Whether out of a sense of guilt at the wartime conquest of much of China or because the country provided a cost-effective production platform, Japanese companies began flocking to China since the 1980s in numbers which rivalled their investment in Manchuria during the 1930s. Along with Taiwan, it is investment from Japan that has been the prime mover of Chinese economic expansion. Today, there are around 39,000 Japanese enterprises operating within China, and at the least around 20% of these are now seeking to re-locate from the People's Republic of China (PRC).
More than economics, the reason for such an attempted exodus is political. The South China Sea has become a useful means of stoking nationalism among the Chinese people, thereby turning their focus outwards towards perceived injustices by foreign powers (principally Japan) than inwards, towards an examination of the Chinese political system. Japanese managers in China have had to face obloquy and worse, while regional bureaucracies have begun to show differential treatment of Japanese enterprises, as compared to the welcome mat laid out for firms headquartered in other countries.
India has the potential of becoming a significant gainer from Sino-Japanese tension, fissures which seem certain to continue into the foreseeable future, now that Beijing has shown that it is willing to court unpopularity throughout Asia by claiming sovereignty over the South China Sea in a manner which negates not only the rights of the rest of the world to navigate within its waters, but that of other countries whose coastlines abut the now contested sea. While Thailand and Indonesia have been relatively quiet as compared to Vietnam and the Philippines, the reality is that every country in Asia other than China (and, interestingly, Taiwan) opposes the Chinese claim to the South China Sea. This claim has been put forward through the use of arguments that could very easily be used by India to claim Tibet as its territory (seeing that the Maharaja of Kashmir had "Tibet Adhipati" as one of his titles and that both Kailash and Mansarovar are located in land now controlled by China). Indeed, if Beijing can claim Tawang on quasi-religious grounds, India can easily follow suit by claiming Kailash and Mansarovar on the same basis. Not, of course, that the timid souls atop Delhi's Raisina Hill would ever dare follow Beijing's precedent.
If Beijing can claim Tawang on quasi-religious grounds, India can easily follow suit by claiming Kailash and Mansarovar on the same basis. Not, of course, that the timid souls atop Delhi’s Raisina Hill would ever dare follow Beijing’s precedent.
What they can do is to take advantage of the commercial opportunity provided by Sino-Japanese geopolitical frictions, and fashion a welcome mat for Japanese enterprises seeking to re-locate from China. Given the rot within the Indian administrative system, both Vietnam and Indonesia are as of now far better alternative locations for Japanese companies than India, a country where the quality of infrastructure exactly matches the nation-building capabilities of the political class. Rather than swoon over the European Union, as Commerce Minister Anand Sharma is wont to do, more time and effort need to be spent by the minister on Tokyo. Already, the Japanese are working on a Delhi-Mumbai transport and industrial corridor, and there is talk of a similar Chandigarh-Kolkata corridor as well. Both these would pass through some of the poorest states in the Union of India, and hopefully kickstart growth there. Work on them needs to get expedited, including by reminding Jayanthi Natarajan that the worst pollutant is poverty. These days, the influence of trendy NGOs — each with a complement of bright-eyed volunteers coming from countries where per capita energy consumption is horrendous — seems rampant in the Ministry of Environment, which seems to be vying with the stay orders getting passed by India's courts in damping fresh industrial and service initiatives with job-creating potential.
Shinzo Abe, the new Prime Minister of Japan, is a friend of India. The time has come for a Japan strategy, so that this unique and technologically superb power can do for India from this year what it has done for China since the mid-1980s.