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Closer economic ties

This year marks the 40th anniversary of the normalization of diplomatic relations between China and Japan.

But the relationship hasn't been free of tension in recent years. In 2010, they were strained diplomatically after a Chinese trawler collided with patrol boats from the Japanese coast guard in waters near China's Diaoyu Islands, an uninhabited group of islands in the East China Sea, and bilateral tensions intensified this year over a series of issues.

In mid-July, Japan recalled its ambassador to China, Uichiro Niwa, to Tokyo for discussions on the territorial dispute.

According to a survey recently quoted by the Wall Street Journal, 84 percent of Japanese respondents had a negative impression of China, up six percentage points from a year earlier. Nearly two in three Chinese said the feeling was mutual.

But many economic analysts agreed that for both sides, the heated territorial disputes cannot decelerate the process of enhanced economic and trade relations between the two countries, especially as the European debt crisis deepens.

Both Japanese Prime Minister Yoshihiko Noda and former Chinese Vice-Premier Zeng Peiyan said during the Eighth Beijing-Tokyo Forum in early July that the two countries should join hands and expand mutual investment to boost both the Asian economy, and those around the world.

And they urged the two nations, in particular, to hasten negotiations of the China-Japan-South Korea free- trade agreement, expanding cooperation between the three countries, in sectors such as new energy.

However, compared with the upward trend in Japanese investment in China, China's investment in Japan has been small and grown slowly.

By the end of 2011, Japan's cumulative direct investment in China was $82.5 billion, but the capital from the world's second-largest economy into Japan was tiny.

China lags behind other major investors in Japan, including the US and the UK, which spent $3.5 billion and $5.2 billion, respectively, in 2010.

Still, experts tracking individual deals said the Chinese money is an increasingly significant influence.

From April 2003 to March 2012, Chinese companies accounted for 97 of the 970 investment deals in Japan made by foreigners and coordinated by the Japan External Trade Organization, a government investment promotion body.

That put China in second place, after the US with 293 deals.

Wei Jianguo, the former vice-minister of commerce, and also secretary-general of the China Center for International Economic Exchanges, China's top think tank to the government, said: "We can see a sharp contrast in the two-way investment figures, but there is much potential for China to grow its investment in Japan, and there is also much to do to promote it."

Wei, a guest economist of China Daily, added that a priority for the two Asian economies is to develop a China-Japan free trade agreement as soon as possible, in a bid to "expand the Chinese investment in Japan in particular".

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