A New Asian Crisis Has Begun
China-Japan fight is a message to the whole world
Calling geopolitics unpredictable may be an understatement.
Earlier this month, Japan’s new prime minister, Sanae Takaichi, met with her Chinese counterpart, President Xi Jinping, in South Korea. The meeting was expected to clear the air.
But, very quickly, the opposite occurred.
Right after the meeting with Xi, Takaichi met with Lin Hsin-i, Taiwan’s presidential adviser, angering Beijing. The real disruption, however, occurred when Japan’s new leader proposed that Tokyo could come to the aid of Taiwan if China attacked the island nation.
This single remark has put China-Japan relations in a historic crisis.
GEOECONOMIC FIGHT
A flurry of action is taking place.
In the week, at least 491,000 flight tickets from China to Japan have been cancelled as Beijing warns its citizens to avoid travel to Japan. Chinese airlines are handing out free refunds. The cost of losing Japanese tourists - the largest source of tourists for Japan - could be almost $10 billion. One Japanese tourism company has already lost 80% of its bookings. China has also banned Japanese seafood after resuming imports in June, while also sending its coast guard to the disputed Senkaku Islands in the East China Sea.
This has all taken place almost simultaneously, meaning China is moving on multiple fronts to hit back at Japan.
But the biggest warning sign comes from China’s commerce ministry, which has warned that China will take further measures unless Takaichi walks back her comments on Taiwan.
Just one month into power, the feud with China is becoming the political crisis facing Takaichi. This could either destabilize her rise (i.e., a sagging Japanese economy driving a political crisis similar to what happened with Liz Truss in the UK). Or, the pressure could elevate her profile, as she champions nationalism and strengthens her base.
TWO ARENAS
Will Takaichi walk back her remarks? It depends on two arenas.
GEOPOLITICS VS. ECONOMICS
First, the China-Japan crisis is a battle between geopolitics and economics.
China is the largest trade partner of Japan. It is the most strategic market for Japanese firms besides the US. However, China is also the biggest adversary of Japan. And issues like Taiwanese sovereignty or rare earth weaponization have reignited Tokyo’s push for security and defense.
If Takaichi walks back her remarks, it means economics has trumped geopolitics. If she does not, it means the opposite: geopolitics has trumped economics, which is increasingly becoming the case in the world today.
PUBLIC VS. PRIVATE
Second, what Takaichi said is not the problem. It is that her remarks were public.
A separate battle is brewing between public remarks and private positions.
China already knows that Japan is likely to come to Taiwan’s defense if Chinese forces attack, a probability that reaches 100% if American forces are involved. This may also drag in South Korea, Australia, and the Philippines militarily.
Takaichi’s remarks themselves have not surprised China. But their delivery, to the Japanese parliament, in such a public way, has jolted the Chinese leadership. China cannot allow Western leaders (yes, Japan is part of the West, albeit often overlooked) to make statements that indirectly challenge China’s claim to Taiwan or China’s ability to take control of the island-nation.
This is not a war of words. It is a war over words.
If Takaichi walks back, China is deciding what Western leaders can say publicly. If she doubles down, positions that were kept private to ensure stable China relations could disappear throughout the Western world.
TAKAICHI’S BALL
The big question now is where China and Japan go from here.
If Takaichi stands by her remarks on Taiwan, the situation could dramatically snowball. The US-China deal is already fragile, as Chinese purchases of American soybeans stall and as China starts to restrict rare earth exports to firms affiliated with the US military.
This is not the deal America agreed to.
Such fragility could result in China restricting certain exports to Japanese companies (i.e., critical minerals), cutting Japanese businesses out of strategic sectors (i.e., Chinese state-backed firms cannot buy Japanese industrial robots), stationing Chinese troops on the uninhabited disputed islands, or even severing diplomatic relations.
All of it depends on what Takaichi does next.
CHINA’S STRATEGY
Some might scoff at why China would act so aggressively. After all, Takaichi has only proposed aid for Taiwan. It is still all very much conceptual and idea-driven. None of it has become concrete Japanese foreign policy.
Yet, this is the Western cognitive bias. It is not about what Takaichi said, but how Takaichi’s remarks were (and are) being perceived by Chinese officials. For them, punishing Japan does two very strategic things at the same time.
First, it sends a message to everybody else, particularly smaller nations who may be “influenced” by Western geopolitics, to think twice before proposing support for Taipei.
Second, it indirectly challenges American power. US President Donald Trump is unlikely to back Japan in an economic standoff with China, as it would throw the US-China deal off balance. This is a huge signal to the world that China has reached a level where America could stand on the sidelines as its allies lock horns with Beijing economically.
UNPREDICTABLE GEOPOLITICS
Much is up in the air.
But one thing is for sure. Geopolitics is even more unpredictable. Few expected a China-Japan fight like this to begin. Yet, in a matter of weeks, one of Asia’s most critical relationships has completely broken down. It is possible that private discussions will reduce the temperature, and both sides will find a way to save face.
Except, this will not take away from the bigger shift.
In the worsening fights, geopolitics and economics are facing off in a new way.
And if the former increasingly prevails, the remaining ideas about global trade, globalization, and the economy taking priority will start to go out the window. If governments put “geopolitics first*," the world is about to become a whole lot more volatile. The biggest signal of which force has more power could be in what happens next between China and Japan.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.