Political tensions behind China-Japan economic issues: Beijing

Political tensions behind China-Japan economic issues: Beijing

BEIJING - Political tensions are partly to blame for Japanese investment in China recording its biggest fall for almost a quarter of a century, Beijing's commerce ministry said Thursday.

Investment from Japan slid 38.8 per cent to US$4.33 billion (S$5.85 billion) last year, Chinese figures show, with a respected Japanese industry group saying the drop was the steepest since 1989, when it fell around 35 per cent in the wake of the Tiananmen Square killings.

Commerce ministry spokesman Shen Danyang said that in 2014 economic reasons were behind "sluggish Japan-China trade and economic co-operation".

But he added: "Undeniably the severe difficulties in the two countries' political relations also had impact to a certain level".

Asia's two biggest economies have been at loggerheads over a maritime territorial dispute and disagreements over how to interpret and remember Japan's invasion of China during the 1930s and 1940s.

Japan's nationalist Prime Minister Shinzo Abe angered Beijing in 2013 by visiting Tokyo's Yasukuni Shrine, which honours Japan's war dead including convicted war criminals from World War II.

Japanese official figures show the country had a record 5.79 trillion yen (S$66.4 billion) trade deficit with China last year, while according to Beijing's own data, the balance was in the other direction, with China in deficit by US$13.6 billion.

Shen did not explain the contradiction per se, but downplayed the Japanese statistic, stressing it was denominated in yen.

"The Japanese yen has depreciated sharply in recent years and the foreign exchange rate of the yen has been very volatile over the long run, therefore the divergence between statistics in yen and those in the dollar was rather big."

He called for Tokyo to "take concrete actions to implement" an agreement which paved the way for a meeting between the countries' leaders at an Asia-Pacific summit in November, where the two appeared stiff and awkward.

The agreement papered over differences in the dispute over uninhabited islands in the East China Sea that both sides claim, without making progress on a resolution.

Japan should also "continue to make efforts to improve bilateral relations to create positive conditions for the recovery, consolidation and further development of the two countries' trade relations", Shen added.

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