^1. Formally, this is not a jihua (plan), which has, like normal medium-term national economic development plans, legal binding power over capital construction projects, but simply a guihua-gangyao (guide-post plan). It was reported to the 1st Session of the Fifth National People's Representative Conference as part of Premier Hua Guofeng's Government Activities Report (Renmin ribao, 7 March 1978.) Many industrial projects in this guide-post plan in fact started construction in the same year.

^2. This aspect of the policy was formally approved in the 3rd Plenary Session of the 11th CCPCC held in December 1978.

^3. As for the post-war history of major diplomatic and economic relations between the two countries, see Figure 1.

^4. Essentially, this article aims to investigate the issues of Sino-Japanese economic co-operation by examining, as a case-study, the basic measures of economic cooperation which were stipulated in the Japan-China Long-Term Trade Protocol concluded in 1978 on a private basis, and the ways they were in fact implemented by both the Chinese and Japanese sides. This Protocol seems to have been a product of the most favourable circumstances in the development of the Sino-Japanese relationship in which the complementary relationship of the Chinese and Japanese economies developed to the highest degree. Hence, the broad pattern, or what I will call a “grand design” of Sino-Japanese economic co-operation, that was agreed upon in the Protocol, seems to be one of the exemplary models of economic co-operation concluded between any two countries. Furthermore, in the concluding stage no government assistance or participation was received. In the implementation stage, however, a large number of problems and difficulties arose. The Japanese Government's intervention was necessary to resolve some of them. Since then the economic conditions of both China and Japan have changed somewhat, so that the above grand design has come to require modification. On the other hand, through “learning by experience” the activity styles of both sides improved considerably. However, the basic problems remain unsolved, problems which are explicitly identified in the context of the 1978 Protocol and its implementation, namely those relating to the underdevelopment of economic planning and management on the Chinese side, those relating to the Japanese business community's behaviour and short-term views and those relating to the government's stance on economic co-operation that is too passive.

^5. The contrast between trade with Japan and with the world in general may only be made from the Chinese trade statistics as far as total sums are concerned. This is shown in Figure 2.

^6. S. Ishikawa, “The impact of the emergence of China on Asian-Pacific trade,” in Structural Adjustment in Asian Pacific Trade, papers and proceedings of the 5th Pacific Trade and Development Conference held at the Japan Economic Research Centre, January 1973.

^7. This view seems to have been expressed long before. As a most recent expression, see Deng Xiaoping's statement to former Prime Minister of Great Britain, Mr Edward Heath, who visited China in April 1985, to the effect that the structure of China's foreign trade by partner countries is too lopsided, the proportion of trade with Japan taking up approximately 25% of the total, so that it becomes necessary to impose measures to increase trade with Europe (Nippon keizai-Shimbun, 27 April 1985).

^8. There are three semi-official accounts of the important events and developments leading up to and following the 1978 Protocol: (1) Nitchü Keizai Kyökai (Japan-China Association for Trade and Economy), Nitchü Oboegaki no 11-nen (Eleven Years of the Memorandum Trade) (Tokyo: Nitchü Keizai Kyökai, April 1975); (2) Nitchü Keizai Kyökai, “Nitchu Oboegaki no 11-nen” Hökokusho Fuzoku Shiryo (AttachedMaterials to Report on “Nitchü Oboegaki no 11-nen”) (March 1975); (3) Nitchü Chöki Böeki Kyögi Iinkai (Committee of Consultation on Japanese/Chinese Long-Term Trade), Nitchü Chöki Böeki Torikime 5-nenkan no Ayumi (Five Years' Development of Japanese/Chinese Long-Term Trade Protocol) (Tokyo: Nitchu Keizai Kyokai, February 1983). As examples of good books providing a more general account and analysis of the Sino-Japanese trade, see Tadao Miyashita and Hideo Ueno, Chügoku Keizai no Kokusai-teki Tenkai (International Development of Sino-Japanese Trade) (Tokyo: Mineruba Bookstore, 1975), and Takeji Sasamoto and Tamio Shimakura, Nitchü Böeki no Tenkai Katei (Development of Sino-Japanese Trade) (Tokyo: Institute of Developing Economies, 1977).

^9. The observation made in this paragraph is that of Mr Yoichi Yokoi of Nikki Co. (one of the representative plan engineering companies in Japan), to whom I am indebted.

^10. This project is in fact the first and largest turn-key plant project to be concluded as an application of the plant clause of the Japan-China Long-Term Trade Protocol. Many of the issues discussed below are applicable to this project. A good account of this project is Martin Weil, “The Baoshan Steel Mill: a symbol of change in China's industrial development strategy,” in Joint Economic Committee, U.S. Congress, China under the Four Modernizations, Pt 1 (August 1982).

^11. Chen, Huiqin, “Preliminary analysis of the economic effect of technology imports in our country over the past thirty years,” Gongye jingji guangli congkan, Nos. 5 and 6, 1981.Google Scholar

^12. Shigeru, Ishikawa, “The Chinese economy in the 1980s-aiming at the reconstruction of the post-Mao and Chou era,” in S. Ishikawa (ed.), 1980-nendai no Chugoku Keizai (The Chinese Economy in the 1980s), (Japan Institute of International Affairs, 1980).Google Scholar

^13. In this or the following paragraphs the information is from Chen Huiqin, “Preliminary analysis.”

^14. This is a typical pattern in the case of project determination in China. That this pattern applies to the determination, cancellation and revival of major Japanese-related projects is well documented in Ryosei, Kokubun, “The politics of foreign economic policy-making in China: the case of plant cancellations with Japan,” The China Quarterly, No. 105, 03 1986.Google Scholar

^15. Zhang, Zelu, Tan Tan Jiben-Jianshe (Discussions on Basic Capital Construction), (Beijing: Chinese Finance and Economy Publication Co., 1981)Google Scholar, makes it clear that in the Chinese regulations on the capital construction project there is a concept of a project cycle that is similar to that developed in the World Bank and USAID (see note 26 and Table 3). Among various activities that should take place in the pre-construction stages, two are considered vital {ibid. pp. 72–73). One is to ensure that individual projects are based upon medium-and long-term national economic plans which are formulated using comprehensive balancing methods. The second is to pay special attention to conducting feasibility studies. In practice, however, it is said that these provisions relating to the project cycle were not adhered to except for the first Five-Year Plan period (1953–57) and the economic adjustment period for 1962–1965, where adherence was comparatively good. It appears that Western-styled feasibility studies have been introduced into the planning procedures in the 1980s. See State Council's Technology and Economic Research Centre, Koxingsing, YanjiuJi Jingji Pingjia (Feasibility Studies and Economic Analysis) (Taiyuan: Shanxi People's Publication Co., 1984). In Premier Zhao Ziyang's report on the 6th Five-Year Plan presented at the 5th Plenary Session of the 5th People's Representative Conference, any construction project which is not screened by a feasibility study and a technical and economic analysis can no longer be incorporated in the annual capital construction plan.Google Scholar

^16. Zhao, Tongyuan, “Several questions in the current course of development of the machine-building industries,” Jingji guanli, Nos. 5 and 6, 1980.Google Scholar

^17. Keiji Samejima and Yoichi Yokoi (eds.), Nitchü Keizai-Kōryu 1983-nen: Chokiantei to Goben Kyoryoku eno Kadai (Sino-Japanese Economic Co-operation for 1983: Tasks for Long-run Stability and Joint Venture Co-operation) (Nitchü Keizai Kyōkai: 1984), pp. 190–91. It may be noted that the annual reports of a research committee in Nitchü Keizai Kyōkai dealing with the development of Sino-Japanese economic co-operation, starting from 1974, are important white-book-styled documents on the subject, although compiled and written by private individuals (mostly experts attached to large Japanese companies conducting business transactions with China). With the exception of the report for the earliest year, the title of all the reports begins Nitchü Keizai Kōryu… nen. In various passages in this article, I have referred to these reports without mentioning this fact.

^18. Shōichi, Moroguchi, “How to co-operate with China in her programme of technological renovation of the existing factories,” Nitchü Keizai Kyōkai Kaihō (Bulletin of Japan China Association for Trade and Economy), No. 120, 07 1983.Google Scholar

^19. Tatsu, Kambara, “China's energy development during the Readjustment and prospects for the future,” The China Quarterly, No. 100, 12 1984.Google Scholar

^20. Ma, Hong, Zhongguo Jingji Tiaozheng, Gaige yu Fazhan (Readjustment, Reform and Development of the Chinese Economy), (Taiyuan: Shanxi People's Publishing Co., 1982), pp. 281–300.Google Scholar

^21. As for the factual reference for this section, see the annual issues of Nitchü Keizai Kyōkai, Sino-Japanese Economic Co-operation, described in footnote 17.

^22. The crisis occurred during the period of near-completion of construction of the centre, the international prices of ethylene declined considerably, and it was considered almost certain that the centre, once in operation, would suffer a continuous loss. Sumitomo Chemical Co. decided to withdraw from the venture despite the investments already made. This decision was reversed after the amount of capital shared by the OECF was increased, implying that the Japanese Government would continue to support this joint venture. Formally, Petro-chemical Co. of Singapore is a joint venture between the investment company on the Japanese side (Japan-Singapore Petrochemical Co.) and the Singapore Government. Sumitomo Chemical Co, is a major share-capital holder within this investment company, and there is also OECF investment in this company. See Ministry of International Trade and Industry, Keizai-Kyöryoku no Genjō to Mondaiten 1984 {The Current State and Issues of Economic Cooperation 1984) (Tokyo), pp. 303–305.

^23. See the case of Mitsui Bussan Co.'s participation in Iran-Japan Petro-chemical Co., ibid. pp. 305–306.

^24. I take a normal foreign economic co-operation policy as a form of public policy which, in addition to common characteristics of all branches of public policy, carries a special characteristic arising from its application to the economic co-operation activities with developing countries. It consists of a combination of several basic elements: externally decided policy objectives (or the target variables which are derived from them), the constraints placed upon their achievement (the objective economic mechanism, the political and social constraints coming from policy-making and behavioural rules, etc.) and the choice of policy instruments and their values. It is also common to other branches of public policy that if the results of the operation of the objective economic mechanism (or in this case if the results of the economic cooperation of the private base) exhibit the performances that satisfy the policy objectives, the exercise of no particular policy instruments is necessary. Its special characteristic comes from the fact that, due to the various inefficiencies arising from underdeveloped economic organizations and human resources the achievement of government economic co-operation objectives of developed countries tends to become uncertain. A number of alternative measures to cope with the inefficiencies are conceivable, and the choice among these alternatives, often involving diplomatically sensitive issues, constitutes an integral part of this particular branch of public policy.

^25. The article of Osamu Tamura which is referred to in Table 3 is illuminating on a special feature of the Japanese Government's choice among various alternative economic co-operation policies.

^26. Baum, Warren C., “The World Bank project cycle,” Finance and Development, 12 1975.Google Scholar

^27. John, Williamson (ed.), IMF Conditionality (Cambridge, Mass: MIT Press, 1983).Google Scholar

^28. Two points might be made about this dilemma. First, yōsei-shugi and the placing of conditions are two opposite alternatives. There are a number of intermediate alternatives in which such a dilemma is less serious. Secondly, the Chinese Government, Japanese business and the Japanese Government – the three parties involved – have been extending their knowledge, capability, experience, and long-term views with regard to economic co-operation. While I think the problems involving each of the three parties remain fundamentally unresolved, it is possible that their evolution will further reduce the seriousness of the dilemma.