CAUTIOUS OPTIMISM ON CHINA-JAPAN TIES DESPITE LACK

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 007098

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/14/2027
TAGS: PREL PGOV CH JN IN
SUBJECT: CAUTIOUS OPTIMISM ON CHINA-JAPAN TIES DESPITE LACK
OF EAST CHINA SEA PROGRESS


Classified By: Political Minister Counselor Aubrey Carlson. Reasons 1.
4 (b/d).

Summary
--------------


1. (C) Chinese and Japanese contacts were cautiously
optimistic about Japanese PM Fukuda's impact on China-
Japan relations, highlighting his "balanced" approach,
but they were hesitant to predict any significant
developments in the near term. The October round of
talks on joint energy exploration in the East China
Sea ended without progress, our interlocutors said. A
PRC official underscored the "big gap" between Chinese
and Japanese positions, citing disagreement over
exploration of the Chunxiao field near the Sea's
midpoint. There may be progress on the East China Sea
issue before PM Fukuda's upcoming China visit,
according to a Japanese diplomat. Chinese contacts
downplayed the "accidental" timing of the Japanese and
Chinese lunar probes' launching in October, stressing
there is no "competition" between their space
programs. A Japanese Embassy official noted Chinese
displeasure at planned mid-November visits to Japan by
the Dalai Lamaand Uighur activist Rebiya Kadeer. End
Summary.

Assessment of PM Fukuda
--------------


2. (C) MFA Asian Affairs Department Japan Division
Deputy Director Lu Guijun told Poloff on October 26
that PM Fukuda's "steady" style is a "good thing" for
Sino-Japanese ties. Fukuda "understands China" and
was close to China even before he became Prime
Minister. The fact that PM Fukuda has promised not to
visit Yasukuni Shrine demonstrates his more "balanced"
approach, compared with former PM Abe who did not
specifically promise to avoid the shrine, Lu said.
Peking University (Beida) Professor Liang Yunxiang was
reluctant to declare that ties had already improved
under Fukuda. "There has not been a fundamental
improvement yet," stated Professor Liang on October

31. "The atmosphere is better," but concrete issues
have not yet been addressed. At the very least,
China's relations with Japan "will not be bad."


3. (C) Japanese Embassy First Secretary Akira Yokochi
was upbeat about the PRC's impression of PM Fukuda on
October 25, citing the Prime Minister's father's role
in negotiating a friendship treaty with China in the
1970s. Yokochi did not foresee a major change in
Chinese policy toward a Fukuda-led Japan. University
of Shizuoka Professor Hajime Izumi (who was
participating in a conference in Beijing and who
claimed to know the Prime Minister well, having met
with Fukuda once per month during his tenure as Chief
Cabinet Secretary) told Poloff on October 29 that he
is optimistic the bilateral relationship will continue
to develop, though he was hesitant to predict any
breakthroughs. Professor Izumi underscored that PM
Fukuda "likes China." The only trip abroad Fukuda
made while Chief Cabinet Secretary was to China, and
any overseas trip in that position is unusual, he
stated.


4. (C) Professor Izumi said if it were up to Fukuda,
Japan would be more flexible on the WWII history
issue. However, the PM has to consider the domestic
Japanese constituency as well. According to Izumi,
Fukuda is not supportive of the controversial "Arc of
Freedom and Prosperity," as it was a formulation of
Aso's MOFA and not official Liberal Democratic Party
(LDP) policy. This idea will not be continued, he
stressed. Nonetheless, Izumi expected that Fukuda
will push increased engagement with Southeast Asia and
India and will "compete" with China internationally.
Izumi stressed to Poloff that the PM Fukuda, unlike
Koizumi and even Abe, is more interested in
cooperating and handshaking "above the table," while
"kicking" China under the table. China, the Professor
assessed, appreciates this face-saving approach.

Hazards Remain in the East China Sea
--------------


5. (C) The October round of China-Japan talks on joint
exploration in the East China Sea ended without
progress, contacts told us. Beida Professor Liang
said even if the two sides do not address the issue of
sovereignty "on the surface," the discussion of a
joint development area is essentially a sovereignty

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issue. Japan wants to open up the whole of the East
China Sea to joint exploration because it does not
recognize Chinese claims. Meanwhile, Liang said that
China has already begun exploration of a sizable
portion on "its side" and wants to move its own
development "east of the middle line." MFA Deputy
Director Lu noted there is a "big gap" between Chinese
and Japanese positions. The Japanese side put forth
unreasonable demands that it had not raised in
previous rounds, he stated. For example, the Chunxiao
field is on China's side of the "unilateral" line
Japan claims as the border demarcation. Since the
1970s, Lu said, China has been exploring the Chunxiao
field. Hydrocarbons were discovered there in 2004,
and Japan has now requested that China cease its
operations. Previously, Japan tacitly approved
Chinese development, said Lu. Japanese Embassy's
Yokochi confirmed that one of the main issues in the
last round related to Chunxiao. One strand of this
field is connected to the Japanese side, Yokochi
explained. Japan asked China to present a paper on
the Chunxiao "station," he said.


6. (C) MFA's Lu expressed his frustration: while China
has given concessions, Japan has "even higher
demands." Lu was not optimistic about an early
breakthrough in the talks. "These are difficult
negotiations," he said, "and Japan's demands are too
high." Yokochi presented a similar viewpoint from the
Japanese side. Japan is not satisfied with China's
attitude, he said. The Chinese view the issue within
the greater context of sovereignty and territory,
which complicates negotiations. However, the Sino-
Japanese "strategic" relationship hinges on solving
this issue, Yokochi stated. Japan has already made
concessions, and China has not changed its stance at
all, he complained. The Japanese Poloff said he was
"irritated" and "sick and tired of negotiating with
the Chinese side." Yokochi stated that he supports
using the International Court of Justice to "give
advice" on resolution. Lu said the Chinese have not
considered asking an international body to weigh in.
Both sides are willing to continue consultations, Lu
stated, adding that China is prepared to "work hard,"
and Japan should do the same. He stressed that both
parties should make concessions: it should not be up
to China to simply accept the unilateral demands of
the Japanese side.


7. (C) Japanese Poloff Yokochi was hopeful that there
will be progress before PM Fukuda's visit to China,
but he was not optimistic that there will be a
breakthrough in the near term. Now that the Chinese
Communist Party Congress has adjourned, President Hu
Jintao is in a "strong position" to adjust China's
stance on this issue, Yokochi argued. Concessions
from the PRC were more difficult before Hu
consolidated his power, he said. Professor Izumi
assessed the possibility of a breakthrough to be slim.
China wants to "wait and see" on the East China Sea
because they perceive Fukuda to be weak. China does
not have to resolve this issue soon, Izumi stressed.
Yokochi mentioned that Chinese Premier Wen Jiabao and
PM Fukuda may have an opportunity to discuss the East
China Sea issue on the sidelines of the upcoming East
Asia Summit in Singapore.

The DJP and China Policy
--------------


8. (C) In response to questions about the LDP's
staying power, Japanese Poloff Yokochi asserted that
Japan's policy toward China will not change, no matter
which party is in power. Since Abe's 2006 visit, the
Sino-Japanese relationship has increasingly been
characterized by "strategic" ties, he said. The
Democratic Party of Japan (DJP) has no better option
than to continue the current policy. They do not
support visits to Yasukuni Shrine, they do not support
visits of high-level Taiwan leaders, nor do they
support "denying historical facts." The DJP has the
same position as the LDP on these key issues, Yokochi
stated. Professor Liang told us that opposition DJP
leader Ozawa "understands" China. Liang predicted
that lower house elections will take place in mid-
2008, but a "strong" LDP showing would likely keep the
DJP from power.


9. (C) Professor Izumi said that he met with Japanese
FM Komura earlier in October, during which they
discussed China issues. According to Izumi, the LDP
leadership is aware of a "special relationship"

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between DJP leader Ozawa and recently-appointed
Politburo Standing Committee Member Li Keqiang. Ozawa
apparently met Li during a youth exchange in the
1980s. The two have maintained contact over the
years, and Li stayed at Ozawa's house in his hometown,
Izumi said. In addition, Li met with Ozawa during the
Japanese opposition leader's recent trip to China.
The LDP is "concerned" about this relationship, Izumi
told us. PM Fukuda has a "strong hope" and interest
in inviting the new Politburo leadership to Japan
after President Hu's planned visit in 2008.

Chinese: No Space Race
--------------


10. (C) Both the MFA's Lu and Beida's Liang downplayed
any competition between China and Japan on lunar
probes. China launched its first probe to the moon in
October, a week after Japan. The timing was purely
"accidental," said Lu. He told Poloff that China
invited Japanese space officials to observe the
launch. There is no "competition," Lu stressed.
Liang suggested that it was not China, but Japan that
scheduled its launch date with China's in mind.
China's moon shot was planned to coincide with the
conclusion of the Party Congress, said the Professor.

Building Long-Term Trust
--------------


11. (C) Deputy Director Lu was quick to cite recent
"beneficial developments" in the Sino-Japanese
relationship, especially in comparison to 2005. The
Japanese people feel a closer sense of friendship with
China, and the two sides have reached an "important
consensus," Lu stated. However, Beida Professor Liang
was pragmatic in his long-term assessment of the
relationship. It will take at least 20 years before
there is a dramatic improvement in bilateral ties,
said Liang. His prediction rested on the precondition
that relations are stable. Economic issues and
environmental protection are good starting points for
Sino-Japanese cooperation, the Professor said.
Shizuoka Professor Izumi also argued that economic
issues are "good agenda items" for "future
cooperation." In the defense arena, Beida's Liang
argued that the United States can play a constructive
role between China and Japan. When the United States
and Japan hold military exercises, China could also
participate, he suggested, adding that Chna's
relationship to the U.S.-Japan alliance could mirror
the "partnership" between Russia and NATO.

Upcoming Events
--------------


12. (C) MFA Deputy Director Lu, Professor Liang and
Japanese First Secretary Yokochi all predicted that PM
Fukuda will visit China in 2007 or early 2008. A
decision on specific timing has not yet been made, Lu
and Yokochi concurred separately. On November 9, an
MFA Japan Division official told Poloff that no
specific date had been set for the next round of the
East China Sea dialogue, though she indicated the
talks will likely take place in November. The same
contact revealed that the high-level economic dialogue
with Japan will begin December 1.


13. (C) Yokochi noted that the MFA called in the
Japanese Ambassador because of the Dalai Lama's
planned visit to Japan November 14. It will be the
22nd time the Tibetan religious leader has visited,
and he will not meet Fukuda, according to Yokochi.
The MFA also complained to Japan's Ambassador that the
Dalai Lama will meet with Uighur activist Rebiya
Kadeer while there, though Yokochi maintained that his
government had no information regarding the meeting.


14. (C) On December 13, there will be a ceremony in
Nanjing to mark the reopening of the Rape of Nanking
museum, Yokochi told Poloff. The Japanese diplomat
said the exhibits at the museum prior to the
renovation were "terrible" and encouraged young people
to dislike Japan. Many Japanese officials have
encouraged the PRC to make the museum's contents more
"positive" toward the Japanese Government and the
Japanese people, he said.
PICCUTA