China-Japan Dispute Heats Up

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by Ben Yedi/  May 2005 issue of Socialist Action



Japan and China held talks in Beijing last week, but failed to halt the free fall in ties after a third weekend of demonstrations in China against what many

see as Japan's inability to face up to its wartime past.  — BEIJING (Reuters), April 18, 2005


China, Japan, and the United States are the three most productive economies on earth. China is the fastest growing (average rate of growth 9.5 % per annum for over two decades), whereas both the U.S. and Japan are

saddled with huge and mounting debts, and stagnant growth rates.


China today is the world's sixth largest economy, whereas the U.S. and Japan are the first and second largest. China’s trade with Europe in 2004 was worth

$172.4 billion. China's trade with the U.S. was $169.6 billion and with Japan it was $167.8 billion.


China’s external debt is relatively small and easily covered by its reserves, whereas the U.S. and Japan are each approximately $7 trillion in the red. It is

worse for Japan, with less than half the size of the U.S. population and half its economic clout.


Ironically, part of Japan’s debt is a product of its efforts to help prop up America’s global imperial stance. Japan has subsidized America’s military bases in Japan to the tune of about $70 billion.


The U.S. currency, which is falling in value, is being subsidized by Japan, China, Taiwan, South Korea, Hong Kong, and India. The U.S. requires capital imports of at least $2 billion a day to make up for its exported paper money. Japan still possesses the world’s largest foreign exchange reserves, which at the end of January stood at around $841 billion. China sits on a $609.9

billion reserve, which it earned from its trade surpluses with the U.S.


The situation is very similar to the fall of the U.S. dollar’s value in 1971; and the same remedy is being used again. In 1971, with the help of the Shah of

Iran, OPEC (Oil Producing and Exporting Countries) increased the price of oil four fold. 


Considering that crude oil is one of the very few commodities that are traded in U.S. dollars, its daily volume of trade in crude creates substantial demand

for U.S. dollars, which would solve partially the U.S. balance of payments, and would make transportation and production of goods more expensive for countries like Japan, India, and China. This results in a situation that requires that the rate of exploitation of workers in these countries be increased.


Along with the increase of price of oil, in 1971 the United States tried to militarize Iran and the Shah’s army, and the U.S. also sold huge amounts of military goods in the region. This two-pronged policy helped to prop up the falling value of the U.S. dollar.


Now America’s intention is to turn Japan into what Washington neo-conservatives like to call the "Britain of the Far East"—and use it as a proxy in checkmating China. Japan has so far not resisted this American pressure since it complements a re-stoked nationalism amongst Japanese voters and a fear that a burgeoning capitalist China threatens Japan’s established position as the leading economic power in East Asia.


The Bush administration is seeking, among other things, an end to the anti-militarist provisions in Japan's constitution. The U.S. wants Japanese

investment and technical know-how to assist it in the failing Star Wars missile system. 

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