China and Japan are not only competitors but also partners

In the aftermath of the global financial crisis, with the world in search for new economic engines, China and Japan have explicitly given their answer through their expansion of overseas infrastructure investments. A study by senior researcher Yang Jiang demonstrates that China and Japan have a history of competitive partnerships in the global context on issues of trade, finance and development.

The empirical case studies focus on the current flagship sector of both countries, namely high-speed railways (HSR), and examine what kinds of development financing China and Japan have adopted in making these investments. It asks the following questions: What similarities are there in the Chinese and Japanese approaches to investments in overseas infrastructure, and how do they differ from traditional Western development financing? Also, in what ways have China and Japan changed their approaches to overseas infrastructure projects during this process?

In a nutshell, in the process of expanding overseas infrastructure investments and competing for infrastructure projects, China and Japan have unintentionally become ‘competitive partners’ in challenging the traditional norms of development financing represented by the Washington Consensus and the Development Assistance Committee (DAC) of the OECD.

To be more specific, China and Japan have adopted each other’s practices of tied commercial financing, heavy government involvement, focusing on physical infrastructure and industrialization, and showing respect for host-country forms of governance. In particular, by joining China in the new game of exporting infrastructure and through its own ‘quality infrastructure investment’ initiative, Japan has broken out of the constraints of DAC norms as an aid donor and endorsed some fundamental Chinese approaches to development and development cooperation, which in their turn were inspired by earlier Japanese practices.

Finally, because of competition from new donors like China and Japan, and because of reduced funding for aid in Western countries, the West is drawing closer to ‘the East’ in respect of its approach to development financing. New global norms of development cooperation are being established since China and Japan kicked off the domino.