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    Japan to cut PRC loose from development aid gravy train

    As Japan continues to strengthen its ties with the US, it’s naturally moving away from the PRC:

    Now that China is no longer considered a developing nation, Tokyo has told Beijing it plans to begin cutting the size of its low-interest yen loans from this fiscal year, aiming to phase them out entirely by fiscal 2008, sources said.

    Beijing likely will protest, the sources said.

    Some members of the ruling Liberal Democratic Party are calling for an immediate end to all official development assistance (ODA) to China.

    This would be the rightist wing of the party, which believes (not without justification) that, in financing China, Japan is aiding a trade and military rival.

    However, loans will continue to be extended for projects that have already started, and grants and technical aid will be given for training and environmental protection programs.

    The decision to turn off the loan tap to China reflects the government’s belief that China’s economy has taken off and the country has taken its place in the international community, the sources said.

    In addition, development in China’s coastal cities is now about equal to that of industrialized nations, meaning that China no longer can be regarded as a developing nation, the sources said.

    Sources close to both governments said Beijing will press Japan to continue the loans beyond 2008 because provincial authorities across China are pressed for funds to develop their economies. Also, Beijing is unhappy about being told unilaterally by Japan that the ODA well will soon run dry.

    Japanese officials would like to reach agreement on the loan reduction plan this month so that the government can begin implementing cuts soon, the sources said.

    But LDP hard-liners want ODA to China stopped right away, sources said. Thus, there likely will be strong opposition to the plan for gradual reductions.

    Criticism in Japan of ODA to China surged following anti-Japanese outbursts at the Asian Cup soccer matches last summer in China. Further straining relations was the November intrusion by a Chinese submarine into Japanese territorial waters.

    Tokyo is also finding that ODA no longer carries much diplomatic leverage in talks with Beijing.

    Meaty Fly, by the way, has posted twice in the last several days. Japan-China relations are right up his alley–his last post in September was, after all, headlined “Japan to designate China as military threat“–so it’s possible that he’ll get back to more regular writing. On his blog, I mean.

    3 Responses to “Japan to cut PRC loose from development aid gravy train”

    1. Eneils Bailey says:

      I enjoy your posting about the culture, politics, and business of the Far East. I do not think that many people on this side of the pond realize how bad the situation could get for Japan with the PRC and North Korea. Hope the scab does not get scraped off and the pus flows from that chancre of North Korea.

    2. Sean Kinsell says:

      Thanks. I try not to get too pushy about these things, since the obvious response is, “Well, you’re a Japanophile, and you live there, so of course you’re going to think everything that goes on there is important.” But that really isn’t it. As you say, I think a lot of Americans have trouble understanding what it’s like with several volatile countries of over 100 million people each (China, India, Indonesia, and you could count Russia) on the same continent is. And those are just the big ones. The US really needs a stable, stand-up partner in the region, and, while Japan has its shortcomings, it’s pretty much it for us.
      As for North Korea, whatever happens, it’s going to be painful. I hope it doesn’t blow up, too.

    3. Simon World says:

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