Stranded in Islands- The Asian Giants

By Satyajit Mishra

 China and Japan, the world’s second and third largest economies are the top two-way trading partners.  The two economies are heavily dependent on each other.  Although their economies remain heavily coupled, relations between the two economies seem to be headed in an irreversible downward spiral.  The highest negative perception of Japan in the world comes from the Chinese, and similarly the highest negative perception of China in the world comes from Japan.  The main reason for this negativity is due to Japan’s refusal to accept its wartime past to the satisfaction of China.  This perception further deteriorated recently, due to the 2012 purchase of the Senkaku islands by Japan.

The Senkakus, which are called the Diaoyu by China, were purchased in September 2012, by Japan from a private owner.  This purchase was carried out by the Japanese despite repeated warnings by the then Chinese president Hu Jintao.  Hu’s concerns were well founded and legitimate. For years, China had quietly accepted Japan’s occupation of the islands even as its disputed sovereignty. By buying the islands, Japan effectively nationalized them- at least in China’s view.

Now the issue at hand is- given the nationalist mood in China over the past decade, the Chinese government can’t  risk appearing weak in its response to Japan. Similarly, if Japan did not carry on with the purchase or reversed the sale of the islands it would appear that they have succumbed to China’s demands; something that would not sit too well with the Japanese hard-liners. However if Sino-Japanese relations are to improve, a return to the status quo ante is a must.  Both countries need to agree to resolve the issue by taking it up with the International Court of Justice.  It is unlikely to see an Abe-lead administration reach out to China, and even more unlikely for China to respond constructively.  However, cooperation between the two Asian giants would help them scale back the naval and air patrols of the waters surrounding the islands. These are expensive, and are a sheer waste of resources.  As China continues to grow its economy, the new largest Asian economy will look to push aggressively. This increase in aggression will be countered by upgradation of the Japanese defence forces.  Japan will also seek to further strengthen its existing ties with the United States.  All this simply translates to unnecessary and unwarranted expenditure over a set of islands, whose ownership seems to be only ornamental to start with the least sense of economic engagement.

 Satyajit Mishra: Currently in 3rd year of B.Com under Calcutta University  specializing in accounting and finance. Also pursuing Chartered Accountancy. Reading research and analysis of the global economy, political matters that influence our economic decisions, game theory and strategies in war, strategy formulation and implementation and contemporary issues in marketing interest him a lot.