ABSTRACT

This chapter examines the economic basis of Sino-Japanese relations. The conclusion of the Long-Term Trade Agreement (LTTA) between China and Japan in February 1978 heralded a new era in Sino-Japanese economic relations and augured well for the strengthening of diplomatic ties. The chapter discusses the five principal dimensions of Sino-Japanese economic relations which have emerged – bilateral trade, energy, investment, technology transfer, and Overseas Development Aid (ODA). The fundamental assumption underpinning the LTTA was that Japan would provide technology in exchange for energy resources from China. Since 1978, in order to accelerate economic construction, China has been taking steps to improve the climate for foreign investment. These measures have included the establishment of Special Economic Zones (SEZs), the opening of the fourteen coastal cities, preferential terms for foreign investors, accession to international treaties and new legislation. The Chinese insist that most of Japan's direct investment in China is accounted for by small projects.