'Conditions right' for China, Japan FTA

A free-trade agreement between China and Japan will boost relations and benefit both countries, a former trade official said.

"Now is a good time for China and Japan to discuss starting FTA negotiations," said Wei Jianguo, former vice-minister of commerce and secretary-general of the China Center for International Economic Exchanges, during the Beijing-Tokyo Forum which ended on Tuesday in Tokyo.

"Rapidly growing trade and the surge of Japanese investment into China have established conditions for both countries to start FTA talks."

Wei also highlighted the service sector as an area that will benefit from greater cooperation.

Trade between China and Japan hit a record $344.9 billion in 2011, up 14.3 percent from the previous year, and is expected to reach $350 billion in 2012, according to the Japan External Trade Organization.

Japanese investment in China surged by 49.6 percent year-on-year in 2011 to $6.3 billion, and the first five months of 2012 saw Japanese investment of $3.22 billion, up 16.6 percent from the previous year, according to the Ministry of Commerce.

"Though Japanese investment in China has increased at a rapid pace, Chinese investment in Japan often faced restrictions. The FTA, once in place, will greatly improve Chinese investment," Wei, a guest economist at China Daily, said.

"Once FTA negotiations started, both governments could follow step-by-step principles and start talks initially on easier areas while putting aside sensitive areas, such as agriculture in Japan and the automobile industry in China, to ensure success," he added.

The China-Japan free trade area can add about $46.7 billion to Japan's exports annually, and lift Japan's GDP by 0.66 percent, according to Sun Zhenyu, former Chinese ambassador to the World Trade Organization and chairman of the China Society for World Trade Organization Studies.

Wang Yuzhu, a researcher from the National Institute of International Strategy at the Chinese Academy of Social Sciences, highlighted potential challenges.

"It's surely a good thing if China and Japan can start FTA talks, which will improve economic relations, but the talks will be very difficult because of great differences in the industrial structures of the two economies," Wang said.

The FTA will benefit both countries, Wei said.

"This is a fantastic time for China and Japan to promote investment and trade relations. Economic and trade links serve as major drivers of relations. Respect and mutual trust are fundamental preconditions for cooperation," Wei said.

Yao Haitian, a researcher from the Institute of Japanese Studies at the Chinese Academy of Social Sciences, said that a FTA with Japan will boost exports to Japan in the short term. Chinese exports to Japan edged up 0.4 percent year-on-year to $134.7 billion in the first five months, lower than China's export growth of 8.7 percent in the same period.

"However, in the long run the FTA with Japan will have a great impact. Chinese industries are less developed and lack core technology," Yao said before adding that this scenario could benefit Japanese companies at the expense of Chinese ones.

Toshiro Mutoh, chairman of the Daiwa Institute of Research and former vice-president of the Bank of Japan, said that the European crisis provides greater room for cooperation between China and Japan.

Japanese Prime Minister Yoshihiko Noda said that China and Japan should not only strengthen economic and trade cooperation, but also join hands to tackle regional and global issues.

Former vice-premier Zeng Peiyan called on both countries to speed up talks on the China-Japan-South Korea trade agreement.

Earlier this year, the leaders of China, Japan and South Korea agreed to start negotiations this year. Mao Tianyu, a director from the Department of International Trade and Economic Affairs at the Ministry of Commerce, said negotiations are likely to start in November during the East Asia Summit.