A Line in the Sea

SHANGHAI, China – On Sunday, Japan headed to the polls to return the Liberal Democratic Party to power and select former Prime Minister Abe Shinzo as the man to steer the country out of its nearly quarter-century long financial crisis.

But Abe might face just as serious a challenge dealing with the country’s security crisis with China. On Thursday, just three days before the election, the Japanese government responded to a Chinese propeller plane flying over what Japan considers its own airspace by sending eight F-15 fighter planes in response. Ominously, it’s the first time a Chinese aircraft has intruded into Japanese airspace. The incident is just the latest in the two countries’ ongoing showdown over who owns the Senkakus (the islands over which the Chinese plane was flying, known in China as the Diaoyu) that threatens to destroy their bilateral relationship and possibly even send them to war. Prime Minister-to be Abe shows no sign of backing down over the issue, and reiterated the day after the election that the Senkakus are indisputably Japanese territory.

In Shanghai, China’s economic center, discussion about Japan focuses on just how much Tokyo might be willing to risk trade between the two countries over the uninhabited islands. When he takes over next week, Abe needs to understand that China’s new leader Xi Jinping has apparently unanimous backing domestically, and can patiently continue to chip away at Japan’s administrative control over the Senkakus without fear of having to settle the issue anytime soon. That means Tokyo will have to counter with an equally patient, yet credible strategy.

After a seemingly smooth power transfer in November, Xi leads China’s Communist Party and is slated to take over government positions next year. Now the ruler of one of the world’s most powerful countries, Xi has unfortunately given little indication of his views on international affairs, other than repeating bromides about China’s peaceful rise and asserting that it is "absolutely not a threat" to its neighbors. In a recent meeting with foreign experts, he was quoted as saying that China "will not seek hegemony or expansionism." Yet on specific issues, such as territorial disputes like the Senkakus, Xi has been quiet.

Ties between the two Asian giants remain central to the region’s economic prosperity and political stability. In 2011, China and Japan did nearly $340 billion in bilateral trade, largely in electronics, machinery, and foodstuffs, as well as component parts for assembly in China. Millions of Chinese are employed by Japanese firms on the mainland. In June 2012, the two countries introduced a direct yen-yuan exchange mechanism, allowing them to bypass the U.S. dollar and reduce costs of financial transactions.

Yet at the same time, each is also attempting to shore up its own economic position, Japan by flirting with the idea of joining negotiations over the Trans-Pacific Partnership (TPP) free trade area, and China by exploring ways for the yuan to play a larger global financial role. Politically, each continues to jockey for more international prestige and influence, whether through multilateral organizations or direct ties with other countries.

Politics, however, has put economic ties between the world’s second and third largest economies at risk. Major exporters, such as Toyota, have seen sales decline by up to half during the autumn after weeks of demonstrations in China over the Senkakus. Japan’s decision this summer to buy several of the privately owned islands may have been a move to forestall Tokyo’s then-governor Ishihara Shintaro from doing the same thing, but it ruptured relations with Beijing, unleashed a firestorm of anti-Japanese protests throughout China, and set off an ongoing maritime face-off in the waters around the islands. Chinese generals and commentators have been reported urging the country to prepare for combat, and Western observers, including U.S. Defense Secretary Leon Panetta, have raised concerns that conflict could break out between the two historical rivals.

Like Abe, Xi is unlikely to radically alter Beijing’s stance on the islands, which is that they have always been China’s territory "historically and legally," according to an October press briefing by Vice Foreign Minister Zhang Zhijun. Yet he will have to balance a firm diplomatic line with far harsher semi-official stances that serve to inflame Chinese nationalism. For example, Lt. Gen. Ren Haiquan, at meeting of senior military officials from 16 countries in Australia in November, stated that the dispute could cause war with Japan, which he reminded his listeners was once a "fascist" nation that attacked Australia. The hawkish Maj. Gen. Luo Yuan even recommended that rather than negotiating with Japanese, China should send hundreds of maritime vessels to the disputed area to conduct maritime guerrilla warfare. So far, Xi has not specifically repudiated such statements, but neither has he indicated that he intends to reduce the pressure on Japan. Chinese vessels continue regularly to enter the waters around the Senkakus, triggering Japanese Coast Guard responses.

Apart from the rhetoric from various levels of the Chinese government, these near-daily deployments of Chinese ships show that Beijing is not yet considering a reduction in its presence, which might be interpreted as backing down on its claims. Tokyo considers these intrusions near its waters extremely provocative, and believes that the Chinese are attempting to redefine the perception of "administrative control" over the islands that underlies the U.S. security commitment to Japan. In essence, the Japanese government believes Beijing is attempting to show de facto or at least equivalent control over the islands (by claiming to "expel" Japanese ships from the waters around the Senkakus) so as to undercut the U.S. understanding that any territory administratively controlled by Japan falls under Article 5 of the security treaty.

It seems that Xi supports the current policy of challenging Japan’s claim, or at a minimum  has not yet proposed an alternative approach that satisfies his co-leaders. Even a diplomatic outreach by Japan’s new premier , were it possible, might not result in any deal that Xi could bring back to China’s top leadership body, the Standing Committee, particularly if the leadership is confident that China is slowly wearing down Japan’s defenses or is prompting a domestic political backlash against Japan’s government. This may well be a misreading of Japan’s will and strategy, but it at least means the current policy of continually testing Japan will continue.

What China’s ultimate policy over the Senkakus and Japan will be may thus be shaped significantly by Xi’s relationship with the military. Unlike President Hu Jintao, who for the first two years of his reign had to contend with Jiang Zemin as chairman of the Central Military Commission, the body that manages the People’s Liberation Army (PLA), Xi already runs both the party and the military. Also , Xi has some experience with the PLA; he served as the personal secretary to a former defense minister in the early 1980s and held military positions in his provincial assignments in Nanjing, Fujian, and Fuzhou. These experiences may help decrease friction between Xi and the PLA, as should the promotion of senior military officials known to be close to Xi.

Given the PLA’s hard-line stance toward Japan, and the expansion of its naval and air activities in the East China Sea, where the Senkakus are located, it seems unlikely that Xi will challenge the military leadership and dramatically change China’s security presence near the islands. Rather, he can be expected to support the PLA and expand the scope of its missions in waters that China claims, including the East China Sea, as long as it doesn’t appear to be a reckless move that either causes outright conflict or brings in the United States in a far more active manner. Success in keeping the pressure on Japan and appearing in lockstep with the PLA could also protect Xi from any potential rivals who might seek to undermine him through cultivating their own support from the military.

All this augurs poorly for a tamping down of tensions with Japan, even if China’s policy of maritime incursions into the Senkakus so far has not resulted in any evidence that Tokyo will abandon its claims.

Unfortunately, there are few positive counterbalances in Sino-Japanese relations to offset the tensions over the Senkakus. Trade between the two nations has fallen due to anti-Japanese protests in China; Japan’s consideration of joining the TPP has further alienated China, which feels left out of the negotiations; and there are few joint diplomatic initiatives between the two countries, such as the six-party-talks over North Korea or anything relating to the East Asian Summit, an annual forum attended by leaders of nearly 20 countries. Beijing also continues to try and isolate Japan regionally, as it does to Taiwan, thereby minimizing the only other potential power center in East Asia. Moreover, while Japan will be an important part of China’s economic picture for the rest of this decade, Chinese leaders have already calculated that Japan will suffer more from an economic downturn and poor relations than will China, perhaps increasing their willingness to push Japan ever harder on the Senkakus.

There also is not much Japan can do to bolster its position abroad. Any weakness in defending the islands will only embolden China, but Tokyo is also leery of being thrust into the position of "counterbalance" to China, as a senior Philippines officials suggested in early December. Not only does such an idea ignore over a decade of decline in Japan’s defense budget, Tokyo will not further endanger trade with Beijing by appearing to become the ringleader of Asian opposition to China. Moreover, these other nations are interested primarily in South China Sea issues, and not Japan’s problems further north. This leaves Tokyo with no option other than to rely even more heavily on U.S. support and to ensure that the U.S.-Japan alliance remains the bedrock of security assurance.

This leaves much of the momentum in Sino-Japanese relations in Chinese hands. If there is any respite, it might come from Xi’s likely focus on domestic affairs in the first years of his rule. As for Xi, he must be seen as a strong leader after the Bo Xilai debacle this past summer and rumors of continuing splits among the party’s top leadership. While he will try to repair Beijing’s "smile diplomacy" and not make China an object of fear among its neighbors, what better way to show strength at home and abroad than to adopt the time-honored tactic of standing up to the Japanese?