China and Japan are the two largest economies in Asia, with China being Japan's largest trading partner for more than a decade, and Japan being China's second-largest trading partner, and both countries have been beneficiaries of and advocates for economic globalization and free trade.

Japanese companies were the first to enter the Chinese market after the latter launched the reform and opening-up policy in 1978, and have developed together with the Chinese economy.

According to the Japan External Trade Organization, more than 56,000 Japanese enterprises are operating in China, with their cumulative investment being more than $130 billion, the second highest among all foreign economies. The return on investment for Japanese companies in China is about 15 percent, much higher than those in North America, the European Union and ASEAN member states.

To be sure, Japanese companies have made great contributions to the Chinese economy; they have created jobs, shared their management experience and technologies, and facilitated the development of local enterprises. The two countries' industrial cooperation has transformed from labor-intensive to technology-intensive partnership in sectors such as automobiles, machinery, electronic devices and information and communications technology (ICT) products.

On the other hand, Chinese investment in Japan is growing despite being a latecomer in this regard. China and Japan also play important roles in safeguarding multilateralism and free trade.

Japan's 2024 White Paper on International Economy and Trade says the country had signed 21 economic cooperation agreements with 50 countries as of March 2024, with free trade agreements and other trade and investment agreements accounting for 80 percent of Japan's total trade volume — higher than those for the US and the EU.

With the implementation of the Regional Comprehensive Economic Partnership, China and Japan established their first free trade relationship. Representing about 30 percent of global GDP and one-third of the world's population, the RCEP member states also account for about 50 percent of Japan's total trade volume. As such, the RCEP agreement will make regional trade more resilient and efficient, promote investment, optimize market access mechanisms, strengthen intellectual property rights laws and facilitate e-commerce, thus boosting China-Japan trade.

Also, people-to-people exchanges and investment in retail services are increasing between the two countries. For example, the number of tourists visiting Japan in July increased by 41.9 percent year-on-year to more than 3.29 million, hitting a second-straight monthly high, the Japan National Tourism Organization said in August — with visitors from the Chinese mainland surging by 147.8 percent, the highest among all countries.

China and Japan have their respective advantages in industries and technologies, and the continuous upgrading of their cooperation yields win-win results. For instance, Japan has advantages in high-end manufacturing such as precision machinery, electronic components, auto parts and robotics, while China is known for its large-scale production capacity and cost effectiveness, and supplying them to the market.

Besides, the close connection between upstream and downstream industries makes China-Japan industry chains highly competitive in the global market. Japanese companies belong to the high value-added upstream category in the global supply chain, and excel in high-end material and special equipment manufacturing, while Chinese enterprises have a strong advantage in processing, assembling and manufacturing in the downstream industry chain.

Japan is a leader in technology-intensive industries such as semiconductors, precision instruments and medical equipment, and China's advantage lies in the service industries including e-commerce, logistics and financial technology, and applying R&D results to commercial use. No wonder the two sides seek to deepen cooperation in fields such as intelligent manufacturing and smart city construction.

China has learned many things from Japan, with the two sides jointly promoting innovation. Since signing the intergovernmental agreement on science and technology cooperation in 1980, China and Japan have established all-round, multi-channel cooperation in fields such as agriculture, environmental protection, meteorology, pharmaceuticals, electronics, machinery, ICT, energy, automobiles and research into "new infectious diseases".

The two countries have also established scientific research platforms, and employ ICT to boost exchanges between their industry- and university-affiliated research institutes. As a matter of fact, China has been pursuing innovation-driven high-quality development, which has created new opportunities for Chinese companies to gain competitive advantage in the global market.

The supply chains of the two countries are intertwined thanks to their complementary economies. However, Japan enacted the Economic Security Protection Act in 2022, in order to reduce, if not end its dependency on some countries for certain products, because it sees the dependency as a supply chain risk. By imposing export restrictions on certain products in the name of safeguarding "economic security", Japan has violated the rules of globalization and free trade.

And the Japanese government's direct intervention in trade activities and its directive to Japanese companies to adjust their supply chains have disrupted the industry and supply chains. Therefore, China and Japan should deepen their economic and technological cooperation and contribute to regional and global development. Also, China has reaffirmed its determination to push forward reform and opening-up, which should boost the confidence of foreign companies.

The White Paper on the Chinese Economy and Japanese Companies 2024 issued by the Japan Chamber of Commerce in China shows that 54 percent of Japanese companies were very satisfied or satisfied with the business environment in China, while 51 percent said China is "the most important market" or "one of the three most important markets".

Moreover, due to the depreciation of the yen, Japan has been getting larger returns on its overseas investment. So the two sides should take measures to use their respective advantages to deepen cooperation in the digital economy, green development and third-party markets, maintain the stability of their industry and supply chains, and boost global free trade, because strengthened China-Japan economic cooperation will not only boost bilateral relations but also expedite regional economic integration.

The author is a professor at the Beijing Center for Japanese Studies of the Beijing Foreign Studies University.

The views don't necessarily reflect those of China Daily.

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