China, “Not Lending Any Yen”

The Business communities of Japan are paying special attention to whether the Chinese government’s abandonment of their plan to raise funds in yen from the Japanese financial market during this summer has anything to do with the relations of the two nations, which grew worse with the effect of the “soccer war.”

Although there is a small possibility that the economic exchange will suddenly dwindle since both countries are desperate in terms of economic cooperation, the views are dominant that this delicate atmosphere will continue for a while.

China, “We Will Not Use Japanese Money”—

The Nihon Geizai Shimbun reported on August 10 that the Chinese Department of Finance has delayed in issuing 30 billion yen (approximately 300 billion won) worth of yen-dominated bonds (Samurai bond).

This bond was pushed as a refunding type after the 10-year maturity Samurai bond that the Chinese government had issued in 1994 expired at the end of last month. The Chinese government was planning to sell the bond to institutional investors in Japan and Hong Kong.

As the relations between the two countries worsened after the territorial dispute over the Sengaku Islands and Japanese Prime Minister Junichiro Koizumi’s visit to the Yasukuni Shrine, the financial circles of Japan are interpreting the situation as an attempt to avoid fund raising from Japan as much as possible.

China did not issue any bonds after the start of Koizumi administration, with its last issuance of a 30 billion yen worth bond (5-year maturity) in June 2000.

Disappointed Japan, Considering Dealing with China Face-to-Face—

The economic exchange between China and Japan has proceeded on the principle that the economy runs hot despite the cold politics.

As the governments of both countries have respected this principle, the correspondence between businessmen and the investment on the non-governmental level has proceeded very actively even in times when visits between the summits were discontinued.

Business communities in Japan are paying attention to whether the China’s suspension of issuing bonds means a renunciation of the separation of politics from economics. The Nihon Geizai Shimbun analyzed, “This means that political matters have started to cast a subtle shadow upon economic matters.”

The Japanese media is reporting that the Japanese businesses, which are branched out in China, are feeling serious threats as an anti-Japan feeling is recently running high in China. They are also saying that the reason why the possibility of Japan winning on the bidding for the Beijing-Shanghai high-speed railroad became very low was because of political logic based on the anti-Japan feelings which rose upon netizens.

Some view that the Japanese government’s action of raising a reduction of 20 percent on China’s yen-based loans in 2003 compared to last year might have stimulated China. Upon Japanese businesses showing great interest in branching out to China, some are taking a cautious behavior in investing in China, conscious of the anti-Japan feelings.

A Japanese corporate associate from Chongqing, where the booing for the Japan team was especially intense during the Asian Cup, said, “It may be likely for some of Japanese companies to give up branching out to China if this situation continues.”

Won-Jae Park parkwj@donga.com