More room for growth in trade

Sino-Japanese trade relations boast great growth potential and the two sides should make more efforts to push economic cooperation in more fields.

China and Japan have made much headway in terms of bilateral trade in the past 30 years, when their bilateral trade volume expanded, with more types of goods traded, and they have played an increasingly important role in each other's trade development.

Japan is China's third largest trade partner and the fourth largest export destination while China replaced the US in July to become the No 1 export destination of Japan. The volume of bilateral trade jumped to $236 billion last year from a meager $4.8 billion in 1978, a 48-fold increase. During this time, China had a trade deficit with Japan for most of the years.

However, Sino-Japanese trade growth still lags behind that of China's overall trade. In 1978, Sino-Japanese trade accounted for 23.4 percent of China's total trade while last year it had shrunk to less than 11 percent. Unwelcome as it is, it also shows that bilateral trade still has great potential to expand further.

Japan has supported China's economic development through yen loans and grants. By the end of last year, Japan had committed to a total of $30 billion to China for financing 255 projects.

Another $1.27 billion has been earmarked in grants to help China's social causes, such as education and poverty reduction.

As Chinese President Hu Jintao said in a speech during his visit to the Waseda University in May: "The Japanese government has played a positive role in China's modernization drive by making Japanese yen loans in support of China's infrastructure construction, environmental protection, energy development and scientific and technological advancement."

Japan also benefits from its yen loans for China. Through the yen loans, it can ensure imports of Chinese resources, provide more opportunities for its enterprises to export to and invest in the Chinese market. Japanese enterprises, for example, have had much more investment in such places as the Yangtze River Delta, the Pearl River Delta and areas surrounding Bohai Sea. They used to invest mainly in Dalian, Liaoning province.

As Sino-Japan economic cooperation deepens, the market has replaced government as the major driving force for bilateral trade and investment growth. The yen loans have been earmarked for projects in more fields, such as environment since 1996, and Chinese enterprises have expanded investment in Japan, with some listed in the Japanese stock market.

With those achievements, the two countries need to strengthen cooperation in sectors of mutual concern, such as energy saving and environment. Japanese enterprises are not very active in technological transfers owing to IPR concerns. They have transferred mainly low-end technologies to China.

As the Chinese government is enhancing IPR protection, it is advisable for Japanese enterprises to enter China to have the "first-mover" advantage in future cooperation. Meanwhile, the prices of technological transfers are often too high for Chinese firms to afford, which is also a hurdle for technology trade between the two countries.

The two sides should also enhance cooperation between Japanese small and medium enterprises (SMEs) and Chinese businesses through such moves as establishing a "Japan SME Park". The China Association of International Trade is now setting up a system to help products of Japanese SMEs to enter the Chinese market.

The author is president of the China Association of International Trade and former economic and commercial minister-counselor of Chinese embassy in Japan

(China Daily 09/18/2008 page9)