Lu Kejian on China-Japan economic & trade relations under the full implementation of RCEP
Former MOFCOM Head of Asian Affairs briefs top SOE cadre school students ahead of Japan visit on opportunities for China-Japan economic cooperation.
The following article is based on a recent internal speech by Lu Kejian during discussions with trainees preparing to visit Japan at the 中国大连高级经理学院 China Business Executive Academy, Dalian (CBEAD) under the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), the academy is dedicated to training current and future leaders of key state-owned enterprises and financial institutions of China.
Lu, a non-resident senior fellow at the Center for China & Globalization (CCG), studied Japanese at Dalian University of Foreign Languages and has had a long career with China's Ministry of Commerce. He has served as Head of the Department of Asian Affairs and Minister-Counsellor at the Chinese Embassy in Tokyo.
Lu shared the transcript of his Chinese speech with CCG, which was then put into English. After a long and detailed account of China-Japan economic and trade relations in 2023, Lu emphasized the importance of both nations reconciling with their shared history to build a sustainable, win-win future. He underscored the need to honor the original spirit of diplomatic normalization in 1972—a pivotal step beyond a century of warfare and conflicts. Lu urged both nations to work together to implement the RCEP effectively, aiming to inject fresh momentum into the steady growth of bilateral relations.
RCEP全面生效背景下的中日经贸合作关系:回顾与展望
China-Japan Economic and Trade Cooperation Relations under the Full Implementation of RCEP: Review and Outlook
The year 2023 marks the 45th anniversary of the Sino-Japanese Treaty of Peace and Friendship, the year when both nations reaffirmed their strategic and mutually beneficial relations and agreed to dedicate themselves to jointly building a constructive and stable China-Japan relationship that meets the demands of the new era.
The 45th anniversary served as an opportunity for both countries to enhance their bilateral partnership and emphasize peace and friendship, organizing a series of activities. In November 2023, the leaders of China and Japan met in San Francisco, the United States, where they reiterated their commitment to the principles and consensus stipulated in the four political documents between the two countries. They reaffirmed the positioning of comprehensively advancing the strategic and mutually beneficial relations and agreed to dedicate themselves to jointly building a constructive and stable China-Japan relationship that meets the demands of the new era. Both sides agreed to maintain dialogue and communication at various levels, and hold at an appropriate time a new round of China-Japan High-Level Economic Dialogue as well as a meeting of high-level consultation mechanism on people-to-people exchanges. They will maintain communication and coordination on international and regional affairs, and jointly cope with global challenges such as climate change.
In June 2023, the Regional Comprehensive Economic Partnership (RCEP) was fully implemented across all 15 signatory countries. This milestone will support China in advancing its high-standard opening up, attracting global resources with internal circulation, and enhancing the quality and level of trade and investment cooperation. It also plays a role in jointly upholding and strengthening a rules-based multilateral trading system.
Additionally, China and Japan share several important goals, including maintaining stable and resilient industrial supply chains, using technological innovation and the digital economy to drive high-quality development, promoting green transitions for a harmonious relationship between humanity and nature, and actively addressing the challenges posed by an aging population. With the full implementation of RCEP, Sino-Japanese economic and trade cooperation is poised for new breakthroughs, aligning with historical trends and moving in the right direction. The 45th anniversary of the Sino-Japanese Treaty of Peace and Friendship marks a significant milestone and a new beginning. Both countries have the opportunity to build a constructive and stable China-Japan relationship that meets the demands of the new era, achieving greater mutual benefit and win-win cooperation.
I. Review of China-Japan Economic and trade relations in 2023
(1) In 2023, China-Japanese trade overcame the impact of external adverse factors and achieved steady progress
Since the normalization of diplomatic relations between China and Japan 50 years ago, bilateral trade has increased more than 300 fold, a testament to the joint efforts of both nations. Their economies have become deeply interconnected and mutually beneficial, with trade serving as a "ballast" and "propeller" for the China-Japan relations. Notably, since 2020, despite the continuous external challenges such as the COVID-19 pandemic and geopolitical tensions, China-Japan trade has remained stable, showcasing its great resilience and strong foundations. Since 2007, China has consistently been Japan's largest trading partner, while Japan has long been one of China's key trading partners and a major source of foreign investment.
In 2023, although Japan has made notable progress in its post-pandemic economic recovery, the global economic slowdown and the "deglobalization" trend in Western governments cast uncertainty over whether Japan could overcome its long-standing recessionary trajectory. Meanwhile, China-Japan trade has continued to show stability, supported by favorable factors like the full implementation of the RCEP. For several consecutive years, bilateral trade between the two countries has consistently surpassed $300 billion.
In 2023, according to customs statistics, the total value of Chinese imports and exports reached 41.76 trillion yuan [$5.8 trillion], a year-on-year growth of 0.2%. Exports rose by 0.6% to 23.77 trillion yuan [$3.3 trillion], while imports declined by 0.3% to 17.99 trillion yuan [$2.5 trillion]. In USD terms, China-Japan trade amounted to $318 billion, marking a year-on-year decrease of 10.7%. China's exports to Japan totaled $157.52 billion, down 8.4%, while imports from Japan reached $160.48 billion, a decrease of 12.9%. Japan became China's fourth-largest trading partner, following ASEAN, the EU, and the United States. By country, Japan ranks as China’s second-largest trading partner, second-largest export destination, and third-largest import source. Meanwhile, China is Japan's largest trading partner and import source, as well as its second-largest export market.
Despite general stability in China-Japan trade in 2023, the path to its stable recovery and growth faces numerous risks and challenges. The ongoing impact of major geopolitical conflicts, the shift in U.S. Federal Reserve monetary policy from tightening to easing, coupled with weakened global demand and insufficient growth momentum have all contributed to slow global economic recovery and uncertainty in international trade growth, complicating the prospects for China-Japan trade.
(2) Mutual investment between China and Japan has maintained steady growth and enjoys a promising prospect
In 2023, despite external challenges, Japan's direct investment in China remained stable. Japan established 888 new enterprises in China, marking a 7.3% increase. However, investment in actual use amounted to $3.89 billion, a 15.5% decline. Cumulatively, Japan has established 56,000 enterprises in China, with total investment in actual use reaching $131.48 billion, making Japan China's third-largest foreign investor by country.
According to the 2023 White Paper on China's Economy and Japanese Companies, released by the Japanese Chamber of Commerce and Industry in China in mid-June 2023, 64.9% of Japanese companies expected to achieve net profits for 2022. In the manufacturing sector, 63.8% reported expected profitability. Regarding their business development plans in China over the next one to two years, 33.4% of companies indicated plans to “expand (scale),” while 4.9% planned to “downsize,” and only 1.4% intended to “relocate or withdraw to a third country (region).” These results highlight the strong foundation of China-Japan economic cooperation. While many major Japanese companies remain cautious about expanding in China, the majority have opted to stay, aiming to continue profiting from the Chinese market rather than considering withdrawal or downsizing.
China will always be a major driver of global development, firmly committed to advancing high-level opening up and promoting an economic globalization that is more open, inclusive, balanced, and beneficial for all. The full implementation of the RCEP has created a high-level free trade cooperation mechanism between China and Japan, offering significant business opportunities for Japanese and other foreign enterprises. As two of the world's largest economies, China and Japan have developed a deeply integrated economic and trade partnership. With highly complementary industrial structures and closely interconnected production and supply systems, their joint efforts are crucial for maintaining the integrity and security of industrial supply chains in the East Asian region. This deep cooperation will also contribute to the transformation and upgrading of global industrial supply chains.
In 2023, various economic and trade organizations, including the Japanese Association for the Promotion of International Trade (JAPIT), Keidanren (Japan Business Federation), and Japan-China Economic Association, actively worked to strengthen pragmatic cooperation with China. The stable and healthy development of China's economy in recent years has also bolstered confidence within the Japanese business community, which remains optimistic about China's economic prospects and vast market potential. Japanese companies have placed greater emphasis on expanding their investments and collaborations in China, particularly in key sectors such as the green economy, e-commerce, healthcare, and elderly care.
On the other hand, over the past 20 years, the China Enterprises Association Japan (CEAJ) has experienced significant growth, expanding from just a dozen members to over 160. It has played a vital role in strengthening China-Japan economic and trade relations, as well as fostering friendly exchanges. Similarly, the Chinese Chamber of Commerce in Japan (CCCJ) has remained committed to its principle of serving in Japan, consistently working to support Chinese businesses and create platforms for China-Japan engagement. The CCCJ is also planning to host the World Chinese Entrepreneurs Convention in collaboration with the three major Japanese economic organizations—Keidanren, the Japan Chamber of Commerce and Industry (JCCI), Keizai Doyukai (Japan Association of Corporate Executives)—and the seven major Japan-China friendship organizations—Japan-China Friendship Association, JAPIT, Japan-China Cultural Exchange Association, Japan-China Friendship Parliamentarians' Union, Japan-China Society, Japan-China Economic Association, and Japan-China Friendship Center. Their goal is to use Japan as a foundation to deepen China-Japan economic exchanges and cooperation.
(3) Significant Recovery and Promising Outlook for People-to-People Exchanges and Technical Intern Cooperation
Since the normalization of diplomatic relations between China and Japan 50 years ago, labor cooperation with Japan has been a key component of China's foreign labor cooperations, serving as a dual vehicle for both economic collaboration and people-to-people exchanges. This cooperation has actively contributed to economic interaction and strengthened mutual trust between the two countries over the years. According to statistics from the Ministry of Commerce of China, in 2023, China sent 13,941 technical interns to Japan, bringing the total number of Chinese technical interns in Japan to 43,000. These interns are primarily employed by small-and-medium-sized enterprises throughout Japan.
In recent years, labor cooperation between China and Japan has evolved and shown some changes. China's traditional advantage in providing low-cost technical interns has gradually diminished, while Japan's recent institutional reforms to its foreign worker scheme have added new dynamics. Chinese enterprises must focus on their strengths in providing mid-and-high-end skilled workers. Efforts should be directed toward expanding cooperation with Japan in related industries, leveraging both domestic and international markets and resources to identify new business growth opportunities.
On the other hand, according to estimates released by the Japan National Tourism Organization on January 17, the number of foreign visitors to Japan in 2023 exceeded 25.06 million, marking the first time in four years that the figure has surpassed 25 million since the outbreak of the COVID-19 pandemic. This represents a recovery to 80% of the pre-pandemic level in 2019. By country and region, South Korea ranked first with 6.96 million visitors, while the Chinese mainland ranked third with 2.43 million visitors.
Although current people-to-people exchanges and the number of flights between China and Japan have not yet returned to pre-pandemic levels, this does not signal a bleak outlook for China-Japan tourism cooperation. On the contrary, as the tourism markets in both countries mature and consumer demands evolve, new opportunities for collaboration are emerging. Looking ahead, the two nations can deepen cooperation in the tourism sector to promote the healthy development of the China-Japan tourism market. For instance, efforts could focus on innovating tourism products, offering more personalized travel routes and products tailored to the preferences of Chinese tourists.
(4) Deepening Cooperation in Service Trade, Represented by Financial Services, Healthcare, and Elderly Care
With the full implementation of the RCEP, service trade cooperation between China and Japan has deeper and broader development potential. In areas such as financial services, healthcare, elderly care, and e-commerce, both countries possess unique advantages. Notably, Japan's expertise and leadership in elderly care complement China's large aging population. It is foreseeable that, under the RCEP framework, service trade cooperation between China and Japan will create new opportunities and inject fresh vitality into the long-term economic development of both nations.
In March 2023, the China-Japan Finance and Economic Forum, organized by China International Capital Corporation (CICC), was successfully held in Tokyo, attracting hundreds of investors from Japan and beyond. The forum discussed key issues and opportunities in China, Japan, and Asia, focusing on industrial policy, macroeconomics, aging populations, carbon neutrality, emerging Chinese enterprises, and ESG investment strategies. The main forum also hosted the official launch of CICC's Fixed Income, Commodities, and Currency Department (FICC) app on Japan's app stores, making it accessible to Japanese users. The app, which provides comprehensive market insights and professional information services, has already registered over 20,000 users.
On September 16, 2023, during the 20th China-ASEAN Expo, a Japan-Guangxi Enterprise Exchange Meeting was held in Nanning, the capital of South China's Guangxi Province. The event, themed "Deepening Pragmatic Cooperation, Pursuing Development, and Sharing New Opportunities under RCEP," attracted major Japanese companies such as Mitsubishi Corporation, Mitsubishi Electric, MUFG Bank, AGC, ORIX, Itochu Corporation, Mizuho Bank, Marubeni Corporation, and Panasonic. These companies engaged with representatives from Guangxi’s cities, key industrial parks, and enterprises. The meeting featured thematic presentations and matchmaking exchanges aimed at strengthening economic and trade cooperation between Guangxi and Japan, exploring third-party markets like ASEAN, and promoting mutual benefits and shared development.
At the 2023 China International Fair for Trade in Services (CIFTIS), the Japan Pavilion adopted the theme "Integration of Online and Offline" to showcase a wide range of products and services, including "Food and Beverages," "Beauty, Health, and Elderly Care," "Daily Goods and Traditional Crafts," and "Content Products and Services." The pavilion focused on enhancing B2B cooperation, promoting the "JETRO Business Pavilion" mini-program on WeChat, which allows users to browse online catalogs and conduct consultations in Chinese. Currently, nearly 500 Japanese companies have joined the platform, displaying over 5,000 products, with the number of participating companies and products continuing to grow.
(5) Significant Achievements in China-Japan Intergovernmental and Local Exchange Cooperation
In 2023, through the joint efforts of both governments and proactive individuals from the economic sectors of China and Japan, intergovernmental and local-level economic exchanges between the two countries flourished, leading to significant achievements. Institutions such as China's Ministry of Commerce and the China Council for the Promotion of International Trade (CCPIT), along with various provinces, cities, and regions, actively participated in pragmatic exchanges and cooperation with Japanese economic and trade organizations, local governments, and sister cities.
On October 23, 2023, the 40th China-Japan Economic Knowledge Exchange Conference was successfully held in Beijing. Representatives from both countries engaged in in-depth, pragmatic discussions on key topics such as "Global Economic Situation and China-Japan Economic Development," "Addressing Low Birth Rates and Aging Populations," and "Carbon Neutrality and Sustainable Development." Lu Hao emphasized that, in the new era, the China-Japan Economic Knowledge Exchange Conference should stay true to its foundation while fostering innovation to contribute more development knowledge. "Staying true to the foundation means upholding China-Japan friendship and promoting candid mutual learning. "Innovation" involves injecting new relevance and value into the conference, aligning with the current economic and social development needs of both countries and generating fresh insights to advance their mutual development.
The 17th China-Japan Friendship Conference was held in Beijing on November 7, 2023, with the theme "Inheriting the Spirit of Treaty-making and Developing People-to-People Friendship in the New Era." President of the China-Japan Friendship Association Tang Jiaxuan sent a congratulatory message to the meeting. Approximately 250 participants attended, including representatives from the foreign affairs offices and friendship associations of 24 provinces, cities, and autonomous regions in China, as well as official representatives from the Ministry of Foreign Affairs, the All-China Federation of Trade Unions, the All-China Youth Federation, the All-China Women's Federation, the China Soong Ching Ling Foundation, and the China Education Association for International Exchange. Additionally, representatives from Japan's 22 prefectural Japan-China Friendship Associations, friends of both countries and members of the media were also present.
From November 14 to 15, 2023, the China Center for International Economic Exchanges and the Japan Business Federation jointly hosted the ninth round of the Sino-Japanese Entrepreneurs and Former Senior Officials Dialogue in Tokyo, Japan. This event aimed to foster the healthy and positive development of China-Japan economic relations amidst a complex international environment. Representatives from both sides engaged in open discussions and in-depth exchanges on key topics, including "Prospects for China-Japan Economic Relations and Development," "Building a Free and Open Business Environment," and "Addressing Climate Change and Other Global Challenges."
From the local economic and tread level, in 2023, seven China-Japan Local Development Cooperation Demonstration Zones in Beijing, Shanghai, Chengdu, Suzhou, Dalian, Tianjin, and Qingdao actively seized opportunities to enhance cooperation. These zones prioritized innovation in areas such as institutional mechanisms, resource integration, project construction, and cultural exchanges, achieving significant results and striving to advance China-Japan local development cooperation to new heights.
(6) Seizing the Opportunity of RCEP’s Full Implementation and Advancing Northeast Asia Regional Economic Integration Progress
In 2019, the China-ROK-Japan Cooperation Vision for the Next Decade was released at the meeting of leaders of China, Japan, and South Korea. The document underscored the commitment of the three nations to expedite negotiations for a China-Japan-South Korea Free Trade Agreement (FTA) and the goal of establishing a comprehensive, high-quality, and mutually beneficial FTA with unique value. The full implementation of RCEP will further integrate three major economies—China, Japan, and South Korea—under a unified framework.
On November 26, 2023, the Tenth Trilateral Foreign Ministers' Meeting between Japan, the People's Republic of China, and the Republic of Korea was convened in Busan, South Korea. This was the first meeting between the foreign ministers of the three countries in four years, since 2019. Three countries reached a significant consensus on pursuing a comprehensive, high-level, and mutually beneficial China-Japan-South Korea Free Trade Agreement (FTA) with unique value. They also agreed to enhance the level of trade in goods, services, and investment liberalization, while upgrading rules and standards based on RCEP, therefore establishing an "RCEP+" FTA. The future China-Japan-South Korea FTA is expected to surpass RCEP standards and develop related institutional arrangements. Based on existing bilateral FTA cooperation, the three countries can expand mutual market access and reduce trade barriers. This will also pave the way for innovative cooperation, creating fresh momentum for East Asian integration and global economic recovery.
Looking back on the 50-year development of the normalization of China-Japan diplomatic relations, the Japanese business community has consistently supported and promoted Sino-Japanese friendship. Economic cooperation between the two nations has played a crucial role in China's reform and opening-up and economic construction. This economic and trade collaboration has not only increased in quantity but also improved in quality, serving the fundamental interests of both peoples and aligning with the trend of current-era development. The achievement resulted from the joint efforts of governments, businesses, and individuals from both countries. As leading global economies, China and Japan have demonstrated the strong resilience of their economic and trade cooperation in recent years, successfully coping with challenges posed by the pandemic and geopolitical tensions. The complementary nature of their mutual needs and advantages has become even more evident. As a result, comprehensive China-Japan economic cooperation benefits both nations and contributes positively to the stability and growth of the Asia-Pacific region and the global economy.
II. Prospects for China-Japan Economic and Trade Cooperation
Since 2024, several factors—including rising global debt risks, sluggish trade, and investment growth, and the intensification of "de-risking" policies that heighten the risk of economic decoupling—have exacerbated global economic divergence, posing ongoing risks and challenges. This year, marking the 75th anniversary of the founding of the People's Republic of China, is crucial for achieving the targets set in the 14th Five-Year Plan. China will continue to adhere to the principle of pursuing progress while maintaining stability, promoting stability through progress, and first solidifying its foundation before implementing changes. The country will introduce policies aimed at stabilizing expectations, growth, and employment, while actively advancing efforts to transform its development model, adjust the structure, and improve quality and efficiency, thereby reinforcing the foundation for sustained and positive growth.
On the morning of January 25, Premier Li Qiang met with a Japanese business delegation at the Great Hall of the People. Li emphasized that the economies of China and Japan are deeply integrated, and economic and trade cooperation plays an important role as the ballast and propeller of bilateral relations. China is ready to work with Japan to fully tap cooperation potential, continue to share development opportunities, support enterprises of the two countries to strengthen cooperation in fields such as scientific and technological innovation, digital economy, green development, medical care and elderly services, jointly ensure stable and unimpeded industrial and supply chains, and achieve complementarity of a higher level and win-win results. Li Qiang expressed the hope that the Japanese business community will play a positive role in the win-win cooperation between China and Japan.
From January to July this year, total trade between China and Japan reached $173.47 billion, marking a 5.2% year-on-year decline. China's exports to Japan totaled $86.29 billion, down 6.3%, while imports from Japan amounted to $87.18 billion, a 4.1% decrease. Japan established 432 new enterprises in China, a 15.8% drop, with actual investment in China falling by 50.4% to $1.52 billion. Cumulatively, Japan has invested in 57,000 enterprises in China, with total actual investment reaching $133.01 billion, making Japan the second-largest source of foreign direct investment for China. Additionally, China sent 5,613 new technical interns to Japan, with a total of 41,000 Chinese technical interns currently in Japan.
It is clear that while future China-Japan economic and trade cooperation will face various risks and challenges。 However, the two countries share a long history and strong foundation of economic and trade collaboration. Looking ahead to the next 50 years, the prospects for China-Japan economic and trade relations remain promising.
(1) Focusing on New-Quality Productive Forces, Promoting China-Japan Industrial Innovation and Cooperation through Technological Innovation and Collaboration
President Xi Jinping has emphasized the importance of accelerating the development of high-quality productive forces and advancing high-quality growth. This shift involves moving away from traditional economic growth models and embracing innovation as the primary driver, using technological advancements to propel industrial progress and fostering new industries, models, and growth momentum through disruptive, cutting-edge technologies.
Since 2023, amid a complex domestic and international environment, China's semiconductor industry has steadily advanced toward high-end manufacturing, while the new energy vehicle (NEV) sector—bolstered by policy support and market demand—has entered a phase of rapid growth, positioning China as the world’s largest automobile exporter, surpassing Japan. Additionally, the rapid advancement of artificial intelligence (AI) is emerging as a critical force in the next wave of technological transformation.
Looking forward, China plans to actively promote new industrialization, develop the digital economy, and accelerate AI advancement. The country aims to establish several strategic emerging industries, including biomanufacturing, commercial space, and the low-altitude economy while pioneering future sectors in quantum technology and life sciences. Broad applications of intelligent digital and green technologies are also anticipated. These sectors, with high growth potential, are expected to drive economic expansion, foster new trillion-yuan-level pillar industries, and form industrial clusters, serving as engines for China's future economic development.
Chinese enterprises have developed strong innovative capabilities in various application fields and demonstrate a high sensitivity to emerging markets, while Japanese companies are renowned for their refined craftsmanship, high-quality traditional manufacturing expertise, and efficient management systems. As Chinese enterprises work to enhance their independent innovation capabilities, they can also absorb and integrate the advanced technologies and management experiences of Japanese companies. Meanwhile, Japanese enterprises can tap into the vast potential of the Chinese market, seeking technological and capital cooperation with Chinese firms. This collaboration will enhance the core competitiveness of both sides, supporting their stable development in an increasingly competitive market.
On January 15, the Japanese Chamber of Commerce and Industry in China released its second survey on member companies' development and business environment in Beijing. The survey revealed that 51% of Japanese companies continue to prioritize the Chinese market, identifying it as their most important or one of their top three key markets. Additionally, over half of the Japanese companies in China indicated they would maintain or increase their investment. It is hoped that, under the RCEP framework, Chinese and Japanese businesses can further promote the development of an innovation network between the two countries. This would facilitate the free flow of resources such as capital, technology, and talent in science and technology-related fields, support the implementation of trade and investment facilitation measures, drive industrial cooperation between China and Japan through technological innovation, cultivate new productive forces, inject momentum into both countries' economic development, and create new growth opportunities for China-Japan economic and trade cooperation.
(2) Leveraging the Hydrogen Energy Sector to Strengthen China-Japan Cooperation in the 3060 Goal and Promote Green Development
China and Japan, both major importers and consumers of fossil fuels, have substantial potential for cooperation in carbon peaking and carbon neutrality efforts. On February 11, 2023, the 16th China-Japan Comprehensive Forum on Energy Conservation and Environmental Protection was held in a hybrid format in Beijing. This forum represented a key step in advancing the consensus reached between President Xi Jinping and Japanese Prime Minister Fumio Kishida during their meeting in Bangkok, aiming to deepen collaboration between the two countries in green development initiatives.
Hydrogen energy plays a central role in Japan's new energy strategy, offering significant potential for China-Japan cooperation in this sector. In 2022, China released its Medium- and Long-Term Plan for the Development of the Hydrogen Energy Industry (2021-2035), while Japan introduced its Basic Hydrogen Strategy in 2017, becoming the first country to establish a national hydrogen energy framework. Having started earlier in hydrogen technology research and development, Japan possesses world-leading expertise in hydrogen production, transportation, storage, and utilization, making it an ideal partner for advancing international cooperation with Chinese hydrogen energy enterprises. By learning from Japan's experience and practices, China can further deepen and expand bilateral cooperation in the new energy field such as hydrogen energy.
350 Japanese companies participated in the 6th China International Import Expo (CIIE) in November 2023, making up over 10% of all exhibitors and giving Japan the largest presence among foreign companies. Many Japanese firms were among the first to sign up for the 7th CIIE. Major manufacturers, including Toyota, Hitachi, Mitsubishi Electric, and Sumitomo Electric Industries, highlighted their support for China's 3060 goals. Toyota showcased its hydrogen energy technologies across manufacturing, transportation, storage, and application, while Hitachi focused on solutions for transforming industrial parks to adopt clean energy and improve energy efficiency.
Meanwhile, the Lin-gang Special Area in Shanghai, China's only demonstration zone for China-Japan local development cooperation centered on the hydrogen energy industry, will play a pivotal role in advancing joint efforts in this sector. Looking ahead, this Special Area will establish a continuous dialogue mechanism between the two countries, aimed at building a hydrogen society. It will leverage its role as a platform for China-Japan local cooperation in Shanghai to facilitate close communication on policy formulation, standard setting, technology development, and business operations related to hydrogen energy. This initiative will also encourage more Japanese enterprises to establish a presence in Shanghai and invest in China.
(3) Actively Promoting Cooperation in Elderly Care and E-Commerce
On January 15, the General Office of the State Council issued the Opinions on Developing the Silver Economy to Enhance the Well-being of the Elderly, marking the first national-level document focused on the "silver economy." It outlines 26 measures covering four key areas, addressing a broad range of needs for the elderly, including clothing, food, housing, transportation, elderly care, and health management.
Aging populations pose a critical challenge for both China and Japan. Currently, China's population aged 65 and above exceeds 216 million, representing 15.4% of the total population. The China Research Center on Aging, under the Ministry of Civil Affairs, projects that the scale of China's aging industry will reach 50 trillion yuan [$7 trillion] by 2030 and 100 trillion yuan [$14 trillion] by 2050, highlighting immense potential for the silver economy. Japan, which became an aging society in the 1970s, has accumulated extensive experience and developed a relatively advanced elderly care system. It possesses rich expertise and mature technologies in healthcare, investment, management of the elderly care industry, talent training, and project operations. The complementary strengths of China and Japan provide a solid foundation for deepening cooperation in elderly care and jointly exploring markets in Northeast Asia and globally.
There is also significant potential for China-Japan cooperation in cross-border e-commerce. In recent years, Chinese cross-border e-commerce platforms like SHEIN, Temu, and AliExpress have actively expanded into the Japanese market. In January 2024, SHEIN's user base reached 8.39 million, 2.3 times higher than the same period last year. Since entering the Japanese market in July 2023, Temu has rapidly gained market share with its low prices and good quality, growing by 2.2 million users per month, reaching 52% of the average user base of Japan's top three comprehensive e-commerce platforms: Amazon, Rakuten, and Yahoo!. Take SHEIN as an example, its "offline experience + online sales" model shows strong growth potential in Japan, attracting young consumers with affordable prices. The hands-on experience offered by offline stores notably boosts the conversion rate for online purchases. Temu, with its independent supply chain that connects directly with Chinese small and medium-sized enterprises, balances affordability and quality to make "low-price but also high-quality" goods to capture market share.
Hopefully, Chinese cross-border e-commerce companies will enhance cooperation with Japanese e-commerce enterprises in the future to expand their customer base and gather valuable market statistics. This collaboration will accelerate the integration of domestic and international trade, enabling more Chinese e-commerce platforms to expand globally. In the digital economy, Japanese companies possess extensive reserves in technological R&D and strong redevelopment capabilities, while China has achieved substantial success in commercial model innovation. The two countries can capture cross-border e-commerce as a key breakthrough, capitalizing on opportunities like the full implementation of the RCEP to drive the transformation and upgrading of traditional service industries. This will allow both countries to leverage the digital economy's growth, build platforms for industrial cooperation, and deepen regional trade networks.
(4) Actively Promoting China-Japan Sister City Exchanges to Foster Local Cooperation Between the Two Countries
Sister city exchanges are a traditional strength and a key aspect of China-Japan relations. In recent years, these exchanges have expanded significantly, with 263 formal sister-city relationships established. These partnerships have played a crucial role in fostering mutual understanding and friendship between the peoples of both countries, promoting economic and social development, and supporting the healthy and stable development of China-Japan relations. For instance, the sister city relationship between Shanghai and Osaka, established on April 18, 1974, shortly after the normalization of diplomatic relations, has set a precedent for such sister cities' collaboration. Over the past 50 years, the two cities have collaborated extensively in areas such as trade and investment, healthcare and elderly care, and port shipping, while maintaining close exchanges in science, technology, and culture, becoming a model for China-Japan local cooperation and exchange.
On May 25, 2023, the 19th China-Japan Local Exchange Promotion Symposium was held successfully in Dujiangyan, Chengdu, Sichuan Province, China. Co-organized by Japan's Council of Local Authorities for International Relations (CLAIR), the Department of Foreign Affairs Management of China's Ministry of Foreign Affairs, and the Sichuan Foreign Affairs Office—and hosted by the Chengdu Municipal Foreign Affairs Office and the Dujiangyan Municipal People's Government—the symposium centered on the theme, "In the Context of the New Era: Local Cooperation and Exchange between China and Japan—Leveraging Regional Resources to Boost Tourism and Urban Economic Growth."
With over 200 representatives from Japanese local governments, Japanese institutions in China, and Chinese foreign affairs offices across relevant provinces and cities, this symposium saw its highest attendance to date. Participants reaffirmed that China and Japan, as key neighbors and collaborative partners, will prioritize long-term development, striving together to achieve deeper complementarity and mutual benefit and to foster a China-Japan relationship attuned to the demands of the new era.
As economic exchanges and cooperation between China and Japan deepen, the need for strengthened local partnerships continues to grow. This includes signing economic exchange agreements, facilitating communication and investment among local enterprises, constructing specialized industrial parks and trade centers, promoting industry chamber exchanges and agreements, and establishing product exhibition halls and permanent specialty product centers. These local exchanges will further enhance business cooperation between Chinese and Japanese enterprises. China and Japan are key trading partners, and within this close economic and trade framework, targeted, specialized local economic exchanges between sister cities can foster bilateral trade and support regional development.
There is significant potential for sister-city cooperation in areas such as energy conservation and environmental protection, healthcare and elderly care, vocational education, small and medium-sized enterprises (SMEs), and rural revitalization. Organizations like the CCPIT, the Japan Business Federation, JAPIT, and the Japan-China Economic Association are expected to continue serving as vital connectors. By collaborating with local government departments in both countries, these organizations can facilitate deeper economic exchanges between local governments and SMEs, contributing to the development of China-Japan relations that meet the evolving needs of the new era at the local level.
(5) Encouraging Two-Way Investment Between Chinese and Japanese Enterprises to Enhance Industrial and Supply Chain Cooperation
On November 5, 2023, President Xi Jinping sent a letter to the 6th China International Import Expo (CIIE), where he emphasized: "China will continue to be an important opportunity for global development, and will firmly advance high-standard opening up and work for an economic globalization that is more open, inclusive, balanced and beneficial to all." China remains committed to its national policy of opening up, continuing to pare the negative list for foreign investment, fully implementing the lifting of restrictions on foreign investment in the manufacturing sector, protecting the national treatment of foreign enterprises, and continuously working to build a market-oriented, law-based and internationalized business environment. China welcomes companies from Japan and other countries to continue investing in China, and it is hoped that Japan will provide an open, fair, and non-discriminatory business environment for Chinese enterprises in Japan.
As the two most crucial players in East Asian industrial and supply chains, China and Japan—despite their competition—must actively seek common ground to achieve mutual and regional benefits through enhanced cooperation. For many years, investing in China has been a strategic choice for most Japanese companies, driven by the principle of maximizing profits. China's robust infrastructure, comprehensive industrial chain, expanding R&D and innovation capabilities, and vast consumer market with significant potential for consumption upgrades make it an essential base for Japanese companies' global supply chain operations. While some Japanese companies may diversify their supply chains by shifting parts of their operations to Southeast Asia and other regions to mitigate risks, completely excluding China from global supply chains remains highly unlikely.
With the full implementation of the RCEP agreement, Chinese and Japanese enterprises—especially the numerous Japanese companies operating in China—are encouraged to actively leverage RCEP's preferential tariff policies and trade facilitation measures to promote mutual investment, strengthen the resilience of both countries' supply chains, and sustain the positive momentum of China-Japan business cooperation in the Chinese market.
(6) Advancing Regional and Multilateral Economic Cooperation
China cannot develop in isolation from the world, and the global progress likewise relies on China. Committed to promoting high-level opening-up, China aims to provide greater opportunities globally through the Chinese path to modernization. During a meeting with a visiting Japanese business delegation, Premier Li Qiang said that China is committed, with utmost goodwill and effort, to providing a fair, secure, and stable environment for Japanese enterprises, emphasizing that China remains open and welcomes Japanese companies to invest in China and in the future. On February 5, 2024, the CCPIT and the Japan-China Economic Association co-hosted a business dialogue in Tokyo, aimed at enhancing exchanges and cooperation between the business communities of both nations to further strengthen bilateral economic and trade relations. CCPIT President Ren Hongbin reiterated China's commitment to expanding high-level opening-up and to fostering a market-oriented, law-based, and internationalized first-class business environment, welcoming continued Japanese investment in China.
In the context of slowing global economic growth, ongoing geopolitical shocks, and the rise of de-globalization, economic and trade cooperation between China and Japan—two key nations in Asia and the world—is crucial for advancing regional integration and fostering an open global economy. China will continue to firmly oppose unilateralism and protectionism, working with other nations to reject the politicization, weaponization, and over-securitization of economic and trade issues. China remains committed to building an open global economy, ensuring the high-quality implementation of the RCEP, and actively participating in and leading the regional integration process.
As two of the world's largest economies, China and Japan should enhance coordination on macroeconomic policies and jointly contribute to global economic governance. This includes advancing trade and investment liberalization, promoting Asia-Pacific economic integration, ensuring the stability and smooth functioning of global industrial and supply chains, and taking on a stronger leadership role in global economic governance.
Conclusion
In November 2023, during a meeting in San Francisco with then-Japanese Prime Minister Fumio Kishida, President Xi Jinping emphasized: "As the two countries' economic interests and industrial and supply chains are deeply intertwined, attempts to build 'a small yard, high fences,' decouple economies or disrupt supply chains will do no one any good. China is pursuing high-quality development and high-standard opening up, which will bring unprecedented opportunities to Japan and other countries in the world. The two sides should deepen cooperation and contribute to each other's success, uphold the global free trade system, and achieve a higher level of mutual benefit and win-win results."
Currently, China-Japan relations stand at a critical juncture where both nations must build on past achievements while looking to the future. It is essential for both countries to align with global trends, steer relations in a positive direction, uphold the spirit of learning from history to foster a better future, remain true to the original aspirations of diplomatic normalization, and maintain an objective, rational view of each other's development. Together, China and Japan should work to ensure the effective implementation of the RCEP and the stability of regional industrial and supply chains, injecting fresh momentum into the stable development of bilateral relations and making a positive contribution to the long-term stability and progress of bilateral ties.