Where’s our diplomacy?
China and Japan have agreed to form a joint framework within the year, with government and central bank officials from the two countries to discuss and coordinate economic and financial policies. China hopes to draw more Japanese investment, while Japan can help China’s struggling campaign to address overcapacity and restructure state enterprises. The two countries will also discuss renewing their currency swap arrangement.
The two are still bickering over geopolitical and historical issues. They are at odds over Tokyo’s lack of an apologetic tone over its past aggressions and renewed military power, the military showdown over the Diaoyu (Senkakku in Japan) islets and China’s expansionism in the South China Sea. Japan blatantly took the side of the United States to help it contain China’s influence in the region. It snubbed the China-led Asian Infrastructure Investment Bank, instead joining the U.S.-led Trans-Pacific Partnership.
Yet, the two rivals joined hands because they need each other for practical economic reasons. China’s economy has decisively lost steam from last year. Its currency and other financial markets are battered by a mass exodus of foreign capital. Beijing’s ambitious agenda to retool its traditionally dominant manufacturing industry and export-reliant economic structure by expanding domestic demand and the services sector could go through a setback if financial instability continues.
Strained ties with China have also taken a toll on Japan’s trade and investment. Beijing’s devaluation of the yuan strengthened the yen, which could interrupt Abenomics, Tokyo’s economic agenda based on the weak yen to combat deflation and prop up exports. The two can win a great deal by joining forces. They set aside diplomatic and political differences for the sake of economic causes.
An improved relationship between Asia’s two largest economies would also work favorably for Korea, as it paves the way for three-way trade and cooperation. But we should also be embarrassed. Chinese President Xi Jinping will be the first among world leaders to visit Iran after the lifting of international sanctions. Japanese Prime Minister Shinzo Abe will also be visiting the country within the first half of the year.
President Park Geun-hye said she has been mulling a visit to Iran, even as many have been saying since last year that Korea must act fast to restore ties. We should also not have easily ended the currency swap arrangement with Japan just because our diplomatic relationship was poor. With external trade policy so rigid, it is no wonder that the economy remains in the doldrums even as the president raises alarms. JoongAng Ilbo, Jan. 28, Page 30