Mistrust hindering Sino-Japanese ties

Strained Sino-Japanese relations have taken a toll on bilateral economic ties as major Japanese automobile companies in August saw slower growth in the Chinese market.

Toyota Motor Corporation, Mitsubishi Motors and two other Japanese automakers reported lower year-on-year sales in China. Nissan Motor Company, which posted five straight months of double-digit growth in the first half of the year, said sales increased by just 0.6 percent in August.

Nissan attributed the slow growth to increasing anti-Japan sentiment among the Chinese public in recent months.

"For the moment, it is difficult to initiate a promotional campaign, especially an outdoor campaign," Toshiyuki Shiga, chief operation officer of Nissan, said during a press conference in Chengdu.

China and Japan's recent row over the Diaoyu Islands, especially Japan's claim that it would "nationalize" the Chinese territory, has ignited long simmering anti-Japan sentiment among the public and led to protests.

"Nissan is not alone. All Japanese automakers have been affected, especially in August," Shiga said.

Some industry analysts said Japanese automakers shouldn't worry too much about the drop in sales. Performance, not patriotic sentiments, is still a major consideration for Chinese consumers shopping for a new vehicle, they said.

But Xi Cheng, a commercial lawyer who specializes in dealing with Japanese clients at Beijing's Zhonglun Law Firm, told China Daily that his business has been brisk as usual.

"Actually, I feel more and more Japanese firms are considering stepping up or expanding their China businesses," Xi said.

Xi said Japanese firms in China are used to ups and downs in relations, and are prepared to deal with the latest increase in tensions.

"Compared to the flareup (over the Diaoyu Islands), they are much more interested in China's coming leadership transition, which would affect their business more," Xi said.

Experts in Sino-Japan economic ties said they are more concerned with the long-term consequences of the increase in tensions.

Bilateral trade between China and Japan reached $342.9 billion in 2011, and trade with China made up 20.6 percent of Japan's foreign trade.

Japan also heavily invested in China, its largest trading partner. By the end of 2011, Japan's cumulative direct investment in China was $82.5 billion, accounting for 8.6 percent of Japan's total outbound FDI.

Zhao Jinping, a Sino-Japan economic relations expert with the Development Research Center of the State Council, said economic ties could be much better.

For example, because of a lack of a free trade agreement, many Chinese imports to Japan face high barriers, as do Japan's imports to China, Zhao said.

But a much-desired bilateral free trade agreement, which could address these problems, has been delayed over the years mainly because of setbacks in bilateral relations, Zhao said.

China's trade with ASEAN has surged over the past two years, after the two sides established a free trade area in 2010. In 2011, ASEAN surpassed Japan to become China's third-largest trade partner.

Escalating tensions between Beijing and Tokyo could affect negotiations over the China-Japan-South Korea free-trade agreement, Zhao said.

zhengyangpeng@chinadaily.com.cn