that previously had been agreed to by foreign countries. More than half of
all the foreign contracts that required readjustment were Japa nese. In Jan-
uary 1981, tele grams were sent to Japa nese firms announcing that the first
phase of the Baoshan construction work, which had already begun, was
cancelled.
The cancellation of work on the Baoshan proj ect was particularly trou-
blesome to the Japa nese because its scale was so large, so many Japa nese
companies were involved, and many Japa nese companies had already made
huge investments in the proj ect. Japa nese officials, whose hopes were dashed,
were upset about the money they would lose and about the disregard of
the Chinese for international contracts. Some Japa nese wondered whether
the Chinese would resume all the proj ects for which they had signed con-
tracts. The Chinese expressed frustration with the Japa nese for their arro-
gance in lecturing them on the importance of respecting contracts, which
seemed to them a minor issue, considering all the horrible things the Japa-
nese had done to the Chinese during the Sino- Japanese War.
China’s early hope that the expansion of oil production would earn for-
eign exchange for trade also ran into prob lems. Beginning in 1978, the Chi-
nese were optimistic about oil exploration in many areas off the Chinese
coast, and they had sought help from foreign firms for the expertise and
technology they lacked. The Chinese chose to cooperate with French firms
off the coast of Vietnam and with Japa nese firms in the Gulf of Bohai.
Hoping to convince the Japa nese of their need for the cancellations, Yao
Yilin, one of Chen Yun’s balancers, was sent to Japan to provide an expla-
nation. He acknowledged that China had not been able to develop new oil
. 345 .
china and japan
fields as quickly as the Chinese had hoped. When Deng Xiaoping received
Japa nese leaders who were upset at the failure of the Chinese to fulfill their
commitments, he explained the Chinese situation. Deng personally met
Doko Toshio, then age eighty- five and chairman of Keidanren, a former
engineer with tremendous moral authority owing to his integrity and
humble lifestyle, and Ohira Masayoshi, the statesman who had negotiated
normalization of relations. Both sought ways to keep the relationship
moving forward. Deng was not a bud get balancer by nature, nor was he the
kind of person who would bow deeply in apology as many Japa nese might
have done, but he was straightforward in admitting China’s errors and in
acknowledging that the Chinese lacked experience. He forthrightly said that
the Chinese had made some mistakes, they lacked foreign capital, and they
could not afford to pay for all the factories for which they had signed con-
tracts. He also made it clear that China intended to move forward on the
proj ects as soon as it could afford them.
Japan’s Economic Advice, Assistance, and Cooperation
Okita Saburo, a respected, cosmopolitan economic planner who had lived
in Dalian from his birth in 1914 until he completed elementary school and
had worked in the Ministry of Communications in Beijing from June 1939
to February 1942, was sent to China in January 1979 to impress on Chinese
leaders how upset Japa nese businesspeople were about the cancellations. He
met with Deputy Prime Minister Gu Mu, the se nior official guiding eco-
nomic development. Okita warned him that Beijing’s cancellation of the
contracts could affect China’s reputation in international business. When
he returned to Japan, Okita explained to Japa nese po liti cal and business
leaders that China had not been able to exercise proper oversight when plan-
ning to import foreign plants because so many experienced officials had
been pushed aside during the Cultural Revolution and they had not re-
turned to their positions in time to provide due diligence.
While in China, Okita sought to understand what China and Japan
could do to resume work on the contracted proj ects. He suggested a pro-
gram of Japa nese aid to relieve China’s shortages of foreign exchange, and
when he returned to Tokyo, he made the rounds to po liti cal leaders and bu-
reaucrats to win their support for the aid program. He became Japan’s for-
. 346 .
Working Together, 1972–1992
eign minister in November 1979, and in the next month he returned to Bei-
jing with Prime Minister Ohira for the official launch of Japan’s Overseas
Development Assistance program for China.
Over the following two de cades, from 1979 to 1999, Japan provided some
56 percent of all bilateral aid given to China, consisting of three kinds of
aid: grant aid, primarily for health, education, and other social infrastruc-
ture; technical aid; and yen loans, primarily for the development of infra-
structure. When China requested technical advice, JETRO identified ap-
propriate Japa nese technicians; it dispatched a total of 4,158 technicians to
China, and China sent some 9,712 technicians to Japan for training pro-
grams. From 1979 to 2001 Japan supplied a total of $15.9 billion worth of
aid to China.4
Japan did not give direct aid only to China. It also gave grants to Aus-
tralia to support the mining of coal and iron ore that would be supplied to
China at low prices so that the Baoshan steel proj ect, by far the largest single
proj ect with Japa nese funding, could soon be resumed.
Gu Mu invited Okita Saburo to or ga nize a group of high- level Japa nese
advisers who could introduce their experiences in guiding Japa nese eco-
nomic development. By 1979 it was clear that China had made disastrous
errors during the Great Leap Forward and the Cultural Revolution just as
Japan was achieving its rapid industrialization. In early 1978 Gu Mu led a
five- week, high- level study mission to Eu rope to learn about diff er ent ap-
proaches for guiding economic development. The governments of the Eu-
ro pean countries and the United States had guided their economies mainly
by providing regulations to ensure fair market operations, but the Japa nese
government had promoted economic development by providing coordina-
tion and guidance, and assuring that funds were available for the develop-
ment of key sectors. Gu Mu and his staff regarded Japan’s experience as
more appropriate for China than that of the Western countries. Okita
himself had been head of research on Japan’s Economic Stabilization Board,
guiding economic activities in Japan immediately after World War II when
the country was especially concerned about controlling inflation in a time of
shortages. In 1955, when the Economic Planning Agency was established to
provide long- range coordination for economic development, Okita was
director- general of the agency’s Planning Bureau. He thus had experience in
both stabilization and planning for growth.
. 347 .
china and japan
After initial discussions, an advisory group was formalized as the China-
Japan Working Group for Exchange of Economic Information, and its first
meeting was held in Hakone in May 1981. Gu Mu
brought in Ma Hong, a
well- known economist who would later be chiefly responsible for overseeing
the introduction of a market economy, to head the Chinese side of the
discussions. Okita brought in imaginative se nior Japa nese officials who
since 1955 had played impor tant roles in guiding Japan’s economic develop-
ment. Shimokobe Atsushi had played a key part in conceptualizing how to
delineate regions and how to plan and coordinate the vari ous components
required for regional growth. Miyazaki Isamu was a leading scholar and
official responsible for economic planning. Nagai Michio, the son of a
leading Diet member and Japan’s only academic specialist in higher educa-
tion to serve as minister of education, was brought in for a discussion on
higher education.
The China- Japan Working Group, with appropriate replacements over
time, has continued to meet every year, with the exception of 2013 and 2014
when relations between the two countries were especial y tense due to the
dispute over the Senkaku / Diaoyu Islands. Over the years, the group took up
such issues as macroeconomic policy in the two countries, Sino- Japanese rela-
tions, the Chinese economic reforms, and global changes. Japa nese members
spoke of their past experiences, including Japan’s emphasis on the civilian
economy rather than on military affairs, the stress on high- quality labor, the
nature of cooperation between government and the private sector, the impor-
tance of al owing foreign companies to bring in ideas and technology, and the
desirability of first investing in sectors that could produce quick payoffs. The
group remained informal and did not publicize the results of its talks, but
Chinese participants expressed appreciation for the frank discussions and ad-
vice as China was beginning to open its markets and link up with the interna-
tional economy. The World Bank also played a large role by bringing in eco-
nomic advisers from socialist as well as market economies. The economic
advisers from the socialist countries had led economies where the govern-
ment directly supplied inputs. Western economists had worked in countries
where the role of the government was to provide regulations but not to lead
the modernization of the economy. But in working with Japanese economic
planners, the Chinese did not need to go through the World Bank. They
could work with Japanese pioneers directly.
. 348 .
Working Together, 1972–1992
By 1982 many of the proj ects in China that had been delayed had re-
sumed construction, thanks to Japa nese loans, including construction of
phase two of the Baoshan Steelworks, the largest of all the joint proj ects.
Plans had originally called for steel production to begin in 1983. Fi nally,
owing to extraordinary efforts on the part of Chinese and Japa nese man-
ag ers and workers, steel production began in 1985. Completion of the
Baoshan Steelworks enabled China to accelerate machinery production and
construction, and Baoshan became a model for other modern steel plants
in China. By 2015, with the addition of other steel plants based on the
Baoshan model, China was producing almost one million tons of steel per
year, roughly forty times China’s steel production in 1977 and more than
half of the world’s total steel production. Excellent relationships were de-
veloped between the Japa nese and Chinese officials and engineers working
together at Baoshan. Even many years later, Chinese and Japa nese officials
who had taken part in the technology transfer held reunions to celebrate
the success of their joint collaborations, allowing the Chinese to express
their appreciation to the Japa nese who had assisted in the proj ect.
The Japan- China Economic Association estimated that between 1978
and 1984, China concluded some $11.7 billion in contracts for whole plants
and technology from abroad, and Japan won more than $6 billion of those
contracts.5 The Japa nese had the lead in China not only in the steel and pet-
rochemical sectors but also in synthetic textiles and chemical fertilizer,
which played key roles in producing cloth and raising agricultural output
while containing the amount of farmland allocated to cotton production.
By 1984 China was beginning to import consumer goods from Japan, in-
cluding tele vi sions sets, refrigerators, washing machines, and automobiles
(mostly for official use); in 1986, however, Chinese officials, worried about
inflation and the balance of payments, greatly curtailed imports from Japan,
once again leading to the cancellation of orders.
In short, there were frustrations for the Japa nese in their efforts to work
together with the inexperienced but ambitious Chinese on their path to in-
dustrial modernization. However, unlike Rus sian scientists and technicians
who had been advising China and were brought home in 1960, many Chi-
nese and Japa nese businessmen found ways to continue working together.
. 349 .
china and japan
Cultural Exchanges in the 1980s
Deng Xiaoping believed that to maintain robust economic exchanges be-
tween China and Japan it was impor tant to strengthen the nations’ under-
lying cultural ties. After the Treaty of Peace and Friendship was signed in
1978, many Japa nese religious and cultural groups sent del e ga tions to China
to interact with their Chinese counter parts, including Buddhist associations
and groups specializing in arts and culture, such as calligraphy, Chinese
chess, music, and poetry. Several hundred prefectures, cities, and towns in
Japan established sister relations with their Chinese counter parts. Some-
times these cultural groups had an economic impact, as the Japa nese
groups were hoping for marketing opportunities in China and some Chi-
nese localities were seeking Japa nese investments.
Many Japa nese books were translated into Chinese. In the 1980s, Japa-
nese movies were widely shown in China, including romantic stories be-
tween Chinese and Japa nese men and women. Since tele vi sion was just
being introduced in China and China had not yet produced many dramas
or historical plays on its own, translations of Japa nese tele vi sion programs
were popu lar. The Japa nese family- drama series O- shin ( A- xin in Chinese), about a hard- working, frugal, rural Japa nese family in Yamagata, was by
far the most popu lar Japa nese series broadcast on Chinese tele vi sion. The
program centered on an impoverished but highly disciplined mother, A-
xin, who worked hard, saved, and was completely dedicated to helping her
children get a good start in life. A- xin’s character displayed the moral qual-
ities that Chinese leaders wished to instill in their people. Many Chinese
youths who grew up in the 1980s have fond memories of Japa nese stories,
songs, movies, and tele vi sion series.
In October 1984 General Secretary Hu Yaobang and Prime Minister
Nakasone Yasuhiro arranged for some 3,000 Japa nese young people to
visit China, hosted by the Communist Youth League under the direction
of Hu Jintao, to help Chinese and Japa nese youth build friendships for the
future. In Januar
y 1987 when Hu Yaobang was criticized and dismissed
from office, one of the main criticisms was that he had been too generous
in using Chinese resources to entertain the Japa nese youths. But the rela-
tionships formed during the exchanges were later useful when some of
those young people in both countries rose to higher positions and drew on
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Working Together, 1972–1992
the contacts they had made earlier in dealing with issues between their
two countries.
In 1984 Japan and China, under the leadership of Prime Minister Na-
kasone Yasuhiro and General Secretary Hu Yaobang, established the Com-
mission for Sino- Japanese Friendship in the Twenty- First Century. The
commission, consisting of prominent Chinese and Japa nese representatives,
provided a forum that would continue even after 1992, when relations be-
tween the two countries grew tense.
Po liti cal Frictions in the 1980s
Compared with the po liti cal difficulties between China and Japan that in-
creased after 1992, the years from 1978 to 1992 constituted a golden age of
po liti cal cooperation, cultural exchange, expanding economic connections,
and people- to- people exchanges. However, even during this golden age po-
liti cal frictions arose that foreshadowed prob lems that would become
more serious in the 1990s.
Within Japan, the Japan Teachers’ Union after World War II was dom-
inated by leftist intellectuals critical of both Japan’s war time be hav ior and
conservative po liti cal officials, such as Kishi Nobusuke and Sato Eisaku.
The Japa nese Ministry of Education, in contrast, was dominated by con-
servative educators who sought to teach patriotism to Japa nese youth, and
it published guidelines for what the textbooks on each subject in each grade
should cover. On June 26, 1982, Japa nese newspapers criticized the Ministry
of Education for attempting to change the guidelines for modern history
courses to soften the criticism of Japa nese militarism that had led to World
War II, suggesting that instead of the word “aggression,” the texts should
refer to the “advance” of the Japa nese troops. (In fact, it was later shown that
the newspaper reports were inaccurate.) For almost a month after the news-
paper reports were published, the Chinese press hardly paid any attention
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