Testimony

The Impact of the Rise of China and Regional Economic Integration: A Japanese Perspective

Naoko Munakata

I will discuss the impact of China’s rise from a Japanese perspective focusing on two
issues. One is how China’s rise as the factory of the world is perceived in Japan. This
question is typically phrased as “is it a threat or an opportunity?” The other is how
China’s new activism in forging regional economic framework—particularly free trade
agreements—affects Japan’s regional economic policy. Both issues have a significant
impact on the U.S. position in Asia.

1. China as a Threat or an Opportunity

Perception of China as an economic threat

In the early 1990s, China’s rapid economic growth, combined with its external posture,
generated an argument in Asia that China could become an economic and military threat.
The importance of China in Japan’s total trade started to increase substantially around that
time and, in 1994, the bilateral trade deficit with China became Japan’s largest.
Nevertheless, there was no sense of urgency in Japan about the economic threat China
was said to pose. It was widely believed that the level of economic development was so
different that China was not going to threaten Japan’s lead in the immediate future.

By the year 2000, however, the argument that China was an economic threat gained
momentum in Japan. There were several inter-related factors behind this development.
First, imports from China accelerated in 2000. The success of the Japanese apparel
brand “Uniqlo” impressed Japanese consumers with high quality products made in China.

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