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East China Sea Talks Test Warming China-Japan Ties
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By Feng Zhaokui

Today's resumption of China and Japan's attempts to resolve their dispute over gas exploration rights in the East China Sea will test the two countries' dramatic ice-thawing talks in Tokyo last month.

The Beijing meeting to draw up a joint development proposal is rich with potential for the newly minted "strategic relationship of mutual benefit".

Seven earlier rounds of talks starting in 2004 ended in failure.

Despite the recent diplomatic breakthrough, some in Japan are still using the East China Sea issue as an excuse to reverse the increasingly positive bilateral ties.

Finding a way to resolve the East China Sea issue is the first major task policymakers must tackle within the framework of the new strategic relationship of mutual benefit.

The solution or lack of solution of the East China Sea issue will directly affect the overall development of bilateral ties.

Deng Xiaoping once characterized Sino-Japanese friendship as "more important than anything else between our two countries". The two countries' economic interdependency has been continuously growing. A Japanese economist characterized the economic ties between China and Japan as "closer than people can imagine".

Similarly, the two countries' energy needs are seen as both competing and shared. As for the environment, which is closely linked to energy resources, China and Japan's interests are almost indistinguishable as they are separated by only a strip of water.

Simply put, at a time when globalization and the environment are both major concerns, the interdependency and similarity between the two countries' national interests are increasing.

Strategic mutual benefit reflects the contemporary characteristics of interdependency and similarity, with the East China Sea issue a case in point.

For example, a few years ago many Japanese-owned enterprises located in the Shanghai-led Yangtze River Delta region suffered from power shortages and both countries were concerned.

Obviously, if the Chunxiao natural gas field not far from the coastal areas of Zhejiang and Jiangsu provinces was able to supply natural gas to these areas, it would be beneficial not only to China's energy supply and environmental protection in China's coastal regions but also to numerous Japanese-owned businesses there.

Surprisingly, some Japanese politicians have been pressuring China to stop the development of the Chunxiao natural gas field in a show of strategic ignorance. They choose to ignore the interests of Japanese businesses with a misguided patriotism.

In order to resolve the East China Sea issue, China and Japan must consider their energy interests and energy security. Some observers believe the energy issue can only pit China and Japan against each other.

This is a very narrow point of view.

It is fair to say China's emphasis on cooperation in energy development has been a prominent feature in the development of bilateral relations since the start of its economic reforms. China supplied oil and other energy resources to Japan for many years while Japan provided huge amounts of yen-denominated interest-free loans including energy-development loans.

In the early years of economic reform, loans from Japan helped finance the Shisanling, or Ming Tombs, hydropower plant in Beijing, the Ezhou coal-fire power plant in Hubei, the Wuqiangxi hydropower plant in Hunan as well as the Qinhuangdao Port's coal handling facilities and Dalian-Qinhuangdao coal-shipment railway, both for coal export to Japan and other foreign destinations.

From the angle of a broad energy resource strategy that covers oil, natural gas, nuclear power and energy conservation, it is completely inaccurate to argue that China and Japan can only compete rather than cooperate. They can carry out exchanges in the following eight areas:

Raising the efficiency of energy use. Japan leads the world, with its energy efficiency 8.9 times greater than China's;

Developing renewable resources such as solar energy;

Teaming up as energy buyers to boost their bargaining power against Asia premium pricing. Middle East oil sold to Asia costs US$1 to US$2 a barrel more than that sold to the West;

Conducting energy resource exchanges. South China's natural gas consumption peaks in summer whereas Japan's peaks in winter;

Keeping oil shipment routes secure. Middle East oil accounts for 50 percent of China's oil imports and 86.5 percent of Japan's;

Learning from each other's strengths in deep refining and petrochemical production technology. China is more advanced in heavy oil refining while Japan maintains an edge in plastics and synthetic rubber;

Developing oil and natural gas reserves. Japan had 10 national oil reserves in 2003 and will build five national liquified petroleum gas reserves by 2010. Currently the country's private and national liquified petroleum gas reserves can last a total of 168 days, whereas China has just started building its own oil and petroleum gas reserves;

Cooperating on nuclear energy, including manufacturing related equipment and safety technology.

There are ample reasons for the two countries to cooperate in these areas.

But when it comes to resolving the East China Sea issue, it all depends on whether we can make the necessary diplomatic efforts to combine joint development there with China's energy conservation and Japanese assistance. This is putting the strategic relationship of mutual benefit to the test.

Considering the huge gap between China and Japan in terms of energy efficiency, it is possible for China to save several super-large oilfields' worth of petroleum if it can effectively apply Japan's experience and expertise.

It is also possible for the two sides to conduct joint development in China's exclusive economic region of the East China Sea west of the so-called middle line as long as Japan recognizes China's sovereign rights in these waters. It's similar to Japanese businesses on Chinese land being allowed to invest directly and build manufacturing bases.

Japanese technology in deep water oil refining and construction of natural gas facilities is among the most advanced in the world. This will be of great importance when China and Japan jointly develop the East Sea oil and natural gas resources.

For the sake of both nations, people have every reason to expect China and Japan to give wide-ranging consideration to the issues related to the East China Sea. Its bountiful natural resources include fisheries and shipping routes.

The goal is turning the East China Sea into a sea of peace, friendship and cooperation.

The hope is that the two nations will transform the natural resources buried under the East Sea into the mutual benefits of real wealth.

The author is a senior researcher with the Institute of Japanese Studies at the Chinese Academy of Social Sciences.

(China Daily May 25, 2007)

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