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....These same concerns drove Tokyo to encourage oil exploration in an area of the East China Sea that is claimed by China. Japan's military assertion has accelerated China's defense buildup while contributing to the creation of the China-Iran-Russia alliance. The shift in Tokyo's foreign policy has led to a sharp deterioration in China's relations with Japan. Foreign policies in Beijing, Washington and Tokyo are all characterized by two separate components - geopolitical relations and economic relations.
Cold War redux Beijing's geopolitical relations with Washington and Tokyo are arguably at their lowest ebb since China established formal relations with the US and Japan in the 1970s. The deterioration in China's relations with the US and Japan and the resultant improvement in relations with Iran and Russia are being driven by Washington's outsized global security concerns. These security concerns are becoming a self-fulfilling prophecy for Washington.
In sharp contrast to geopolitical relations, economic relations between Beijing, Washington and Tokyo remain quite strong. The mutual interdependence of these economies argues strongly against the preeminence of security issues in overall relations. China is the largest trading partner of Japan and third largest trading partner of the US. In addition to substantial trade links, American and Japanese companies have invested tens of billions of dollars in China over the past 15 years. Nonetheless, Beijing, Washington and Tokyo have all elevated the importance of security to overall economic well-being.
While a conflict between the US and China over Iran or North Korea cannot be ruled out, economic interdependence suggests Beijing and Washington have entered a period of geopolitical detente. Beijing's increasingly close relations with Moscow and Tehran will contain Washington's further military projection in the Middle East, Central Asia and Asia and foil the Bush administration's plans for subduing uncooperative governments in Iran and North Korea. Finally, Washington's unilateralist foreign policy will increasingly isolate the US to the benefit of China's foreign economic relations, making Beijing all the stronger.
Jephraim P Gundzik is president of Condor Advisers, Inc. Condor Advisers provides emerging markets investment risk analysis to individuals and institutions globally. Please visit for further information.
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