Recent Developments in China and Japan-China Relations

December 1999

1. Recent Developments in China

(1) Domestic Politics

  • This year, which marks the 50th anniversary of the foundation of the People's Republic of China (in October) and the reversion of Macao (in December), the Chinese Government has been putting further emphasis on stability and solidarity and managing state affairs with prudence. Although the Government faces various problems, such as the reform of state-owned enterprises and the administrative organization, an increase in unemployment, and ethnic minority issues, so far the domestic political situation has been relatively stable. Large-scale protest demonstrations against the bombing of the Chinese Embassy in Yugoslavia in May soon died down, and the 10th anniversary of the so-called Tian'anmen Incident (in June) passed without any particular disturbance.
  • In April more than 10,000 persons related to Falun Gong, a qigong group founded by Li Hongzhi, staged a sit-down demonstration near Zhongnanhai, the Chinese leadership compound in Beijing. On that occasion, the authorities quelled the demonstration with a moderate approach, but on July 22 the Central Committee of the Chinese Communist Party, the Ministry of Civil Affairs, and the Ministry of Public Security declared that Falun Gong was an illegal organization. The Government issued a notice of prohibiting Party members from participating in Falun Gong and conducted a large-scale campaign of criticism against the organization. Nevertheless, Falun Gong members continued their activities even after that. At the end of October the Standing Committee of the National People's Congress approved a decision relating to the control of cult groups and began to tighten its control.
  • The 4th plenum of the 15th Chinese Communist Party Central Committee was held from September 19 to 22 and adopted "the central committee's resolution on a few major problems relating to the reform and development of state-owned enterprises." Among other things, with regard to military personnel affairs, Hu Jintao, member of the Standing Committee of the Political Bureau and Vice-President, was elected as Vice-Chairman of the Central Military Commission.
  • On October 1,500,000 people were mobilized at Tian'anmen Square in Beijing for the Ceremony to Commemorate the 50th Anniversary of the foundation of the People's Republic of China. At the event, President Jiang Zemin, riding in a convertible car, inspected troops of the People's Liberation Army and delivered an important address from the top of Tian'anmen Square. There was also a military parade, for the first time in 15 years.

(2) Diplomacy

  • The Chinese Government has been engaging positively in diplomatic activities aimed at creating good international relations, striving for its top priority issue of constructing the domestic economy. Recognizing the post-Cold-War international order as a multipolar world, the Chinese Government has been emphasizing its relations with such powers as the United States, Russia, Japan and the EU, which are poles in the new order. However, the bombing of the Chinese Embassy in Yugoslavia amplified distrust toward Western countries among a broad spectrum of Chinese society.
  • Regarding relations between China and the U.S, Although Zhu Rongji, Premier of State Council, visited the U.S. in April, no settlement was reached in negotiations on China's membership of the WTO. China-U.S. relations then became strained after the bombing of the Chinese Embassy in May. Bilateral talks were resumed in August, and efforts to restore the bilateral relations were made at a China-U.S. summit meeting on the occasion of a meeting of the APEC in Auckland in September. On November 15 China and the U.S. reached an agreement in bilateral negotiations on China's accession to the WTO.
  • On June 3 a delegation led by Kim Yong Nam, President of the Presidium of the Supreme People's Assembly of North Korea, visited China. This was the first high-level visit between these two countries in seven years since 1992, when then Chinese President Yang Shangkun visited North Korea. Also, from the Chinese side, Foreign Minister Tang Jiaxuan visited North Korea on October 5-9 to attend a ceremony commemorating the 50th anniversary of the establishment of diplomatic relations between China and North Korea.
  • Since the end of summer China has been actively engaged in diplomatic contacts. For example, President Jiang Zemin made official visits to Europe and the Middle East in November, Li Peng, Chairman of National People's Congress visited African countries in November and December, and Premier Zhu Rongji attended a meeting of the ASEAN together with the leaders of Japan, China, and South Korea on November 28 and also made a tour of Southeast Asia.

(3) Economy

  • In 1998 China achieved 7.8% GDP growth although it did not reach its target of 8% growth. On the other hand, however, deflationary trends were conspicuous, with the wholesale price index dropping 2.6% and the consumer price index falling 0.8%. Such issues as the reform of state-owned enterprises, unemployed countermeasures, and the disposal of large-scale nonperforming debts remain serious. As shown by the collapse of the Guangdong International Trust and Investment Corporation (GITIC), the poor management of some nonbanks has become striking. Labor disputes also appear to be on the rise. In 1999 the Chinese Government has been continuing its efforts to boost domestic demand through positive fiscal measures and other means. The GDP growth rate is expected to reach 7%. (In the January-October period, the GDP growth rate was 7.4% compared with the same period in the previous year, and the consumer price index dropped 1.8%.)
  • Affected by the economic crisis in East Asia, exports and imports last year registered a decline of 0.4% from the previous year, the first negative figure since 1983. In the first half of the year, exports were down 4.6%, imports up 16.6%, and direct investment (on a contract base) declined 19.9% (down 9.2% on an effective base). Meanwhile, Premier Zhu Rongji clearly stated that the renminbi (RMB) would not be devaluated this year either, for fear of such adverse effects as increased external debt and inflationary pressure brought on by a rise in the price of imports.
  • The reform of state-owned enterprises is an important policy issue. The "resolution" of the 4th plenum of the 15th Chinese Communist Party Central Committee reaffirmed the immediate policy of pulling the majority of large and medium enterprises with deficit out of difficulty in around three years and also indicated a long-term target and policy up to 2010.

(4) Military affairs

  • The Chinese Government is promoting the qualitative improvement and modernization of equipment, especially in the Navy and Air Force, and a 500,000 cut in the number of troops. In July 1998 the Chinese Government issued a comprehensive White Paper on National Defense for the first time. The fiscal 1999 defense budget is 104.65 billion renminbi (up 15.0% over the initial budget for the previous fiscal year; up 12.7% over disbursement figure).
    On August 2 China carried out a test launch of Inter-Continental Ballistic Missile, "the Dong Feng 31 (DF-31)", which was thought to be under development. Also, the DF-31 and other modern equipment were grandly put on display in the military parade, for the first time in 15 years, that was held as part of the celebrations to commemorate the 50th anniversary of national foundation on October 1.

2. Japan - China Relations

(1) Basic Policy of Japan

  • In order to ensure the stability and prosperity of the Asia-Pacific region, it is important to encourage China to become an even more constructive partner in the international community. In particular, the following points are stressed:
    1. Support for China's open and reform policy
      (implementation of economic cooperation, support for China's early accession to the WTO, etc.)
    2. Promotion of bilateral and multilateral dialogue and cooperative relations
      (high-level exchanges, Japan-China security dialogue, ASEAN Regional Forum, APEC, etc.)

(2) Overview of Japan-China Relations

(a) High-level exchanges

In 1997, Prime Minister Ryutaro Hashimoto visited China in September, and Premier Li Peng visited Japan in November. On the latter occasion, the two countries agreed that every year one of their leaders should visit the other country.

  1. President Jiang's visit to Japan (November 25-30, 1998)
    This was the first visit to Japan by a Chinese head of state. During the visit, the two sides issued the "Japan-China Joint Declaration on Building a Partnership of Friendship and Cooperation for Peace and Development" and the "Joint Press Announcement on Strengthening Cooperation Between Japan and China Toward the 21st Century," which specified the 33 concrete items for cooperation. The two countries thereby established a framework for joint action toward common goals.
  2. Prime Minister Obuchi's visit to China (July 8-10, 1999)
    The two countries agreed to promote bilateral cooperation toward the twenty-first century, under the name of a "partnership of friendship and cooperation for peace and development." In this way, his visit is hoped to serve as a bridge to the twenty-first century. Results included agreement on Premier Zhu's visit to Japan in the year 2000, the substantial conclusion of bilateral negotiations on China's accession to membership of the WTO, a review of the steady development of the 33 items of cooperation, and agreement on their further promotion.

A Japan-China summit meeting also took place in September, on the occasion of the APEC conference in Auckland. The two sides discussed bilateral relations, relations between China and the United States, the Taiwan issue, and other topics.
In December this year, Li Ruihuan, the Chairman of the Chinese People's Political Consultative Conference (ranked fourth in the Party), is scheduled to visit Japan.

(b) Economic relations

  • The value of trade between Japan and China reached about $64 billion in 1997, 58 times more than the value in 1972. In 1998, however, the value dropped to about $57 billion.
  • China ranks as Japan's second largest trading partner, and Japan as China's first.
  • Japan's direct investment in China amounted to 243.8 billion yen in fiscal 1997. Although this figure has been trending downward in recent years, China remains the principal recipient of Japanese investment in Asia.
  • On the occasion of President Jiang's visit to Japan in November 1998, it was agreed that Japan would provide a yen loan amounting to as much as 390 billion yen in fiscal 1999 and 2000, as the final two years of the fourth yen credit. The Chinese side expressed its appreciation of Japan's economic cooperation to China as stated in the above-mentioned Joint Declaration.

(c) Security

  • The two countries have been developing an active exchange of defense-related dignitaries. For example, Chinese Defense Minister Chi Haotien visited Japan in February 1998, Defense Agency Director General Fumio Kyuma visited China in May 1998, and Zhen Wannian, Vice-Chairman of China's Central Military Commission, made an unofficial visit to Japan in September 1998. The 6th Japan-China Security Dialogue was held in Tokyo on October 7.

3. Hong Kong and Macao

  • The "one country, two systems" policy has been basically functioning quite well so far. Affected by the Asian economic crisis and other factors, the Hong Kong economy has stagnated (both personal consumption and real estate prices have been declining), recording negative growth (minus 5.1%) for the whole of 1998. The unemployment rate also remains at a high level (6.2% in the August-October period), so the situation is severe. In the second quarter of this year, however, Hong Kong recorded positive growth (0.7%) for the first time in six quarters.
  • Regarding the issue of the Court of Final Appeal's verdict concerning permanent residency in Hong Kong, the Hong Kong Special Administrative Region (SAR) Government requested the Standing Committee of the National People's Congress for its interpretation of the Basic Law so as to control the inflow of people from the mainland. At the end of June the Standing Committee of National People's Congress issued an interpretation almost completely recognizing the argument of the Hong Kong SAR Government. Although the problem is attracting much attention as one involving the rule of law and judicial independence, most observers have the view that the interpretation is unavoidable for maintaining the prosperity and stability of Hong Kong.
  • Regarding the issue of the Court of Final Appeal's verdict concerning permanent residency in Hong Kong, the Hong Kong Special Administrative Region (SAR) Government requested the Standing Committee of the National People's Congress for its interpretation of the Basic Law so as to control the inflow of people from the mainland. At the end of June the Standing Committee of National People's Congress issued an interpretation almost completely recognizing the argument of the Hong Kong SAR Government. Although the problem is attracting much attention as one involving the rule of law and judicial independence, most observers have the view that the interpretation is unavoidable for maintaining the prosperity and stability of Hong Kong.
  • Macao will be reverted to Chinese sovereignty on December 20 of this year, after which it will be called the Macao Special Administrative Region (SAR). Prior to this, in May Edmundo Ho, the President of Dafeng Bank, was elected and appointed as the first Chief Executive, and now preparations are going ahead, centered on Mr. Ho, toward the establishment of the Macao SAR Government. In September, for example, the organization of the Macao SAR Government was announced.

4. Taiwan

  • Cross-straits talks through the private liaison organizations of China and Taiwan have been suspended since the visit of Taiwanese President Li Denghui to the United States in 1995. Since November 1997, however, there have been negotiations between the Association for Relations Across the Taiwan Straits (ARATS, on the Chinese side) and the Straits Exchange Foundation (SEF, on the Taiwanese side) toward a resumption of the talks, and in October 1998 Koo Chenfu, the head of the SEF, made a visit to China. So the icy China-Taiwan relations appeared to be melting.
  • On July 9 of this year, however, President Li stated in an interview with the foreign press that the relationship between China and Taiwan was a "special state-to-state relationship," to which China responded furiously, saying that the statement denied the principle of "one China" and was aimed at the division of the state. The Chinese Government continued to repeat its criticism of President Li and to hint at the possibility of the use of forces.
  • On September 21 a large earthquake hit the center of Taiwan, killing 2,321 and injuring 8,722 people (as of October 9). Immediately after the earthquake, in the evening of the same day, Japan dispatched a first international emergency relief team, and later a medical team and a team of anti-earthquake experts. Japan also provided $500,000 in emergency grant aid, the equivalent of about 29.8 million yen worth of emergency relief items, such as tents and power generators, and 1,000 temporary housing units as grant assistance (approximately 250 million yen). The Chinese side suggested the provision of $100,000 in financial and material aid and the dispatch of a medical team through the Chinese Red Cross. The Taiwanese side did not accept them, however, and strongly criticized China for its political use of the situation, including its treatment of Taiwan as a "province of China" even in offering disaster aid.
  • Japan's stance as to Taiwan explicitly stated in the Japan-China Joint Communique of 1972 remains unchanged and Japan has stated repeatedly that it hopes for a peaceful settlement of the Taiwan issue through discussions between the direct parties on the two sides of the straits.
  • In preparation for the presidential election scheduled to be held in March of next year, the Kuomintang (KMT) at its convention in August of this year chose current Vice-President Lian Chan and Vincent C. Siew, Premier of the Executive Yuan, as its candidates for the election. As a result, the presidential election is expected to be a three-man race between Lian of the KMT, Chen Shuibian of the Democratic Progressive Party (DPP), and ex-Governor of the Taiwan Provincial Government James C.Y. Soong, who declared his candidacy against the will of the KMT and was expelled from the Party.


Back to Index