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Chinese Vice President Wang Qishan, left, has been tasked by President Xi Jinping to handle Japan relations. (Nikkei Montage/ Source photo by Reuters)
China up close

Xi moves right-hand man to Japan affairs as ties with West sour

China turns to a familiar crisis management formula: flatter thy neighbor

KATSUJI NAKAZAWA, Nikkei senior staff writer | China

TOKYO -- Chinese Vice President Wang Qishan, the closest aide to President Xi Jinping and the former enforcer of the leader's tough anti-corruption campaign, has been tasked with a new mandate: improving ties with Japan.

China historically has turned to its relations with Japan to escape a crisis. After the 1989 Tiananmen Square crackdown, Beijing moved to bolster ties with Tokyo to break its international isolation.

Wang's appearance at the forefront of Japan diplomacy could reflect the rough terrain that Xi stands on, including the potentially embarrassing possibility that China may not reach his predecessor's goal of doubling gross domestic product and per capita GDP by 2020, compared with 2010 levels.

In his last speech to the nation before stepping down as the head of the Chinese Communist Party, Hu Jintao declared the lofty goal.

That was seven years ago. Today, the prospect of missing out on that target has tongues wagging in the economic corridors of Chinese officialdom.

"There was a real possibility that Xi would fail to reach the goal passed on to him by Hu," one person said. "But they appear to have found a way, somewhat forcibly, to achieve it."

Once ridiculed as an incompetent leader who accomplished little, Hu suddenly finds himself being praised for having had a steady economic hand and for overseeing perhaps the end of a golden period for China's economy.

Immediately after the party's 2012 national congress, where Hu made his prediction, a Chinese central bank official expressed confidence that doubling GDP "can be achieved one or two years ahead of schedule."

But the situation has changed dramatically, with the Chinese economy growing 6% in real terms in the July-September quarter of 2019, its slowest pace of growth since 1992, when quarterly figures became available.

The handling of macroeconomic policy and China's trade war with the U.S. continue to add downward pressure on the economy.

Now, somewhat in desperation, the Chinese government is expected to inflate past GDP figures based on a new survey of small companies.

Originally, China was said to need at least 6.2% growth in 2019 and 2020 to achieve the GDP target. But with upward revisions of past GDP figures, the target can be achieved even if growth slips slightly below 6% in 2020.

Call it a magic wand.

China's GDP figures are a politically sensitive issue in a country that tightly regulates what people can say about the economy.

An influential economist who is said to be an adviser to Premier Li Keqiang recently predicted that growth over the next decade "will not exceed 5% on average."

In a video widely circulated within China, the economist said, "Given the severity of the Chinese economy, it is important to secure growth of 4% first."

The video was later scrubbed from the internet, as Chinese authorities decided it was too sensational for this moment.

But there is little doubt that Chinese economic statistics are inflated. The Xi administration itself has continued to warn local bureaucrats not to pump up local growth figures and make false reports to the central government.

Xiang Songzuo, an outspoken professor at Renmin University of China, pointed out that the rate of growth in the July-September quarter might be lower than the official figure of 6%.

In a recent interview with the Nikkei, Xiang said China's growth figures simply do not add up, given factors such as government tax revenues and corporate earnings. He is quite right, and alarm bells are ringing among party leaders.

On Friday, the party's powerful 25-member Politburo held a meeting and reaffirmed the "six stabilities" in relation to next year's economic policies.

Topping the list is employment stability, suggesting there are job concerns despite 6% growth, a pace many countries would envy.

Second on the list is financial stability, hinting that China is concerned about the risk of a systemic financial crisis.

Meanwhile, there are no references to reducing debt or curbing property speculation. This suggests that greater importance will be attached to boosting the economy than to implementing structural reforms.

There was another interesting passage. The Politburo talked of "transforming external pressure into motivation for deepening reform and further opening-up, and focusing on running China's own affairs well," according to the official Xinhua News Agency.

The unfamiliar pronouncement suggests a departure from the hard-line rejection of U.S. demands for structural reforms that the Xi administration has maintained since May.

All in all, Xi is driving on a rugged road. China's relations with the U.S. are tense. The Chinese economy is in dire straits. And Beijing is coming under international criticism for its hard-line approach to the Xinjiang Uighur Autonomous Region and Hong Kong.

Shigeru Kitamura, secretary general of Japan's National Security Secretariat, left, meets Wang Qishan in Beijing on Dec. 6. The meeting was reported prominently on that evening's news program on state television.    © Kyodo

China's predicaments are often reflected in the lineup of news stories on state-run China Central Television. On Friday night, CCTV's top story was about the day's Politburo meeting, where the need to avoid an economic crisis was discussed. The segment was followed by stories critical of the Uighur Human Rights Policy Act passed by the U.S. House of Representatives.

In a surprise move, CCTV then reported a Japan-related news story, showing lengthy footage of Wang holding talks with Shigeru Kitamura, secretary-general of Japan's National Security Secretariat.

The meeting's high-profile coverage is significant: Media reports in China are often vehicles for propaganda coordinated by the party's publicity department.

Wang spearheaded Xi's signature anti-corruption campaign during the latter's first term as party chief. Although Wang is not among the some 200 Central Committee members, he is in effect positioned as the "eighth member" of the seven-man Politburo Standing Committee.

Wang also has many acquaintances on Wall Street and has long taken charge of adjusting China's economic relations with the U.S.

But the supernatural power Wang seemed to have wielded has eroded since President Donald Trump came to power. His role in China's ties with the U.S. has been limited recently. Instead, he has begun to take charge of China's relations with Japan.

In October, Wang visited Japan to attend Emperor Naruhito's enthronement ceremony. Last week, Wang met with Kitamura at the direct request of Xi.

China has historically turned to its relations with Japan to escape a crisis. After the 1989 military suppression of pro-democracy student protests at Beijing's Tiananmen Square, China suffered from the West's economic sanctions. Improved ties with Japan eventually helped China escape its international isolation.

Now, facing a potential crisis in its relationship with Washington, Beijing is giving top priority to Xi's scheduled state visit to Japan in April. Sino-Japanese relations are a world away from where they were seven years ago, when tensions flared over Japan's nationalization of the Senkaku Islands in the East China Sea, a group of small uninhabited islets that China claims and calls the Diaoyu Islands.

Japanese Prime Minister Shinzo Abe, left, and Chinese President Xi Jinping shake hands on the sidelines of the G-20 Summit in Osaka in June. Xi is expected to make his first state visit to Japan next April.   © Reuters

The nationalization sparked a wave of anti-Japan demonstrations across China, and many Japanese businesses were vandalized by angry protesters, plunging bilateral ties to their lowest point.

China is now rapidly moving closer to Japan.

The recent early release of a Japanese professor who had been detained in Beijing is closely related.

"The early resolution of the detention case can be welcomed as there were even moves to cancel China trips among Japanese scholars," said Lim Chuan-tiong, a professor at Wuhan University's Research Center for Japanese studies in China's Hubei Province.

But Lim also cautions Japan from working up too much excitement. "How long will the underlying trend of improving Sino-Japanese relations last? They are closely related to the new cold war between the U.S. and China," he said.

Paradoxically, if China's economy begins humming along and relations with the U.S. stabilize, Japan's strategic value will decline significantly. The wave of anti-Japanese demonstrations that swept across China seven years ago showed how fast ties can fray.

This is the harsh reality of international politics.

Katsuji Nakazawa is a Tokyo-based senior staff writer and editorial writer at Nikkei. He has spent seven years in China as a correspondent and later as China bureau chief. He is the 2014 recipient of the Vaughn-Ueda International Journalist prize for international reporting.

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