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December, 2006
Taiwanese companies have invested heavily in China, providing a particular boost to the economies of the Pearl River and Yangtze Delta regions. However, as they continue to do so, despite restrictions imposed by Taipei, the pattern of their investment is changing, although still to the great benefit of the mainland. In the absence of political adventurism, economic inter-dependence could mean closer ties that reduce the chances of political conflict rather than precipitate it.
The Japanese Defence Agency and Chinese People's Liberation Army held defence talks yesterday. Japan was represented by a vice-minister and China by an assistant to the chief of general staff in the first such meeting for some months, with more senior defence officials having not met since late 2003. The resumption of high-level exchanges has been made possible by the departure of Prime Minister Junichiro Koizumi in September and the visit to China by his successor, Shinzo Abe, in October. Beijing shunned Koizumi for visiting the Yasukuni war shrine, but wants to mend relations with Abe. China's minister of defence, Cao Gangchuan, is now expected to visit Japan next year. High on the agenda are likely to be China's military expansion, Tokyo's military strengthening, disputed waters and maritime posse ssions, North Korea and Taiwan, as well as broader regional and international security issues. Beijing will have calculated that the more the momentum of bilateral exchanges builds, the more Abe stands to lose if he also visits Yasukuni. More generally, a resumption of high-level defence talks reduces the risk of miscalculation that could lead to a confrontation between the two regional powers.
Chinese President Hu Jintao and Pakistani President General Pervez Musharraf today signed a free trade agreement. Under the deal, bilateral trade is expected to triple to 15 billion dollars within five years. On the second day of Hu's visit to Pakistan, the two countries also reached agreements on defence cooperation, the establishment of a joint investment agency and a five-year development programme. Beijing also pledged continued support for Pakistan's nuclear power industry, but fell short of expectations that it would back a new nuclear deal to mirror an India-US civilian nuclear pact reached last year. Washington's refusal to offer Pakistan an equivalent nuclear supply deal has humiliated Musharraf and Islamabad is looking increasingly to China. Mutual economic and str ategic interests will enhance Pakistan's long-standing ties with China. Beijing is keen to reassure Islamabad that its warming ties with India pose no threat, but it will find it increasingly difficult to balance the interests of Islamabad and Delhi.
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