Factors Which Could Lead to Improvements in Sino-Japanese Relations in the East China Sea

On November 7^th China and Japan issued a carefully worded statement which indicates that Beijing and Tokyo are seeking to ease the tensions between the two countries which have risen dramatically since 2012 when Japan nationalized the islands in the Easy China Sea known as Senkaku to the Japanese and Diaoyu to the Chinese. The statement admitted that "Different Positions" exist in regard to who has sovereignty over the islands and announced plans to create a "Crisis Management Mechanism" to try and prevent the situation from worsening. A mechanism such as this could ideally set the stage for some form of formal agreement as to the legal status of the islands. A victory for China is that the original draft of the statement apparently stated that Japan had sovereignty over the islands but was aware of China’s claims. If Japan had refused to modify this wording it would have greatly complicated discussions and made it less likely that Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe would meet during the APEC Summit in Beijing, that is currently under way, to discuss the matter further. Japan's apparent concession here indicates that Tokyo is serious about finding a resolution.

Both Japan and China have incentives to resolve this dispute. China has seen a significant drop in Japanese investment which is problematic during at time when the economic implications of potential shifts, such as reigning in China’s Shadow Banking Sector and reforming its Real Estate Market amongst other things, could severally compromise the growth rates that China has seen in recent decades and lead to an increase in social instability. (In theory China could refuse to make any meaningful reforms but that could lead to even worse consequences in the long-term). Japan meanwhile is facing its own degree of economic uncertainty as an increase in consumption taxes has limited economic growth, and the deflation of the Yen, while good for Japanese exporters, has negatively impacted the wealth of much of the Japanese populace. Both countries also have negative demographic trajectories which, barring a dramatic change to immigration policy, will lead to a context in which relatively fewer workers will be supporting a rapidly graying population. All of this comes at a time when China is working to transform its Navy into a Blue Water Navy, Japan is seeking to remilitarize, and the United State has made it clear that it will back Japan in the event of any military disputes.

It is pretty clear that both Beijing and Tokyo have a variety of pressing concerns. Resolving the disputes over the islands would afford both China and Japan more bandwidth to address these obstacles. A resolution could also afford Tokyo a degree of flexibility as Japan’s activities in the East China Sea are similar to those of China in the South China Sea. In January 2013 the Philippines filed a lawsuit against China in the Permanent Court of Arbitration alleging violations of the United Nations’ Convention on the Law of the Sea. If the court findings favor The Philippines it could set a legal precedent that Beijing could use against Tokyo. Such a finding would not be an issue for the Japanese if the dispute over the islands were already resolved.

Despite the incentives to find a resolution the islands enflame nationalist sentiment in both countries. If either side is perceived as giving in too much there could be political consequences. It is also not impossible that any resolution in the East China Sea could be used as a template to resolve disputes in the South China Sea, thus, Beijing will not want to set any precedents that could be used against China. After all, Japan (backed by the US) and China are far more evenly matched than China and countries such as The Philippines and Vietnam. Beijing has no interest in setting precedents which weaker countries can use to the detriment of Chinese interests. In the next week we shall see how this potential compromise progresses. How far it goes and what each side is willing to give up will be telling not just for the Senkaku/Diaoyu Islands but also for disputes in the broader Western Pacific Region.

The Implications of Developing Sino-Bangladeshi Relations in the Indian Ocean on International Relations in the South China Sea

This week Bangladeshi Prime Minister Sheikh Hasina completed a three day visit to China. One of her primary objectives during the trip was to attract investment to develop a deep-sea port on Sonadia Island in the Bay of Bengal. Though an agreement is still pending such a development would serve as an additional stop along the so-called String of Pearls, a network of ports that the Chinese have helped develop which link East Africa, Southwest Asia, and South Asia to China. A further increase in China's presence in the Indian Ocean and the concomitant increase in trade that would presumably accompany it will be a positive step for Bangladesh even if it could complicate relations between Delhi and Dhaka. What garners less attention is the reality that an increase in China’s presence in the Indian Ocean could also exacerbate tensions in the South China Sea.

If there is a an increase in trade between the Indian Ocean and the South China Sea the route will become more valuable. Though the energy resources in the South China Sea are attractive Beijing's primary interest in the region is to have greater control over shipping lanes through which half of the world’s cargo by tonnage passes through each year. China wants to be a great power and great powers are Blue Water Powers (i.e. they have a global naval presence). The problem with a global naval presence is that sovereign powers resent foreign powers imposing themselves near their territory. We have already seen heightened tensions in the South China Sea between China and Vietnam and China and the Philippines with the former allegedly ramming Chinese ships and the latter having filed a case against China in the Permanent Court of Arbitration in The Hague accusing Beijing of violating the United Nations’ Convention on the Law of the Sea (UNCLOS). As long as China's neighbors are divided they cannot stand up to China in an effective manner. For this reason it will be important to note if the Philippines and Vietnam decide to cooperate to protect their interests in the South China Sea.

Though Manila and Hanoi have conflicting claims over the Spratly Islands there is evidence that the Vietnamese and Filipinos recognize that they can better protect their respective interests by cooperating. Last Sunday members of the Filipino and Vietnamese navies staged a symbolic display by gathering to play soccer and volleyball and drink beer on the Vietnamese held Southwest Cay in the South China Sea. Though such a gathering is hardly a concrete commitment to mutual defense it does send a message that cooperation is possible. It will be important to monitor if Filipino-Vietnamese relations develop beyond the symbolic and whether or not an agreement between the two countries will gain either direct or indirect support from Japan and the United States. 

The so-called String of Pearls is a potential step to transform China into a Blue Water Power. This process will take decades and will be prone to conflicts. Whether or not these conflicts escalate to the point where diplomacy fails remains to be seen. What is important to note is that
what happens in the Indian Ocean can impact relations in the South and East China Seas. As countries in one region see China enhancing it power in another region they will question how this will impact their long-term interests. It is possible that we will see greater cooperation between the Philippines, Vietnam and a remilitarized Japan with either the explicit or implicit backing of the United States. Such a grouping might be able to provide a balance of power in the Western Pacific but it could also be viewed as a sufficient threat for Beijing to take action to protect Chinese interests. For this reason it is important to monitor factors which could unite countries in the South and East China Seas even if these factors are occurring in another region and their implications are not always immediately evident.