits the U.S., the Trump administration would be well on the way to developing a winning relationship with China. Just keep in mind that the people of the United States and China have everything to gain from collaboration and nothing from confrontation.

By George Koo
Dr. George Koo recently retired from a global advisory services firm where he advised clients on their China strategies and business operations. Educated at MIT, Stevens Institute of Technology, and Santa Clara University, he is the founder and former managing director of International Strategic Alliances. He is a member of the Committee of 100, and a director of New America Media.
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