Sino-Japanese relations have entered a new phase, though military exchanges remain highly unlikely.
Fears of conflict between Japan and China have been on the increase since last autumn, amidst tensions over the Diaoyu/Senkaku islands. With political nationalism apparently growing on both sides, there are concerns that a military conflict could be sparked unintentionally.
The risks are certainly higher than they were six months ago. Since then, there have been close encounters between vessels and both sides have sent military planes to airspace around the islands. An event such as a landing on the islands by either side would raise the risks further. Conflict cannot be ruled out.
The context is wider uncertainties about strategic alignments in East Asia, as evidenced also in revived maritime disputes in the South China Sea, where there have been military clashes in the past.
Still, military exchanges between China and Japan - let alone prolonged conflict - remain highly unlikely. The structural constitutional and policy constraints on both sides are significant. Even amidst the tensions, the policy goals of both countries are for peaceful development in the region, spelled out again on the Chinese side by New Party General Secretary Xi Jinping at a Politburo study session on 28 January. Further, neither country's military strategy is offensive, nor are their forces prepared for conflict. Japan's constitution provides for defense only, while China's current goals are the modernization of its military, predominantly defensive in scope.
The economics also mitigate against any decisions to engage in conflict, with intertwined supply chains, and significant bilateral trade and investment. And the two countries have agreed with South Korea that they will pursue a free trade agreement, discussed most recently in the margins of the East Asia Summit in November last year, at a time when bilateral tensions were high.
However the dynamics are changing, including in commerce. The lure of the China market is strong, but part of the reaction of many Japanese businesses to violent demonstrations in China last September has been to look to diversify their investments where possible, at a time when a number of other Southeast Asian economies are growing strongly.
Indeed, we have clearly entered a new phase in relations between these two countries and the islands issue cannot easily be put back on the shelf. The Japanese government's 'purchase' of the islands last year prompted Beijing to assert its position on their sovereignty in new ways. We should expect Chinese ships to continue to sail into the waters around the islands, unless perhaps the Japanese position shifts to acknowledge the existence of a dispute. Chinese suspicions about the exact nature and objectives of US rebalancing to Asia will lead to continued statements of Beijing's intent to protect 'core interests', also a theme of the 28 January Politburo meeting.
Even so, it seems that both China and Japan are trying to keep their policy options as open as possible. Xi Jinping's decision to meet the visiting leader of governing coalition party New Komeito, Natsuo Yamaguchi, in late January was a positive sign. Indeed, both sides have been sending out diplomatic feelers at the same time as their vessels and planes have brushed shoulders. There have even been hints that a summit might be arranged, though this looks difficult and would be unlikely to resolve fundamental issues.
Nonetheless, pragmatic politics in East Asia makes a return to bilateral dialogue a much more likely scenario than any form of conflict, either intentional or unplanned. More likely than both, however, is a prolonged period of uncertainty and diplomatic skirmishing.
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