Following six weeks of big pro-US moves by Japan, Tokyo is also signing deals with China. As the Wall Street Journal reports, last week saw a package of economic agreements that could help ease the Chinese yuan into a more international role and make life easier for Japanese companies doing business in China.Declinists will want to trumpet these agreements as yet another milestone on the road of American decline. They will see them as evidence that China’s economic power is reshaping Asia and also as further proof of the erosion of the dollar’s international role. (The agreements will enable Chinese-Japanese trade to be settled in the currencies of these two countries without first converting the funds into dollars.)But context matters. The US actually supports these agreements. While a few American banks may lose some foreign exchange conversion fees. this process represents an important step in internationalizing the Chinese yuan. The more the yuan is used in international trade, many believe, the more its exchange rate will reflect market forces and the harder it will be for China to keep the yuan artificially undervalued.Moreover, as Via Meadia readers know, the US goal is not to isolate and contain China. It is to deter China from aggressively pushing for regional hegemony while integrating it ever more tightly into the international economic system. Rather than trying to link India, Japan, Australia and the other Asian countries into a tight anti-China alliance, the US wants to promote security cooperation among these countries while simultaneously promoting economic integration in Asia and better relations among all Asian countries, including China.The new Japan-China agreements fit this pattern exactly and China’s willingness to move forward on economic cooperation with Japan despite Japan’s more aggressive and pro-US stance on a number of contentious issues suggests that at least some factions in China’s government are ready to work within the kind of Asia America hopes to help build.
Japan And China: BFF?