Bilateral trade and investment creating opportunities for growth and stability

China-Japan economic and trade ties will be boosted by their complementary industrial structures and the Regional Comprehensive Economic Partnership agreement, thanks to favorable terms in areas such as tariffs, investment and trade in services, said experts and corporate executives.

In the year that marks the 50th anniversary of the normalization of diplomatic relations between the two countries, they said that the business cooperation between the two major manufacturing powerhouses — as well as investors for outbound direct investment — will create vitality and stability to ensure supply chain operations in the years ahead.

The implementation of the RCEP pact, which came into force in January, will embolden China and Japan to achieve win-win results in bilateral trade and cross-border investment, said Zhang Jianping, deputy director of the academic committee of the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

This trade agreement has not only brought three major economies — China, Japan and South Korea — into the same economic system for the first time, but is the first direct economic free trade agreement between China and Japan, he said.

In terms of trade in industrial goods between China and Japan, the number of tariff-free products on both sides will gradually reach about 86 percent, under the RCEP terms, according to the Japan External Trade Organization Beijing office.

For Japan, export tariffs on auto parts, steel products, chemicals, home appliances and fiber products will be greatly reduced. Its export of sake and other alcoholic beverages to China will also enjoy zero tariffs, said JETRO Beijing. For Chinese companies, Japan remains a top destination for the issuance of RCEP certificates of origin by value in the first half of this year, according to the Beijing-headquartered China Council for the Promotion of International Trade.

"The RCEP certificates of origin have been widely applauded among Chinese exporters to Japan. The momentum shows that the RCEP has begun to deliver benefits for enterprises doing business with Japan," said Feng Yaoxiang, head of the trade and investment promotion department at the CCPIT.

The RCEP certificates of origin allow China's export-oriented companies to enjoy preferential policies and reduced tariffs when exporting to Japan for the first time. It also helps expand exports to members of the Association of Southeast Asian Nations and lays a solid foundation for building more open and inclusive regional economic and trade structures, Feng said.

Thanks to complementary industrial structures, the total trade value between China and Japan soared from $1.1 billion in 1972 to $371.4 billion in 2021. Meanwhile, the two-way investment volume has reached nearly $130 billion, statistics from China's Ministry of Foreign Affairs showed.

China exports mainly agricultural, chemical, plastic, mechanical and electrical products, timber, glass, coal, precious and base metals, textiles, garments and household appliances to Japan, according to China's General Administration of Customs.

In addition to vehicles, mechanical appliances, precision instruments, and electrical and pharmaceutical products, Japan's exports to China include daily necessities, industrial robots, synthetic resins, optical instruments and steel plates.

Zhou Lei, a researcher specializing in regional economic development at the University of International Business and Economics in Beijing, predicted that the trade volume between China and Japan will grow steadily this year. Their business ties will continue to expand in areas such as service, finance, logistics and technology cooperation despite challenges threatening the recovery of the global economy, he said.

China-Europe freight train services are a practical option for Japanese companies to move their products to Europe and other third-party markets via multimodal transport, said Li Muyuan, vice-president and secretary-general of the Beijing-based China Container Industry Association.

With digital trade emerging as a new growth driver, Li noted that this important component of the digital economy will assist companies in both countries to communicate and share information, and cut transaction costs.

Hirai Hirohide, vice-minister for international affairs at Japan's ministry of economy, trade and industry, and Li Fei, assistant minister of China's Ministry of Commerce, held a consultation via teleconference in early September. It was the 20th such consultation since 1990.

The two sides talked in detail on building better business environments and government procurement systems.

Kenichi Tanaka, president of Fuji-film (China) Investment, said even though the COVID-19 pandemic has brought great challenges to the global economy, the performance of the Chinese economy has showed resilience and will continue to lead the way for promoting China-Japan business relations.

"For Japanese businesses, China is a large and important export market. The country has contributed significantly to global growth over the past few decades," he said.

"The unified consistency of the Chinese market is rare in terms of language and culture on a global scale, even unique."

Though some companies plan to implement the "China Plus One" strategy, where one diversifies supply chains for risk dispersion, the country still has advantages with its complete industrial chains and broad market prospects, he added.

"With China deploying more resources to push digital transformation, promote peak carbon emissions before 2030 and achieve carbon neutrality before 2060, our highly functional material business will be a key area for future growth in the country," he said. He added that about 13 percent of Fujifilm Group's annual sales revenue comes from China.