An old wound

The potential for the China-Japan relationship to turn sour is illustrated in the way that one war-related issue tends to come to prominence even as another recedes. Thus, efforts to mend fences over Yasukuni were overshadowed by Abe's claim that there is no evidence to confirm that thousands of "comfort women", mainly from other Asian countries, were coerced into wartime sex-slavery by the Japanese army. The remarks were greeted with uproar in China and Korea, and although Abe later distanced himself from the blunder, local media reported that Wen's visit to Japan would be shortened as a result.

Japan's perceived revisionist approach to its own history, as embodied in its school textbooks (or a small proportion of them, at least), is the source of further long-standing tension with China. The perennial accusation that they - and official Japanese memory more generally - gloss over or understate Japanese wartime atrocities on the Chinese mainland is raised particularly in relation to the Nanjing massacre of November 1937. While many Chinese demand a full and sincere apology for this hideous incident, many Japanese nationalists deny that it ever took place.

But if many of China and Japan's disagreements have their origins in the past, it is the way that they are used to sharpen and justify present-day disputes that accentuates the sense of risk that surrounds them. If this tends to happen more inadvertently in Japan, thanks to the ignorance or malevolence of individual nationalist politicians, in China it is often the result of an adept use of anti-Japanese popular fervour in order to serve a political objective.

The current ingredients available to spark tension include a shifting regional security environment (accelerated by North Korea's nuclear test of October 2006) and the related issues of territorial disputes and competition over energy exploration (particularly natural-gas reserves) in the East China Sea. Will Hutton, author of The Writing on the Wall, has said that the current political climate in east Asia is "akin to that of pre-war Europe". Alarmist or not, the challenges to constructive Sino-Japanese diplomacy are evident.

It is little wonder that many in Japan react with suspicion to their far larger neighbour's dizzying economic rise and concomitant insatiable thirst for resources. The annual report of the East Asian Strategic Review, the journal of the influential Tokyo think-tank the National Institute for Defence Studies (Nids), assessed China's main foreign-policy goal as "assuming dominant leadership in the region". The Nids report recommends a continued strengthening of Japan's defence capabilities, the speedy introduction of a ballistic missile-defence system, and a more assertive, "active" foreign policy.

In March 2007, Japan's hawkish foreign minister Taro Aso pursued this logic in outlining plans for a "new pillar of diplomacy" aimed at creating an "arc of freedom and prosperity" across China's traditional spheres of influence in east Asia.

In support of this new stance, Shinzo Abe has made a central objective of his premiership the revision of Article 9 of the constitution, to allow an expansion of the remit of the Japanese military beyond the confines of the current "Self-Defence Force". The upgrading of the Japanese defence agency to full ministry status in January 2007 may have been largely symbolic, but the move also clearly signalled Japan's shift from constitutional pacifism towards a more robust diplomatic approach.

The United States and Nato have welcomed Japan's desire to increase its influence abroad, but the Chinese see here a disturbing echo of past militarism. Beijing compared Aso's "arc of freedom and prosperity" to the "Asian co-prosperity sphere", the benign linguistic façade behind which lay the brutal imperialist project that Tokyo imposed upon its neighbours.

A new dynamic

Against these points of tension there are four promising signs. First, Kim Jong-il's nuclear ambitions have pushed China and Japan (along with the US, Russia, and South Korea) into renewing the painstaking six-party talks aimed at reversing nuclear proliferation on the Korean peninsula. Second, in a small first step towards resolving their bitter historical disputes, the two countries agreed to launch a joint academic study of select wartime events; the initiative, announced following Abe's visit to Beijing, is due to report its findings in 2008. Third, after talks between Chinese and Japanese diplomats over the possible joint development of disputed energy reserves, Chinese officials have confirmed that the topic of energy will be included on the agenda for Wen's visit.

The fourth sign is also the most important. Below the level of state diplomacy, Sino-Japanese relations are changing in subtle yet profound ways, reflecting broader patterns of integration across the region as a whole. An often-overlooked aspect of Sino-Japanese relations is the depth and dynamism of the economic bonds connecting them. A vast web of trade, investment and people linkages demonstrates that globalisation is rapidly bringing China and Japan closer together.

Even after ten years of recession and deflation, and China's rise notwithstanding, Japan remains by far the largest economic actor in the region. Japan's ability to shrug off its economic malaise since 2001 - in what has become the longest period of sustained economic expansion in its post-war history - has been enabled not by consumer spending at home but by export-led growth in the corporate sector. In 2006, over 17% of those exports went to China, with total trade between the two countries amounting to $207 billion. China is expected to replace the US as Japan's primary trading partner by the end of 2007.

Japanese companies, led by the three major car manufacturers (Toyota, Honda and Nissan), have created vast supply-chains throughout China that by 2006 employed an estimated 1.4 million people. But the links go far beyond manufacturing: Japanese banks, law firms, real-estate developers and other industries have all expanded into the Chinese market, eager to take advantage of China's burgeoning economy. The trade ministry estimates that Japanese companies invested more than $6 billion in China during 2005, a 20% increase on the previous year; Japan is now China's second largest source of inward investment.

It's not all one-way traffic: in April 2007, a Beijing-based publisher became the first Chinese company to list on the Tokyo stock exchange. Corporate activity is creating a buzzing trade-and-investment corridor, stretching across Sino-Japanese political boundaries, vastly enhancing interdependence between the two countries.

Thus, while disputes over history and territory continue to trouble relations between China and Japan, rising prosperity means the likelihood of these developing into conflict is increasingly remote. China and Japan really do share common strategic interests. The more interconnected the two countries become, the more each will have to lose from resolving disputes through force. The potential for squalls cannot be disregarded - especially in this historically sensitive seventieth anniversary year. But the broader political climate in east Asia is becoming more conducive to cooperation, not conflict.