Concessions not a solution for China-US trade war: incoming Chinese ambassador to Japan

[TaiShang]

Concessions not a solution for China-US trade war: incoming Chinese ambassador to Japan

By Xie Wenting, Bai Yunyi and Li Ruohan Source:Global Times Published: 2019/5/28

China, Japan to safeguard open economy, free trade: Kong

Kong Xuanyou, incoming Chinese Ambassador to Japan, at a press event on Tuesday. Photo: Xie Wenting/GT

China is in no way the same as Japan was 30 years ago. Making compromises and concessions won't solve the problems, the incoming Chinese Ambassador to Japan Kong Xuanyou told a press event on Tuesday.

The remarks were made in response to a question on the difference between the ongoing trade disputes between China and the US and the trade disputes between the US and Japan taking place three decades ago.

Kong, who is currently vice minister at the Chinese Foreign Ministry and special representative of the Chinese government on Korean Peninsula affairs, said on Tuesday that the world is different from what it was 30 years ago. And China-US relations are different from Japan-US relations.

China's Foreign Ministry said Kong will assume office as the new ambassador to Japan on Thursday, replacing Cheng Yonghua, who served as ambassador for nine years.

Kong once worked as an office clerk at the Chinese consulate in Osaka from 1985 and 1989. In September 1985, Japan signed the Plaza Accord to ease the economic friction with the US and shrink Washington's budget deficit.

Kong told the media that the Plaza Accord was a huge blow to the Japanese economy, and its influence continues to this day. Back then, Japan limited its automobile, electronics and semiconductor exports.

Kong Xuanyou. Photo: website of China's Foreign Ministry

Liu Jiangyong, vice dean of the Institute of Modern International Relations at Tsinghua University, told the Global Times on Tuesday that unlike the alliance between Japan and the US, in the China-US relations, China is in an equal position with the US.

Unlike Japan, China has no need to make concessions to consolidate an alliance, nor does it need to compromise on trade issues to strive for time and give domestic companies a chance to survive trade frictions, Liu said.

China can endure the US trade pressure because the country's 1.4 billion people are providing huge consumption potential, Liu noted.

Chinese netizens also urged China not to make concessions to the US.

They said that the US likes to use the national security threat as an excuse to suppress other country's advanced industry.

Recently, an article headlined "How Japan lost the chip war 30 years ago" went viral on Chinese social media, which details how the US used this tactic to suppress the Japanese chip industry when it controlled most of the world market.

Upholding multilateralism

The Chinese diplomat also called for cooperation between China and Japan to safeguard an open world economy and free trade system, stressing that East Asia can be a role model of cooperation on multilateralism.

While China and Japan have some disputes, Japanese Prime Minister Shinzo Abe said in 2018 that the two countries' relations had "fully returned to the normal track."

Abe visited China in October 2018 and signed 52 memoranda of cooperation in a wide range of areas with China, the diplomat.com reported.

Analysts said that while the US upholds protectionism and unilateralism, and starts trade disputes with other countries, China and Japan move closer as both countries uphold multilateralism.

Kong said on Tuesday that China and Japan are the "beneficiaries" of a free trade system.

"China has noticed that the Japanese government has repeatedly pledged to uphold multilateralism and the free trade system. Both sides have clear common ground on this point," said Kong.

US President Donald Trump has threatened to impose high tariffs on Japanese automakers.

"Japan will deal with China and the US based on its own interests, rather than being one-sided," said Lü Yaodong, director of the Institute of Japanese Studies at the Chinese Academy of Social Sciences.

"Japan cares about the benefits of multilateral trade and cooperation in third-party markets under the Belt and Road Initiative," Lü said.

Lü told the Global Times that as Japan becomes an aging society where its consumption ability is comparatively limited, China's large market is important for the country.

"Ties between China and Japan also matter to regional and world peace and stability," Lü said.

Amid the escalating China-US trade disputes, most Asian countries, including Japan and South Korea, are worried that their countries' economies would be affected.

Liu noted to the Global Times that Japan and South Korea have a stronger need for an open and multilateral trade environment than China does, and it's not about picking sides, but taking action to protect their own national interests.

Liu suggested that Northeast Asian countries seek cooperation at multilateral events, such as the upcoming G20 summit, because no matter what the US does, the need for multilateralism and free trade should be expressed and heard.

For Kong, an important task after assuming the ambassadorship is to prepare for the G20 summit in Osaka, where the Chinese leader is expected to participate.

"We hope the outcome of the G20 summit in Osaka will send a positive signal to the outside world, and consolidate the confidence of the international community in maintaining the free trade system," Kong told the group of media.

He expressed hope that this year's G20 summit could also touch on sustainable development and climate change.

At the Tuesday press event, Kong also responded to a question on the Korean Peninsula.

Kong told the Global Times that the peace process on the peninsula is encountering some difficulties, but that these are "temporary."

"As long as North Korea and the US and other related parties can adhere to dialogue and show flexibility, the current difficulties are surmountable," Kong said. He noted that China will continue to play a constructive role in this process.

http://www.globaltimes.cn/content/1152118.shtml

***

In one word, unlike Japan, China has national sovereignty.

 

[nahtanbob]

Concessions not a solution for China-US trade war: incoming Chinese ambassador to Japan

Recently, an article headlined "How Japan lost the chip war 30 years ago" went viral on Chinese social media, which details how the US used this tactic to suppress the Japanese chip industry when it controlled most of the world market.

The status quo is not taking you anywhere

Japan lost the chip war because American companies beat them. Talent moved from defense to civilian sector at the end of the cold war. Chinese/Indian/Middle Eastern engineers & scientists helped American firms beat their Japanese counterparts

 

[Feng Leng]

Since Japan is a US-ally, our rare earth sanctions on the US will also require sanctioning Japan at the same time. We are just letting them know no hard feelings, it's just business.

https://www.bloomberg.com/amp/news/...-weaponize-rare-earths-dominance-in-trade-war

 

[Mista]

Kong told the media that the Plaza Accord was a huge blow to the Japanese economy, and its influence continues to this day.

The Chinese media like to cite the Plaza Accord as an example. Does he even know what the Plaza Accord is about?

 

[Suika]

Main goal is to arose anti-American sentiment in Japan.

Lets not forget China has a billion people, Japan has less than the US. China has many rare earth metals. Japan does not. China has a sizeable oil reserves. Japan does not.

If China couldn't stand on a more equal footing with such natural advantages, than China would be doing something terribly wrong.

 

[Bussard Ramjet]

Since Japan is a US-ally, our rare earth sanctions on the US will also require sanctioning Japan at the same time. We are just letting them know no hard feelings, it's just business.

https://www.bloomberg.com/amp/news/...-weaponize-rare-earths-dominance-in-trade-war

Been more than 10 days now!

Only talk, no action!

Where's the action?

China has shown that it is just a paper tiger.

unlike the alliance between Japan and the US, in the China-US relations, China is in an equal position with the US.

LOL.
Sure.

That is why China has capitulated like this with the US throwing punches after punches, and China taking them one after another, without even retaliating.

cooperation between China and Japan to safeguard an open world economy and free trade system, stressing that East Asia can be a role model of cooperation on multilateralism.

Again LOL.

No one in Asia believes in your selfish appeals to Pan-Asianism or something like that. Japan is one of the few countries which refused to join AIIB. Japan also has imposed a de-facto ban on Huawei inside the country.

Until recently you were accusing, bashing, and burning Japanese flags.

Japan, in fact, has doubled down on Pax Americana.

 

[Feng Leng]

Been more than 10 days now!

Only talk, no action!

Where's the action?

China has shown that it is just a paper tiger.



LOL.
Sure.

That is why China has capitulated like this with the US throwing punches after punches, and China taking them one after another, without even retaliating.



Again LOL.

No one in Asia believes in your selfish appeals to Pan-Asianism or something like that. Japan is one of the few countries which refused to join AIIB. Japan also has imposed a de-facto ban on Huawei inside the country.

Until recently you were accusing, bashing, and burning Japanese flags.

Japan, in fact, has doubled down on Pax Americana.

LOL do you need some burnol? Let me know when Indians learn how to use a toilet, okay?

 

[Zsari]

Since Japan is a US-ally, our rare earth sanctions on the US will also require sanctioning Japan at the same time. We are just letting them know no hard feelings, it's just business.

https://www.bloomberg.com/amp/news/...-weaponize-rare-earths-dominance-in-trade-war

No, you want Japan and everyone else to compete with the US by supply them with materials. Learn from the US, and place control on your export. If any company sales anything that involves your material to a hostile state, then sanction that company. This is how the game is best played. Don't need to go overboard by creating unnecessary enemies. You want to get everyone onto your side.

 

[TaiShang]

No, you want Japan and everyone else to compete with the US by supply them with materials. Learn from the US, and place control on your export. If any company sales anything that involves your material to a hostile state, then sanction that company. This is how the game is best played. Don't need to go overboard by creating unnecessary enemies. You want to get everyone onto your side.

Japan is standing quite firm, actually.

Even with full Trump press, they have not given anything except promising to buy some multi-national F-35.

Also, I know, informally, Japanese scholarship and businessmen are in support of China.

Japanese government, perhaps smartly, simply wants to continue to free ride on the US mule.

After all, Japanese companies are still busy killing the once-behemoth US auto industry.

 

[Bussard Ramjet]

Japan is standing quite firm, actually.

Even with full Trump press, they have not given anything except promising to buy some multi-national F-35.

Also, I know, informally, Japanese scholarship and businessmen are in support of China.

Japanese government, perhaps smartly, simply wants to continue to free ride on the US mule.

After all, Japanese companies are still busy killing the once-behemoth US auto industry.

LOL. If that is your analysis, and people like you also are present in the Chinese leadership, then frankly China is in for some really tough times.

 

[Feng Leng]

LOL. If that is your analysis, and people like you also are present in the Chinese leadership, then frankly China is in for some really tough times.

Can you predict whether we will all go toilet-less like some shupa powa?

 

[Bussard Ramjet]

Can you predict whether we will all go toilet-less like some shupa powa?

When you have no answers to these tough questions, you keep diverting.

As to the topic, there is now a government scheme to build rural sanitation in the country, and it is having incredible success building sanitation. Within a few years, every Indian will have access to modern sanitation.

 

[Feng Leng]

When you have no answers to these tough questions, you keep diverting.

As to the topic, there is now a government scheme to build rural sanitation in the country, and it is having incredible success building sanitation. Within a few years, every Indian will have access to modern sanitation.

We'll see whether you build your sanitation first or we strangle USA with a rare earth embargo first then!

 

[Mista]

The greatest lesson for China to learn from the Japanese economic malaise is to regulate housing prices and not to overdo fiscal/monetary stimulus because of economic fluctuations which ultimately led to the asset bubble, as well as coping with the long term-effects of a shrinking labor force.

The Plaza Accord is simply just an agreement to depreciate the USD against the Japanese Yen and the German Deutschmark. Did Germany went through the same economic bubble like the Japanese did? How does a depreciation of currency from another country able to bring 20 years of economic stagnation? If that is even possible, then there's problem with the Japanese economy in the first place; the bubble was already present and the stimulus exacerbated it.

In fact Japanese real exports continued to grow after the depreciation of the USD, albeit at a slower rate. The economic stimulus by Japan was excessive, just like the stimulus by China after the GFC2008.

Policy interest rates were reduced by about 3 percentage points, a stance that was sustained until 1989. A large fiscal package was introduced in 1987, even though a vigorous recovery had already started in the second half of 1986. By 1987, Japan’s output was booming, but so were credit growth and asset prices, with stock and urban land prices tripling from 1985 to 1989.

But IMF reports at the time suggest another factor was also at work. The authorities worried that higher interest rates would further strengthen the yen and feared that appreciation would eventually have serious effects on the economy. In the end, external demand did indeed diminish. But it did not collapse. Real exports continued to grow in the five years after Plaza, by an average of 2½ percent a year (half the rate of the previous fi ve years), while the current account surplus diminished by a moderate 2 percentage points of GDP. (Similarly, Germany’s currency appreciation failed to derail its export or GDP expansion, even with a smaller monetary response.) Put another way, excessive stimulus was adopted in part because there was excessive concern about the impact of appreciation.

Did the Stimulus Cause the Bubble?
Although the monetary easing was certainly large, it is far from clear that it alone was responsible for the asset price bubble. Chapter 3 of the October 2009 World Economic Outlook and Posen (2003) have examined the link between monetary policy and asset price booms in advanced economies over the past 25 years. They conclude that policy easing is neither necessary nor sufficient to generate asset price booms and busts. In Japan’s case, two other elements seem to have played a large role. As Hoshi and Kashyap (2000) explain, financial deregulation in the 1970s and early 1980s allowed large firms to access capital markets instead of depending on bank financing, leading banks to lend instead to real estate developers and households seeking mortgages. As a result, bank credit to these two sectors grew by about 150 percent during 1985–90, roughly twice as fast as the 77 percent increase in overall bank credit to the private sector. Finally, because the dangers of real estate bubbles were not well understood in those years, the Japanese government did not deploy countervailing regulatory and fiscal policies until 1990.

Did the Bubble’s Collapse Cause the Lost Decades?
The aftermath of the bubble proved extraordinarily painful for Japan. But the collapse of a bubble does not inevitably have such powerful and long-lasting effects. What was special about Japan’s case? A key factor was the buildup of considerable leverage in the financial system, similar to what occurred in the United States before 2008. Tier 1 capital of Japanese banks in the 1980s was very low, much lower than elsewhere, as global standards (the Basel I accord) had not yet gone into effect. Moreover, much of the collateral for loans was in the form of real estate, whereas under the keiretsu system a significant portion of bank assets consisted of shares in other firms from the same group. So, when real estate and share prices collapsed, the banking system was badly damaged. This underlying vulnerability was exacerbated by a slow policy response. The authorities delayed forcing banks to recognize the losses on their balance sheets and allowed them to continue lending to firms that had themselves become insolvent, a process Caballero, Hoshi, and Kashyap (2008) call “zombie lending.” This process continued into the early 2000s, stifling productivity growth and prolonging Japan’s slump.

https://www.imf.org/~/media/Website...xternal/pubs/ft/weo/2011/01/c1/_box14pdf.ashx

Basically the Japanese government dragged out with painful reforms and mismanaged the economy with excessive stimulus to 'maintain' GDP growth. That's the important lesson China should learn.